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All bets are off for Internet gambling prohibition

By Jonathan Stanewick
web posted July 15, 2002

Two bills proposing bans on Internet gambling are awaiting a vote on the House floor. One bill would prevent the transfer of funds from credit card companies and other financial institutions to Internet gambling sites. The other bill would update a forty-year-old ban on interstate wagering so that it would apply to the Internet and also include state lotteries.

The supposed need for such legislation arose from fears that the recent growth in online gaming (offshore on-line casinos are expected to rake in somewhere between $5 billion and $6.4 billion next year) will encourage compulsive gambling and undermine local authority. Despite the fact that gambling is a vice for some and many of us find it morally repugnant, there is no reason why the federal government should have final say over whether we may or may not do it.

The proposed legislation for the ban on interstate gambling was initially riddled with carve-outs for "politically favored" activities such as horse racing and jai alai. However, in order to pass the Judiciary Committee, these carve outs had to be removed. Fortunately for privacy advocates, this will lead to the bill's ultimate demise, as it will lose the backing of numerous gambling groups. "As of right now, we don't have those issues scheduled," said California Republican Representative David Dreier, chair of the Rules Committee.

It is important to note that these bills present numerous risks to both individual liberty and American democracy by expanding the reach of the federal government into an area that is mainly controlled at the state level.

These proposals directly contradict rights given to the states in the Tenth Amendment. Gambling in the real world has always been dealt with at the state level, and should be on the Internet as well. Imposing a universal policy would be a foolish and possibly dangerous idea, as community views on gambling vary widely from state to state. Also, by taking away a state's power to regulate its own lottery, as proposed, this legislation ignores the fundamental right of the states to self-governance.
Furthermore, the term "gambling" in the bills is not explicitly defined.

This lack of definition opens the door to more stringent regulation of the Internet. By allowing future prohibition of online auctions and even day trading, which may be seen as gambling, those looking to further regulate the Internet have a loophole. These bills also present a very dangerous movement towards federal regulation of the entire Internet. As Free Congress Vice President for Technology Policy Lisa Dean asked during her House testimony two years ago, if gambling is prohibited, what is to prevent legislation to extend the ban to other industries distasteful to those in Washington?

Additionally, this legislation would require financial institutions to monitor their customers' transactions. Deputizing credit card companies is not only an invasion of citizens' privacy but also a misuse of law enforcement's authority. These requirements also put an unnecessary burden on financial institutions, having to assure that a company is not involved with online gaming prior to transferring funds.

Finally, if Internet gambling were to become illegal at home, United States citizens would be forced to open offshore accounts to fulfil their gambling desires. Such action will result in an economic drain from financial institutions within the United States. Also, gambling addicts with money outside the country may not be exposed to all available help, as laws requiring casinos to post help options would not apply outside the U.S.

Congress may think its intentions are pure, but upon closer inspection, it is obvious that any such legislation is an attempt by the federal government to expand its power and gain a foothold in regulating the Internet.

Regardless of whether or not Congress passes legislation to ban Internet gaming, citizens will continue to use their computers to gamble. Those addicted will not simply quit because the government forbids it. They will find a way around any barriers. In the end, any legislation passed on Internet gambling will result in a reduction in fundamental freedoms for people in the United States, while the social ills caused by gambling will remain uncured.

Jonathan Stanewick is a senior at Tufts University and a summer research associate at the Free Congress Foundation's Center for Technology Policy.

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