Prohibition lessons for Net gaming in the LVBP

In an opinion piece vindicated by last Thursday’s adoption of online poker rules for Nevada and the DoJ ruling that the Wire Act only applies to sports betting, I argue in the Las Vegas Business Press that politics won’t trump pragmatism when it comes to online gambling.

The opposition of Adelson, who has solid political connections, particularly within the Republican party, would seem to render that possibility moot.Or does it?

Politics is only part of the online gambling equation, and, despite current appearances, not necessarily the most important part. A comparison with Prohibition, which banned alcohol in the 1920s, is instructive.

via Las Vegas Business Press :: David G. Schwartz : Prohibition may offer lessons for Net gaming.

I wrote this well before last Thursday…a week before, to be precise. That’s when the echo chamber was reverberating with news that Adelson was morally opposed to online poker. The “consensus” was that online poker was dead in the water.

But, as we saw, the politicians haven’t had the last word on this–at least, Congress hasn’t.

I’ve been saying for years now that the best way to handle online gaming is to let states regulate it. As with horse racing, states can decide on their own if they want to legalize online poker, then figure out how to split the revenues among themselves. And it looks like that’s where we’re headed.

Another anti-gambling editorial

Another week, another smug, alarmist anti-online gambling editorial, this time from the Christian Science Monitor:

Fresh from fixing Wall Street’s casinolike ways in high finance, Congress begins work Tuesday on a bill to overturn a 2006 law banning Internet gambling in the US. The measure is being rushed through the House Financial Services Committee on a promise that it would create 30,000 jobs and billions in tax revenue.

via Bill to legalize Internet gambling: No dice –

I dare you to click through and read the whole thing–it’s short and really all over the place. Let me point out a few of what I believe are misconceptions or exaggerations

1. “a promise that it would create 30,000 jobs and billions in tax revenue”
I’ve said before that most of the projections I’ve seen seem to be to be way too optimistic. I’d really like to see the math behind these numbers, because to me it doesn’t make sense.

2. “Any parent who’s puzzled or despaired over their child’s trancelike playing of video games during the past 20 years can readily see why Internet gambling operators are drooling over the chance…”
In other words, adults shouldn’t be allowed to choose whether to gamble online or not, because children are incapable of not playing video games. So does that mean we’re all children when it comes to gambling, or just gambling on computers?

3. “It’s ‘click the mouse, lose your house.’”
Great, Professor Kindt came up with a rhyming catch-phrase to go up there with “If it doesn’t fit, you must acquit.” But does this make sense? Is it inevitable that everyone who gambles online will lose their house? A few thousand online poker players would say no.

Here’s the general problem with the editorial: it assumes that the worst will definitely happen. It doesn’t take much thought to reduce this to the absurdity that it is. Over a hundred people will probably lose their lives in auto accidents across the United States today (source here). Does that mean we should all stop driving? Someone returning to the United States from abroad will smuggle drugs into the country today–should we close our borders and ban all travel to prevent this? Again, most people would say no. In short, you can’t make rules for society that assume that the worst will always happen. Otherwise, you’ll end up with the most repressive regime the world has ever known.

Now, that’s not to say that the editorial doesn’t made some good points. Which leads toP:

4. I have no idea how the government could squeeze $42 billion in tax revenue out of online gaming. Right now, Americans only gamble about $90 billion a year. Let’s say that online gaming increases the total national wager by 10%, or $9 billion. What do you think the tax rate should be? Even if it was 50%, you’d only be getting $4.5 billion a year, which is a lot of money for most of us, but not much where the federal budget is concerned; I’d guess that much of that would be split with the states as well.

5. We also should take a serious look at state versus federal regulation of gambling. I’m not sure a federal solution would ultimately be in the best interests of any of us, from taxpayers to gamblers to the industry. Interstate horse-race simulcasting provides one model of states cooperating to split gambling revenues, and this approach should be given more consideration.

It’s possible, however, to debate the merits and mechanics of expanding legal gambling without resorting to “click your mouse, lose your house” reductionism and blatant scare-mongering.

Talking online gambling on KNPR

This morning I joined KNPR’s State of Nevada host Dave Berns and poker legend Howard Lederer in studio to talk about the Frank bill and the proposed legalization of online betting in the US:

Americans are expected to lose $22 billion next year via Internet betting, although the practice is technically illegal in this country. We talk with online betting supporter, Rep. Barney Frank, D-Mass., and UNLV Prof. David Schwartz.

Online Betting: News 88.9 KNPR – Nevada Public Radio.

Les Bernal, of Stop Predatory Gambling Now, and Arnie Wexler, a problem gambling counselor, rounded out the discussion. Rep. Frank was on via the magic of a previously-recorded interview.

Lederer made several cogent points about how online poker sites work, and addressed some of Bernal’s accusations about predatory gambling and online poker.

If it isn’t clear enough in my answers in this excerpt, my position is that gambling online is far more similar to gambling off-line than it is dissimilar. Any of the concerns that can be raised about online gambling–including addiction and fraud–could also be leveled against gambling off-line. This doesn’t, however, mean that online gambling shouldn’t be legalized. Rather, we simply need to be realistic about our expectations of what it will and won’t entail.

Throughout American history (indeed, world history), there have been real discussions about the role of gambling in society. At some times, it’s completely outlawed. At others, it’s tolerated on the margins, and, as has become increasing common, it’s often legalized and promoted.

Once the decision is made to take gambling out of the back alleys, distinctions between what kinds of gambling are permitted begin to confuse the issue. As I said on the air, is there really that much of a difference, from a public policy standpoint, over whether someone takes $50 and buys instant lottery tickets at a convenience store or uses that $50 to set up an account and play poker? They’re both gambling, after all.

If states not only allow, but actually encourage people to do the former, why not allow them to do the latter?

I think that both those who support online gaming and those who are opposed to it have gotten too far away from this basic question. Emotions run high on both sides of the issue–those who want to play online see any prohibition as trampling their liberty, and those who fear the expansion of gambling see the threat of a “casino that never closes” in every dorm room.

In the United States, there is no fundamental right to gamble. In two states, gambling of any kind is entirely illegal. The other 48 states, however, allow various forms of gambling. In this case, the question stops being one of crime control and starts being one of regulation. Privileging one form of gambling over another–lotteries vs. casinos in South Carolina, or casinos vs. lotteries in Nevada–can be seen as hypocritical and archaic.

Likewise, there are already “casinos that never close” within a short drive of most Americans. In fact, federal, state, and local governments spend millions of dollars to maintain infrastructure that allows citizens to access these casinos anytime they wish. But no one would argue that we need to dismantle the roads because they can bring people to casinos.