The Legalization of Internet Gambling (in the U.S.)
Had to write a paper for a writing class, I'm not allowed to post links yet, so the works cited page is a little messed up..and here it is:
The Legalization of Internet Gambling
The first virtual casino came online in 1995, with18 different casino games and since that time Internet gambling has exploded into a multi-billion dollar industry (Oliver). This has sparked much debate about the morality and legality of such casinos. Opponents of Internet gambling are eager to implement bans which prevent individuals from accessing these websites and participating in gambling. The arguments against it include negative social impacts associated with gambling such as addiction and the potential for underage players to engage in such activities. The economical impacts are also of great concern as Internet gambling remains unregulated and untaxed by the United States government. These views are misinformed and the views of government officials should not be pushed onto the American public. Instead of hastily and foolishly banning the online poker industry the government should push for regulation and provide a safer environment for Internet players while at the same time collecting much needed tax revenue from these businesses.
In 2006 Congress added an amendment to the Security and Accountability For Every Port Act which specifically prohibits financial transactions to Internet gambling sites or any which represent these sites (U.S. Cong). This is known as the Internet Gambling Enforcement Act and it is an attempt to prevent individuals from using their credit cards or checking accounts to fund online gambling activities. This prohibition has also caused third-party companies such as Paypal and Netteller to discontinue transactions between Americans and Internet gambling companies. There are currently a number of bills being introduced into congress which would reverse the Internet Gambling Enforcement Act that would provide regulation over online gambling instead of trying to prevent individuals from participating in it.
Some people believe that legalizing online gambling will have many social repercussions. One of their main arguments is that playing online is more addictive than playing in a land-based casino. Republican Senator Jon Kyl even called playing online, “the crack cocaine of gambling” (Brunker). Using the argument that playing online is instant and only a mouse click away, one might believe this statement is true. When opponents of Internet gambling use this argument they fail to leave out some key information. Online companies have a very small overhead when compared to land-based casino as they do not have to hire dealers or cocktail waitresses and this allows them to offer many of the same casino games at a much lower stake, one can even play for as little as pennies. It can also be said that playing online isn't nearly as exciting as the flashing lights of a land-based casino.
Internet gambling has become a huge industry in the past few years. The British Gambling Commission conducted a survey to help the Commission understand the nature and scale of gambling in Great Britain. It started as part of the Gambling Commission’s commitment to the objectives of keeping crime out of gambling, ensuring gambling is conducted fairly and openly, and protecting children and vulnerable people from the harms of gambling. The Commission found that the rates of problem gambling in the adult population was about 0.6%. This is the same percentage of the population that they identified in 2000 (Wardle). The Internet gambling business has grown considerably since the year 2000 and this has not affected the amount of problem gamblers. To state that online gambling is more addictive than land-based casino gambling is ridiculous.
Underage gambling is a great concern on both sides of the argument. Those who oppose online gambling believe that anyone with a credit card can play, and that underage gamblers could easily gain access to these websites with a parent's card or personal debit card. While this may be true for some of the lesser known websites, most of the major gaming sites require you to fax or email them a copy of at least one form of identification that must match your credit card information. This is a major problem for both sides but with proper regulation this issue could be combated properly. Regulation and licensing would force Internet gaming companies to take every step possible to insure that players are of age or they would otherwise risk losing their license and right to legally operate in the United States. Banning credit card transactions does not solve the problem as there are many other ways to fund online gambling accounts through money orders, third party payment processors and international means.
It has been argued that online gambling is an easy way for criminals to launder money. The government's response to this is the attempt to stop the transactions between the banks and online casinos. This is not effective in the sense that when people are unable to fund their online gambling accounts, they use other means such as overseas payment processors. "It forces people who want to play to find alternative means of funding their accounts rather than just using the most transparent system of all, the U.S. banking system," says John Pappas, executive director of the pro-legalization Poker Players Alliance. What they would like to see is a regulated industry that protects consumers. This can be done by licensing these companies and allowing them to conduct business in the U.S.
Online gambling is a $13 billion dollar and growing industry worldwide (Govtrack). Current U.S. laws prohibit online gambling and therefore income generated by these sites is not regulated. This results in the loss of billions of potential tax dollars, not only from the companies themselves but of individual winnings which are often filtered through foreign institutions in order to bypass the current ban. Congressman Barney Frank introduced the Internet Gambling Regulation and Tax Enforcement Act of 2007 which would allow monetary transactions to take place between financial institutions once again but would regulate the income, license these businesses and protect American consumers. PricewaterhouseCoopers, indicates that regulating Internet gambling could reclaim and generate between $8.7 billion to $42.8 billion over the first ten-year period (McDermott). Given the current state of the economy and the enormous deficit of the U.S. we can not afford to let much needed revenue to slip through the cracks. David Carruthers, the CEO of BetOnSports.com states, “We want to be taxed. We want to be licensed. Instead of dealing with us constructively to address issues of mutual concern, these legislators prefer to pretend that they can control the Internet. Instead of protecting the public, they would rather waste time on public posturing to their partisan base" (Sullum).
Opponents of Internet gambling don't believe that regulation is feasible. They believe that there isn't any possible way to regulate companies which operate over the Internet outside of the United States. The United Kingdom has already legalized online gambling and have successfully regulated it. Gerald Kitchen, the CEO of Secure Trading Limited made a statement as an expert witness to the Financial Services Committee of the United States House of Representatives stating that “Accordingly, if Congress decides to allow any Internet gambling transactions to occur, they should do so knowing that technology and processes exist to protect their constituents from falling victim to underage gambling, compulsive gambling, and involvement of organized crime, money laundering and fraud. It exists, it is being utilized, and it is working very effectively” (Kitchen). There is the argument that these companies do not have any incentive to incorporate in the U.S. and that couldn't be further from the truth. Operating in the United States would establish credibility to a lot of the obscure companies out there. “Customers want to know that they're playing a fair game, that their bankrolls are secure, and that their privacy is protected. Companies that set up shop in the U.S. with the blessing and encouragement of the U.S. government will almost certainly dominate the market” (Balko). Knowing these facts it doesn't make sense to continue to waste American tax dollars trying to stop people from what they're going to do anyway.
It is very hypocritical to ban online gambling when there is at least some form of gambling legalized in every state inside the U.S. except for Hawaii and Utah (Dunstan). This issue was brought up to the World Trade Organization by the countries of Antigua and Barbuda citing that the ban against online gambling represented an unfair trade barrier. The United States continues to ignore commitments and agreements made under the WTO. Gretchen Hamel, a spokeswoman for U.S. Trade Representative Susan C. Schwab stated that “The Bush administration did not dispute the ruling's finding that it failed to comply with the 2005 decision and said it was allowed to maintain a ban on Internet gambling to "protect public order and public morals" if it doesn't discriminate against foreign companies.”(Giles) With some form of gambling allowed in 48 states, their argument for morality goes out the window, and the U.S. is simply shutting its doors to these online companies.
Throughout the history of the U.S. it has been proven that prohibition does not work. There are between 14 and 23 million players in 2006 that participated in online gambling and half of these players reside in the United States (Lee/McGuiggan). The ban against Internet gambling has not stopped the American players. Prohibition does not stop people from playing, it only forces them to find alternate means. This leaves the American consumer unprotected and opens them up to fraud. There is no protection offered to individuals that operate under the table in order to enjoy some leisure and recreation. “What the bill's supporters fail to understand is that short of completely banning the Internet or heavily censoring the Internet as China does (with criticism from the U.S. government), there will always be Internet gambling available to U.S. players.” (Frank). Education programs should be used in order to prevent problem gambling, not prohibition as this would not stop individuals from gambling online anyway.
What people do in the privacy of their own home with their own money should not be of any concern of the U.S. government. What would founders of this country think about this ban? I am sure that the original intent of government in the United States was not made to ban recreational activities. The Unlawful Internet Gaming Act is a direct attack against personal freedoms. If we allow this ban to continue then we open up a door that would let the government continue to decide what you can and can not do in your free time. Radly Balko is the senior editor of Reason Magazine and he put it best when he said “No one is hurt when two or more consenting adults sit down for a game of poker, be it online or in person. Why any of this should be of concern to the federal government is rather perplexing. I respect the fact that many Americans-and many members of Congress-may have moral objections to gambling, online or otherwise. To them, I'd say, simply, don't gamble, then"(Balko). What if one day the government decided that rock music should be banned or if they reverted back to the days of alcohol prohibition? We can not allow these attacks on personal freedoms to take place and to allow our government to push their personal moral values onto the general public. Gambling has been around for centuries and it is not going to disappear anytime soon.
In April of 2007 Representative Barney Frank introduced the Internet Gambling Regulation and Enforcement Act of 2007 which would provide an exemption to the ban on online gambling for properly licensed operators, allowing Americans to lawfully bet online. Frank states that “Traditional forms of legalized gambling already exist in nearly every state. By continuing to prohibit Internet gambling in the U.S., the U.S. has left Americans who choose to gamble online without meaningful consumer protections. The proposed legislation would institute practical and enforceable standards to bring transparency to Internet gambling and provide consumers the protections they expect and deserve” (Frank). This act would provide licensing to companies and allow them to operate inside of the United States and allow transactions between U.S. banks and the online sites. There are strict guidelines in place in order to receive a license which includes safeguards to ensure the individual placing the bet or wager is 18 years of age or older, safeguards to combat fraud, money laundering and compulsive gambling, as well as mechanisms to ensure all appropriate taxes and fees are collected from individuals and the licensees and safeguards to ensure that the individual placing the bet or wager is physically located in a jurisdiction that permits that form of Internet gambling (Frank).
The “Internet Gambling Regulation and Enforcement Act of 2007” addresses all of the issues which are of great concern on both sides of the argument. The act would stop underage gambling by requiring customers of these sites to provide a range of information including “name, address, date of birth, telephone number and details of an identity document, such as a driver’s license or social security number. This information would then be passed on to the Payment Service Provider (PSP) and run through the Know Your Customer (KYC) system to confirm that the data being provided matches against several separate sources of information and is in fact accurate. Operators could also request a physical copy of documentation, such as a utility bill and/or a copy of the customer’s identity document, for further verification” (Frank). Using modern technology and multiple means of verification this issue can be combated properly. “The issue of compulsive gambling can be handled by limiting credit limits by the operator, credit card company, Payment Service Provider, or all three as well as the use of public databases that include details used to identify persons who have chosen to exclude themselves from online gambling” (Frank). Fraud and money laundering are also points addressed by this act. “Funds entering a gambling operator’s system are already resident in the banking network somewhere. That is, the funds have previously been deposited into a bank account at some stage, subjected to stringent KYC requirements, and which greatly increases the traceability of any funds entering the system. All transactions can also be checked at the time of authorization against a number of anti-fraud, money laundering and terrorism databases” (Frank).
The ban against Internet Gambling doesn't make any sense when you look at the facts presented. All of the arguments against Internet gambling can be countered with logic and reason. Underage gambling prevention is already in place, and further regulation would only increase this. Stopping transactions between banks and gaming companies does little when there are numerous alternatives to funding gambling accounts, with regulation these transactions will become more transparent and working with these companies would prevent any fraud or money laundering along with potential billions in new tax revenue. With regulation being the reasonable choice, why did Congress opt for an all out ban? The Unlawful Internet Gaming Act was passed in the U.S. Senate on the last day of Congress, late at night with no floor debate by Congressman Bill Frist, and Jon Kyl and it was attached to an unrelated port security bill. Since the Security and Accountability For Every Port Act of 2006 was such an important piece of legislation the ban against online gambling was slipped in and passed without much resistance. The objectives and morals of a few Representatives were pushed onto the American people without any justification. This is an atrocity that should not have been allowed to happen. Now we the American people should not allow the agenda of a few to take away the personal freedoms of the many.
Congressman Barney Frank, along with the 48 other Representatives cosponsoring the bill to overturn the ban and regulate the industry have to sift through the bureaucracy in order to undo the agenda pushed onto the public by the few. Let us support our Representatives in securing our personal freedoms. If we allow the government to take away the right to play a little online poker from the privacy of our own homes, then what do we allow next? It's time to take a stand against ignorant government policies that attack individual liberties. Online gambling is more of a threat to the American public under it's current ban than it would be if we had sensible regulation. The American people should not have to sneak around and bypass traditional means of funding in order to enjoy a recreational game of poker and our government should protect consumers, not turn them into criminals by making a common recreational activity illegal.
Works Cited
Balko, Radley. “Can Internet Gambling Be Effectively Regulated to Protect Consumers and the Payments System?” Rep. 8 June 2007. Financial Services Committee United States House of Representatives. >.
Brunker, Mike. "Online gambling goes global." Technology & science. 10 Apr. 2001. Msnbc. 15 Feb. 2009
Dunstan, Roger. "Introduction of Gambling in the United States." California State Library. California Research Bureau. 19 Feb. 2009
Frank, Barney "Frank Introduces Internet Gambling Regulation and Enforcement Act of 2007." United States House of Representatives, 111th Congress, 1st Session. 26 Apr. 2007. House Financial Services Committee. 18 Feb. 2009 Giles, Warren. "U.S. Ban On Web Gambling Rejected - washingtonpost.com." Nation, world, technology and Washington area news and headlines. 31 Mar. 2007. 14 Feb. 2009 GovTrack.us. H.R. 2046--110th Congress (2007): Internet Gambling Regulation and Enforcement Act of 2007, GovTrack.us (database of federal legislation) (accessed Feb 19, 2009)
Kitchen, Gerald. Submitted for the Record Concerning Legislative Hearing on H.R.2046, the Internet Gambling Regulation and Enforcement Act of 2007 Rep. 8 June 2007. Financial Services Committee United States House of Representatives. Lee, Geoffrey, and Robyn McGuiggan. "Differences between land-based and online gamblers." Journal of Academy of Business and Economics 8.1 (Jan 2008): 72(14). Expanded Academic ASAP. Gale. Victor Valley College Library. 2 Feb. 2009 McDermott, Jim. "Protect Consumers and Finance the Nation's Priorities." Letter to House of Representatives. 29 Jan. 2008. Safe and Secure Internet Gambling Initiative. 14 Feb. 2009
Oliver, James. "Internet Gambling; Will History Repeat Itself." Cyberlaw 2001. 29 Mar. 2001. The University of Iowa. 19 Feb. 2009
Sullum, Jacob. "Some bets are off: the strangely selective and self-defeating crackdown on Internet gambling" Reason 40.2 (June 2008): 38(10). Expanded Academic ASAP. Gale. Victor Valley College Library. 2 Feb. 2009 United States. Cong. House. Committee of Conference. Security and Accountability For Every Port Act of 2006. 109th Cong., 2nd sess. HR H.R. 4954.
Wardle, Heather, Kerry Sproston, Jim Orford, Bob Erens, Mark Griffiths, Rebecca Constantine, and Sarah Pigott. British Gambling Prevalence Survey 2007. Rep. Sept. 2007. National Centre for Social Research. 12 Feb. 2009
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