FROM TODAY'S WSJ EDITORIAL PAGE. THE MOST GERMANE IS " The Senator's Internet Gambling Prohibition Act exempts entities from which the state profits--lotteries, horse racing, dog tracks--should they choose the Internet as a venue in the future. Such loopholes make it difficult to interpret the bill any other way than as an effort, at least in part, to stamp out potential competition."
I'M CALLING THIS THE ELOT LOOPHOLE.
Commentary
Will Uncle Sam Trump
Internet Gamblers?
By Jason L. Riley, the Journal's editorial interactive editor.
The home page of the Golden Palace Online Casino sports a crudely drawn castle outlined in various neon colors. White klieg lights dance back and forth behind the image, which is set against a black background. To the left and right, links such as "View The Games," "How It Works" and "FAQ" are displayed. But the link that commands the attention of visitors is the one in yellow that glows, then dims, glows, then dims. It reads: "Play For Real Money."
Giving grist to cynics who say the Web is just a new venue for old vices, gambling has followed pornography onto the Internet. More than 300 Web sites featuring sports betting and casino games from blackjack to baccarat now exist. The industry is expecting $8 billion in world-wide revenue by 2001, and half of that will come from U.S. bettors.
Gambling comes to cyberspace.
The online phenomenon, however, is really just an extension of America's heightened off-line gambling jones. Between 1988 and 1997, the number of states in which casino gambling was allowed grew from two--Nevada and New Jersey--to 24. Government-run lotteries operate in 37 states today, and one or more forms of legal gambling exist in every state but three. Americans legally wager more than $500 billion a year, an amount that has doubled in the past decade.
Giving grist to cynics who say the Web is just a new venue for old vices, gambling has followed pornography onto the Internet. More than 300 Web sites featuring sports betting and casino games from blackjack to baccarat now exist. The industry is expecting $8 billion in world-wide revenue by 2001, and half of that will come from U.S. bettors.
The online phenomenon, however, is really just an extension of America's heightened off-line gambling jones. Between 1988 and 1997, the number of states in which casino gambling was allowed grew from two--Nevada and New Jersey--to 24. Government-run lotteries operate in 37 states today, and one or more forms of legal gambling exist in every state but three. Americans legally wager more than $500 billion a year, an amount that has doubled in the past decade.
Cyberspace isn't immune to these off-line gambling trends. If anything, expect the Internet to hasten them. Still an infant, the medium so far has had at least a significant effect on those industries (like communications) that it is not already revolutionizing (like commerce). And as with many infants, patience has yet to be mastered. The Internet has not been keen on waiting for lawmakers to decide how to deal with gambling.
"The legal status of Internet gambling needs to be considerably clarified," says Eugene Christiansen, publisher of Gross Annual Wagering, which tracks gambling in the U.S. Republican Sen. Jon Kyl of Arizona agrees. He's sponsoring legislation that would make Internet gambling illegal. "I don't believe it can be regulated, so we must prohibit it," says Mr. Kyl. The senator believes federal legislation is needed because the Internet is unique in its ability to evade state controls.
Traditionally, gambling regulation, with the exception of Indian gaming, has been left to the purview of state authorities. But state attorneys general now say they need Washington's help. "We're simply responding to the states' requests to help them enforce their existing state policy," insists Mr. Kyl. Actually, it's not so simple. States have tremendous vested interests in prohibiting Internet gambling, especially with regard to lotteries. "The states derive revenue from many forms of gambling, but lotteries, which are state agencies typically, are by far the largest contributors," says Mr. Christiansen. "Something like 85% of all state gambling receipts are derived directly from lotteries." In 1997, state lotteries did a combined $56 billion in sales.
Mr. Kyl calls that figure "a pittance," adding, "It would be cynical in the extreme to attribute to these attorneys general a motive that they are trying to protect state revenue streams." Others aren't so sure. The senator's Internet Gambling Prohibition Act exempts entities from which the state profits--lotteries, horse racing, dog tracks--should they choose the Internet as a venue in the future. Such loopholes make it difficult to interpret the bill any other way than as an effort, at least in part, to stamp out potential competition.
Down at the state level, lawmen are pursuing the operators of gambling Web sites using existing law. Wisconsin Attorney General James Doyle says state actions have been brought against three such operators since 1997. New York, Ohio and Missouri, among others, also have moved against online betting parlors.
Tom Bell of the Cato Institute thinks federal and state efforts would be better spent on setting up some type of regulatory framework (as countries like Australia, Hong Kong, Japan and France have) in which online gambling sites can operate legally. In a recent paper, he argues that bans will inevitably fail. Not only does "Internet technology render prohibition futile," says Mr. Bell, but "consumer demand for Internet gambling and the states' demand for tax revenue will create enormous political pressure for legalization." Mr. Bell might also have added that the gaming lobby exerts tremendous influence at both the state and federal level, rivaling the National Rifle Association and the United Auto Workers in its contributions to political campaigns.
Whatever ultimately happens, and it's still too early to tell, the debate is a healthy one because it highlights the government's Pecksniffian approach to gambling. States have become dependent upon revenue from a questionable activity that has had some unquestionably harmful effects on society. Through hundreds of millions of dollars spent on advertising and promotion, the government has mainstreamed gambling. In doing so, it has actively participated in nurturing the demand Internet gaming operators are satisfying. If the government wants to make the Internet off limits to gambling, perhaps it should get out of the business itself. But don't bet on it.>>
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