Various sectors of the so-called gaming industry are excited about the prospects for widespread Internet gambling, and chafing at the regulatory constraints that are delaying its widespread introduction.
I’ve seen the volume of legal gambling in the United States estimated as high as $500 billion peryear. This works out to almost $2000 perperson per year. Even a small fraction of this total is a healthy chunk of change. I hate to think what the amount of illegal gambling is! The Interactive Gaming Council reports that more than $1.2 billion were bet in its member’s 700 cybercasino sites in 1999. This is an amazing numbercomparable to the
$1.6 billion dollars in sales that Amazon.com had in the same year. This gives new perspective on who really runs the Internet. The United States Justice Department and Senator Jon Kyle estimate that this annual total could grow to $10 billion within a few years.
Internet gambling differs in many important ways from conventional gambling. Whetherthese changes are positive ornegative depends upon yourperspective:
■ Loss of community control – Today, forbetterorworse, state, local, or tribal government regulates the opportunities for legal gambling. If the people of a given region believe that casino gambling is harmful, it will be forbidden. If the people of a given region believe that casino gambling is good foreconomic development, they can pass a law and must live with the consequences.
But Internet gambling has no such geographic limitations. Any-one with a computeris a potential player, even in the most righteous
community on earth. The problems of compulsive gambling won’t go away, and indeed theireffects will stay local. All the benefits, such as potential profits, taxes, and jobs won’t stay local but instead get sucked off into cyberspace.
■ Lack of regulation – You are playing virtual roulette in a virtual casino.
After10 straight blacks you just know the next ball will be red. You swallow hard as you put down a $10,000 wager on red. It is more than you ever dreamed of betting, and frankly more than you can afford. It comes up black, again. You lose.
But how do you know that the game was fair? Perhaps the pro-grammer decided to make the ball fall in the slot which minimizes the amount returned to bettors, instead of fairly picking a random number.
The WWW site you have been sending yourmoney to is on an unin-habited island in the Bahamas. If the game wasn’t fair, who could you complain to, anyway?
■ Lack of infrastructure – Expanding casino gambling from an enclave in Las Vegas into a nationwide “gaming” industry required a consid-erable investment in infrastructure and personnel. Massive hotels and powerful politicians had to be bought, the latter to help steer reluctant legislatures towards legalizing their business.
Interestingly, it is the established gaming industry that has the most to lose if Internet gambling gains a foothold in the hearts and minds of gamblers. Operating an Internet gambling site does not require a 3000-room hotel in Vegas. Indeed, well-known establishments like Caesar’s Palace have no particular edge in building a virtual casino.
Instead, they face the prospect of their customers’ sitting home glued to theircomputerscreens. Why lose money in Atlantic City when you can do so from the comfort of your living room?
The Internet Gambling Prohibition Act of 1997 was passed by the Senate on July 23, 1998, by a vote of 90–10. This act amends the Federal criminal code to prohibit and set penalties for: (1) placing, receiving, or otherwise making a bet orwagervia the Internet orany otherinteractive computer service in any State, and (2) engaging in the business of betting or wagering through the Internet or any such service. There are exceptions for state lotteries, horse racing, and (yes) jai alai.
As of this writing, the House of Representatives has failed to vote this bill into law. Special interests line up fororagainst it in interesting ways.
Liquor store owners and religious groups are for the legislation, but per-haps from different motives. The liquor dealers fear a reduction in their lottery ticket sales owing to competition with on-line lotteries. A surprising collection of state governors stand quietly against it, with their eyes open to losing revenue from these same lotteries.
Internet gambling is currently legal in 50 countries, including Liecht-enstein, Gibraltar, Australia, and certain Caribbean countries – more than enough to cause trouble. A California woman who lost $70,000 to an over-seas virtual casino sued her credit card company, asserting that she should get theircut of this action.
The Internet Gambling Prohibition Act is broad enough potentially to threaten full deployment of our jai alai system to frontons beyond those supported by On the Wire. In particular, we could imagine e-mailing our picks to a local agent, who would place ourbets forus in Newport orMiami.
As I read the act, this might be a Federal crime, even though it would be perfectly legal to have our same program spewing out the predictions on the agent’s own personal computer.
This act works by extending the current prohibitions against using telephones for interstate gambling. There are serious consequences for those who violate it:
Whoever, being engaged in the business of betting or wagering know-ingly uses a communication facility forthe transmission orreceipt in interstate or foreign commerce of bets or wagers, information assisting in the placing of bets orwagers, ora communication that entitles the transmitter or receiver to the opportunity to receive money or credit as a result of bets or wagers, shall be fined not more than $10,000, imprisoned not more than 2 years, or both.
The prohibition against using telephones for interstate gambling has proven to be a powerful legal tool against organized crime. It presumably does not apply to my use of On the Wire because the statute provides exemptions as regulated by state law. As a prerequisite to opening my account, I had to assert that I live in one of the states that permits off-track wagering; fortunately, New York is one of these states. Still, it was disconcerting to learn how close my system came to violating Federal law.
If caught, I feel pretty sure it would have been me doing the time, not Maven.