Yikes Online Poker Is In Trouble!!!

March 17, 2006

GOP Misses Mark on Internet Gambling Ban

by Radley Balko

Radley Balko is a policy analyst at the Cato Institute.

Internet gambling is already prohibited, at least in most forms. The companies that operate casino, sports betting, and poker websites are all based offshore, and most of their executives risk arrest if they ever step foot on American soil.

But web-based gambling is still a $12 billion industry. And so just as has happened every other time our government has attempted to ban vice (see illicit drugs, prostitution, and alcohol), efforts to ban online gambling have not only failed, they've created more problems than they've solved.

Because the government has banned the "bet taking" side of online gaming, gambling proprietors have simply set up shop in countries where gambling is legal. That keeps them out of reach of U.S. laws, but thanks to the Internet, still well within the reach of U.S. customers. That makes the people who play these sites highly susceptible to fraud, with no recourse in U.S. courts should they be bilked out of their money.

It also makes offshore gaming a prime target for organized crime and international terrorism, given that there's no U.S. government oversight.

For now, the "bet placing" side of Internet gambling is still legal (there's some debate on this point, but most experts agree that the government can't and won't arrest you for placing a bet from your computer). Which is why, despite that it's illegal, Americans still wager billions of dollars online.

That's where this trio of congressmen comes in. Rep. Bob Goodlatte of Virginia, Sen. John Kyl of Arizona, and Rep. Jim Leach of Iowa are all upset that there are some people out there who still see gambling as the moral transgression they do. So each has proposed a bill to go after the "bet placing" side of Internet gambling.

The bills are complicated, and what finally comes out of Congress is likely to be some sort of compromise between the three. But it's safe to say that none of the Congressmen are interested (yet) in arresting actual gamblers. However, that doesn't make what they're proposing any less disturbing. Instead, the bills aim to "deputize" companies like banks and Internet service providers (ISPs) to sniff out the illegal activity of their customers.

For example, Congress may end up asking ISPs to block out gaming sites from their customers, to ban websites on their server from linking to gaming sites, or to monitor the browsing habits of their customers.

Or they may force your bank to closely monitor where your money goes, and to block any transaction not only with an offshore gaming site, but with companies that facilitate transactions between banks and gaming sites.

The privacy implications of such measures are disturbing enough. But there's also something troubling about asking private companies to become de facto law enforcement agencies (a practice that started with aggressive money laundering laws).

Depending on which version of the various Internet gambling prohibition bills passes, these companies could also end up bearing staggering compliance costs. Which, of course, they'll then pass on to consumers.

These are important issues, and they deserve an honest debate. Unfortunately, the supporters of the three bills currently under consideration aren't interested in honest debate. All are pushing their bills as part of "lobbying reform," or the GOP's attempt to save face after many of its members have succumbed to their own moral failings.

Rep. Goodlatte and Sen. Kyle in particular have attempted to push their bills as "anti-Jack Abramoff" measures, referring to the now-disgraced lobbyist. I debated Rep. Goodlatte on his bill a couple of weeks ago, and was surprised when he spent most of his time talking not about the merits of his legislation, but about how passing his bill would send an important message to the American people about lobbying and corruption in Congress.

If you're wondering what slapping a ban on the millions of Americans who wager money online has to do with the Republican Party's moral shortcomings in Washington, well, so was I.

Apparently, the reasoning goes something like this: "Because of Jack Abramoff, Congress' previous attempts to ban Internet gambling failed. So Congress should ban Internet gambling to show that it's not under the influence of Jack Abramoff."

The odd thing is, contrary to what the anti-gambling folks would have you believe, Abramoff didn't want to legalize Internet gambling. He wanted to prohibit it--but in a way that carved out exceptions for his high-rolling clients. (Abramoff's clients were a company that helped state lotteries sell tickets online, and the Indian casinos.) The various bills now under consideration are remarkably similar to the bill Jack Abramoff wanted passed.

As I mentioned, the current gambling bills are complicated. But knowledgeable people on both sides of the debate generally agree that by the time all is said and done, none of these three bills will actually ban Internet gambling. They'll ban gambling for all but those gambling interests that have politically powerful allies in Congress. Which is exactly what Jack Abramoff wanted.

State lotteries, for example, will almost certainly be able to continue to sell tickets online (it's curious how addicted state governments have become to the money generated from those "evil" games of chance, isn't it?). Horse racing is also widely expected to escape any attempt at prohibiting online bets (the anti-gambling crusader Mr. Goodlatte, interestingly enough, has taken some $10,000 in campaign contributions from the National Thoroughbred Racing Association).

Online fantasy football will stay safe, too (previous attempts to ban this growing hobby have met with furious opposition).


The funny thing is, online gaming sites are begging to be legalized and regulated. A better approach would be to allow them to set up shop in the U.S., contribute to the U.S. economy, be regulated by U.S. markets, and be subject to U.S. courts.

Of course, that approach would require Congress to treat Americans as adults, and understand that we ought to be free to spend our own money as we please. Even in ways some morally crusading Congressmen happen to find distasteful.

http://www.cato.org/pub_display.php?pub_id=6003