Vice Squad
Sunday, September 21, 2003
Internet Gambling

Access to legal gambling has accelerated in recent decades, particularly in the United States.
State lotteries, effectively forbidden during the 20th Century until 1964, spread rapidly in the
1970s and 80s, and now 38 states offer lotteries. Casino betting, spurred in part by
legislation in 1988 that codified the rights of Native American tribes, also skyrocketed; by the
end of the 20th century, more than half of the US states housed legal casinos, whereas only
a quarter-century earlier, Nevada was the sole state offering casino gambling. Developments
in many other countries also tended towards liberalization of gambling, as exemplified by the
introduction of the British National Lottery in 1994 and the expansion of casino gambling in
Britain, Australia, and Canada.

Somehow, in overall terms, this enormous increase in legal gambling opportunities has taken
place with rather limited controversy. For the most part, I would say, folks accept the new
status quo and are not that anxious to roll back legal gambling to the situation of the 1960s
or even the 1970s. Further, one of the major remaining legal constraints, that forbidding
betting on sporting events (except in Nevada, basically), is widely and almost openly evaded.

Nevertheless, a major battleground remains, and that concerns gambling via the Internet.
Gambling websites are essentially illegal if they are housed in the US, but in many other
countries they are legal, licensed, and welcome. These sites offer betting in various forms to
US citizens, both over the phone and over the web. That Internet wagering sites are quite
popular with Americans is evidenced by the fact that they make billions of dollars in revenues
from US-based bettors.

Senator Jon Kyl (R, AZ) has been waging a battle against Internet gambling for some time
now. The recent suggestions from his Republican Policy Committee (which can be
downloaded as a PDF from this page) are aimed at preventing financial
institutions from facilitating payments from bettors to Internet gambling operations. (Thanks
to my primo research assistant, Ryan Monarch, for digging up the linked document.) This
proposal is an improvement over Sen. Kyl’s preferred legislation circa 1997, which would have
made gambling over the Internet a federal crime, creating the specter of grandmothers who
played a few hands of Internet video poker being arrested by federal agents. A bill to make
the consumption of Internet gambling a federal crime actually passed overwhelmingly in the
Senate in the late 1990s.

And are we really all that worse off because that bill did not become law (so far, at least)?
Like most vices, Internet gambling is prey to what I call the three and one-third standard
vice concerns: kids, addicts, externalities, and (the one-third component) harms to
non-addicted adult indulgers themselves. But the existence of the three and one-third
concerns does not imply the desirability of a prohibition backed by criminal penalties,
whether the vice that we are discussing is gambling or pornography or heroin consumption.
(And of course, lots of folks take some pleasure from gambling.)

The three and one-third vice concerns, as well as "harm reduction" measures, will
undoubtedly be recurring themes as the Vice Squad blog develops. For now, let me just note
that the approach of many other countries towards Internet gambling is less punitive than that
envisioned by Sen. Kyl. The British, in particular, are moving towards a regulatory structure
for Internet gambling, and are liberalizing their gambling restrictions more generally. With
respect to the Internet, British citizens can already legally gamble from their homes. Websites
based in Britain currently cannot offer gambling, but the government intends to change
that. A British licensing system will be established that will
attempt to ensure that licensed on-line casinos meet high standards of quality. (The Internet
is not the only method to bet from home in Britain. Recently, wagering via interactive television
has become popular in the UK.)

By the way, the New York Times Magazine from a month ago (August 17, 2003)
contained a fine article ("Bookies in Exile" by William Berlind) on American web gambling
operators based in Costa Rica.)

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