July 30, 2006

The gambling double standard

By: David White

Jonathan Kaplan’s Brokedown Palace begins when Alice and Darlene, best friends since childhood, decide on a summer vacation in Bangkok to celebrate their high school graduation. Things turn sour, however, after an attractive Australian convinces the girls to join him for a weekend trip to Hong Kong. Just before boarding the plane, airport police confront the girls and accuse them of smuggling heroin. They are promptly convicted and sentenced to 33 years in a Thai prison.

Just two weeks ago, a real-life British citizen suffered a similar fate in America. David Carruthers, the chief executive of BetOnSports.com, was arrested at the Dallas/Fort Worth airport when his plane touched down on a flight from Britain to Costa Rica. Although online gambling is entirely legal in those two countries, it’s not in the United States. Charged by U.S. prosecutors with racketeering and wire fraud for allowing U.S. citizens to gamble on his website, Carruthers’s arrest sent shockwaves through the online gaming industry, whose revenues are estimated to total $12 billion each year, of which about half comes from the U.S. On the London stock exchange, prices plummeted among the industry’s leading companies.

To industry observers, it appeared as if federal prosecutors were emboldened by recent congressional legislation. Two weeks prior, the House of Representatives passed a measure that would ban the vast majority of online gaming by prohibiting credit card companies and banks from sending funds to overseas gambling websites. Because of the Wire Act of 1961, Internet gambling within the U.S. had already been deemed illegal by the Justice Department. By operating overseas, however, sites such as BetOnSports.com thought they were safely circumventing U.S. law. After all, these companies figured that if an online gambling outfit is headquartered outside the states, then the betting takes place in that foreign country. It doesn’t matter where the customer sits.

Although political analysts considered the bill an election-year ploy–it is unlikely to gain traction in the Senate, and it was part of the House leadership’s politically pandering ““Values Agenda”–115 Democrats joined just over 200 Republicans in supporting the Republican-sponsored legislation. Few were willing, as Massachusetts congressman Barney Frank was, to lash out at the bill’s supporters by stating, “If people want to do something, and it doesn’t hurt anybody else, we ought to mind our own business. This is a bill to tell adults not to do something because people in this body disapprove of what they do.”

The online gambling community had a similar response. “The reaction to the congressional measure was anger and shock,” explained Joel Wertheimer, an avid online gambler who will be playing at the 2006 World Series of Poker. “As a liberal,” he continued, “I’m supposed to say that I’m OK with some milder forms of paternalism. But this one just seems insane.”

“First, it’s entertainment for a number of people,” continued Wertheimer, “we don’t ban pay-per-view. Secondly, the amount of money you need to play is so large that it’s quite hard for someone to become addicted and harm himself. I’m quite confident that people who play online poker can afford to play; they already have an Internet connection and a computer. Finally, poker is a skill game that increases one’s understanding of probability theory, mathematics, game theory, and psychology and, more generally, improves memory and cognitive function. If you were to ask the average congressman to read a basic skill book on poker, I think we’d be horrified by the number of them who couldn’t grasp any of it. We could do much worse than having a bunch of kids in the United States who knew how to play poker.”

But from data-mining and warrantless wiretapping, to the Justice Department’s War on Pornography, the state has never been so willing to regulate the private lives of its citizens, and politicians of all stripes are happy to go along for the ride. Like online gambling, Internet pornography generates an estimated $12 billion each year in revenue, a figure that is nearly identical to that of the three major television networks combined. Moreover, thanks to pay-per-view programs, companies like Comcast, TimeWarner, Cablevision, and DirecTV–all of which distribute adult content to their subscribers–earn hundreds of millions of dollars off sexually explicit material each year, as do the major hotel chains. According to CBS News, about half of all guest at hotels like Hilton, Hyatt, and Marriott rent adult movies, accounting for just about 70 percent of in-room profits.

And just like Internet gambling, online and pay-per-view pornography is consumed in the privacy of one’s own home. But because Americans are profiting, the Justice Department has yet to haul away the CEOs of these companies. After all, thanks to its U.S. omnipresence–and incredibly powerful lobby–horseracing was exempted from last week’s legislation.

As Joel Wertheimer concluded, “It’s just ridiculous. Barry Goldwater must be turning in his grave now that Barney Frank knows more about individual liberty than every member of the Republican Congress.”

And with legislators like that, let’s just hope that other nations don’t follow our lead. As Reason‘s Jacob Sullum pointed out, “If an executive of a U.S. media company were arrested in Beijing for violating a Chinese law against ‘subversive’ online speech, or in Tehran for creating ‘indecent’ Web content viewed by Iranians, Americans would ask what right these countries have to impose their illiberal policies on us.” Then again, aren’t those nations simply enforcing morals? Sounds like today’s GOP is learning from them.

David White, a former assistant editor of The American Enterprise, is a writer in Washington.