Radley Balko’s Article About the Madness of Banning Online Gambling

by Lou on October 25, 2006

The following piece comes from Radley Balko, a senior editor with Reason magazine who also publishes the weblog, TheAgitator.com. In the past few days I’ve also republished articles by George Will and Charles Murray about the Unlawful Internet Gaming Enforcement Act. This is the third and final piece I plan to reproduce here, and I’ll leave you with Balko’s extremely comprehensive and well-thought out article about the the lunacy of UIGEA.

Online Gambling Ban a Bad Bet for Republicans
by Radley Balko
In the wee hours of the last night of the last session of Congress, Majority Leader Bill Frist attached a ban on Internet gambling to a port security bill.
It was a dubious maneuver, which not only prevented any real floor debate over the ban, but also attached an intrusive, unnecessary, big government measure to a bill that addressed important national security concerns. This meant that any senator who held the position that what Americans do with their own money in their own homes on their own time is none of the government’s business couldn’t vote against the gambling ban, lest they risk being smacked about the head with the “soft on national security” cudgel.

If Frist’s move was underhanded, it was also wholly appropriate, given the way the GOP has handled this issue. The debate — to the extent that there has actually been one — has been marred by misdirection, red herrings, and a certain obliviousness among the bill’s supporters to, well, reality.

The two Republican congressmen pushing the ban in the House of Representatives, for example, — Rep. Jim Leach and Rep. Bob Goodlatte — tried for months to sell the ban as an effort to exorcise the scourge of Jack Abramoff from the Congress and the Republican party, as if Abramoff were the reason the bill never passed in the first place.

In fact, the bill we now have is nearly identical to the bill Jack Abramoff would have wanted. The bill bans online poker, sports wagering and casino games, but doesn’t touch state lotteries or horse racing (which, by the way, has in the past made some meaty contributions to Rep. Goodlatte’s campaign chest).

Contrary to what Reps. Goodlatte and Leach would have us believe, the bill Jack Abramoff was pushing was also a prohibition on poker, sports wagering, and casino games. And it also contained exemptions for state lotteries, as requested by one of Abramoff’s clients, eLottery.

It only gets worse from there. When the lobbying reform package fell apart, the Republicans tried a new approach, bundling the ban with flag burning, gay marriage, and a number of policies on the GOP social agenda as part of the “American Values” agenda. That’s how it passed the House.

In the Senate, Frist first tried to attach the ban to a bill reauthorizing funding for U.S. troops in Iraq. When that didn’t work out, he fell back on the last-minute port security bill.

In addition to invoking Abramoff, the ban’s supporters frequently invoked the “for the children” canard, and relayed anecdotes about problem gamblers who frittered away their kids’ college education with online wagers. In truth, there has yet to be a significant peer-reviewed study of online gambling habits, and whether they’re more or less conducive to addictive behavior (there have been studies of state lotteries, however, and most show them to be among the most addictive forms of gambling).

Most online wagers are made in poker rooms. Poker is a game with some element of chance, but with a significant component of skill. Good poker players will turn a profit, which is why lots of people make a living playing the game (as opposed to say, slot machines or roulette).

Poker professionals — three of whom came to D.C. earlier this year to speak against the ban — argue that the game isn’t really gambling at all. At the very least, it’s not a particularly addictive form of wagering. Of course, some (like me) would argue that the nature of poker is beside the broader point: preventing people from playing games of chance simply isn’t a legitimate function of the federal government.

At the very least, there are surely items on the DOJ’s agenda that ought to be of higher priority — fighting terrorism, for example.

Reps. Leach and Goodlatte, along with Sens. Frist and John Kyl, frequently used the words “untaxed” and “unregulated” when describing the estimated $12 billion Americans wager each year online. But they’re “untaxed” and “unregulated” because Congress made online gambling illegal in the first place, pushing gaming sites offshore.

In fact, the major gaming sites are begging to be both taxed and regulated. They’d much rather set up shop in the U.S., pay U.S. taxes, and be subject to U.S. laws and regulations. They’d rather carry the seal of legitimacy that comes with being recognized and incorporated on U.S. soil. Were online gambling legalized and regulated, we’d likely see trusted names like Harrah’s, Bally, and MGM get into the business.

Despite all of the dire warnings from the ban’s supporters about fraud, graft, and preying on minors, this bill will actually make all of those problems worse. Many of the major gaming sites are publicly traded, and/or incorporated in countries like Great Britain or Canada. They are taxed and regulated, just not by the U.S. government.

Before this bill was rushed through the Senate, cautious poker players or sports bettors could choose to patronize companies that are subject to market regulation, or are incorporated in countries that respect the rule of law. Most of those sites also have vigilant child-protection measures in place, and some even have stopgap features players who know their own weaknesses can use to limit their betting. Watchdog groups have sprung up to monitor the fairness and integrity of these sites (private, non-government regulation — imagine that!).

Immediately after the ban passed Congress, many of the major gaming sites announced they’d no longer do business with U.S. customers. Most I’d imagine were intimidated by the U.S. Department of Justice’s recent penchant for plucking foreign gaming site executives out of U.S. airports and tossing them in prison, despite the fact that their businesses were legal in the country where they were incorporated, and where they were citizens (think of the implications there for Americans traveling abroad.)

So once the major gaming sites stop doing business with U.S. customers, who is that going to affect? The problem gambler? The curious minor who swiped his parents’ credit card?

Not likely. The people who are going to be affected by the ban are the millions of Americans who play online poker recreationally — and responsibly. But that $12 billion per year is going to simply dry up. Problem gamblers and minors will still be able to find places online to make wagers.

Any attempt to prohibit consensual activity is going to create black and gray markets. The legitimate, law-abiding gaming sites may now be out of reach for Americans, but that’ll create a niche for truly unregulated sites. These sites will be far more prone to fraud, won’t much care about the age of their customers, and customers who are defrauded will have no recourse.

There’s also no telling who’s behind them. But it’s probably a safe bet (pardon the pun) to say that the people operating black market, blatantly illegal gambling sites will include a significant criminal element.

Some say the GOP pushed this ban to
light a fire under family values voters. Others say their intent was more nefarious — to protect established gambling interests from online competitors. There may be some truth in both of those explanations, though I think the main motivation for the bill was simply the moral aversion to gambling held by its chief sponsors — Goodlatte, Kyl, and Leach — and a desire to impose that moral rectitude on the rest of the country.

What does seem clear is that none of the people behind this bill were interested in thoughtful debate, any serious consideration of the bill’s implications or consequences, or the principle of a limited, “leave us alone” federal government.

Polls show that Americans are overwhelmingly opposed to a federal ban on Internet gambling. Industry experts estimate that some 15-20 million Americans wager online each year. The overwhelming majority do so responsibly. This largely apolitical group could well get politically motivated the first time they try to log on, and are told their small-stakes poker game has now been outlawed by the Republican leadership in Congress. If this was a political move, there’s a pretty good chance it’ll backfire, and cost the GOP more votes than it wins them.

Comments on this entry are closed.

Previous post:

Next post: