And what powerful, sweeping remedy does the commission propose to stop such woes? A moratorium on the expansion of gambling.
The incumbent industry must have raised many a toast to that recommendation. Though already well-protected from competition by highly restrictive licensing schemes, it would, if the commission's proposal became law, win a legal lock on the gaming market. Its would-be competitors online, not having jumped through the requisite regulatory hoops, would never even get started.
In the short run, then, Kyl's bill will mean trouble for the fledgling industry, its customers, and the Internet service providers (ISPs) who connect them. But itwill not stop online gambling. The very architecture of the Internet will frustrate prohibition.
The Internet relies on a packet switching protocol that breaks each message into discrete parts and sends them over various unpredictable routes, to be reassembled at the message's destination. It's a bit like writing a letter, chopping it up, and mailing each piece separately to the same address.
Now imagine Congress ordering the U.S. Postal Service to search for and seize all correspondence related to illegal gambling. The post office would object to the cost and futility of the task, while its customers would object to having their privacy violated. Nor could the postmen simply stop delivering mail to and from addresses associated with illegal gambling. Gamblers would simply change their P.O. boxes periodically and send letters without return addresses.
Attempts to ban Internet gambling face even higher hurdles. The flood of data alone prevents ISPs from discriminating between illicit gaming information and other messages. Furthermore, it's much easier to encrypt messages, change addresses, and send and receive mail anonymously on the Internet.
And e-mail has no monolithic postal service. It relies on thousands of separate and wholly private service providers, many of which stridently object to enforcing a burdensome ban. Testifying before the National Gambling Impact Study Commission on behalf of over 250 ISPs, Ralph Simms said that the prohibitionists "imagine that problems of illegal content on the Internet could be resolved if ISPs assumed the role of traffic cop. This could not be further from the truth." Unless a gambling site rents space on an ISP's own server, Simms said, "the ISP has virtually no ability to control it."
Furthermore, American cops can do little to stop the explosion in legal gambling sites based in other countries. Such services can already set up shop in Australia, Antigua, Austria, Belgium, Costa Rica, the Dominican Republic, Finland, Germany, Grenada, Honduras, Liechtenstein, Mauritius, Vanuatu, and Venezuela, among other places. This growing number of overseas havens guarantees that, regardless of domestic policies, U.S. consumers will have access to Internet gambling.
Even Kyl admits that "we don't have jurisdiction over the people abroad who are doing it." To isolate Americans from the gaming traffic, he proposes to "pull the plug at the point of entry into the United States." But that traffic can enter the country from any number of overseas sites. To stop the trade, Kyl would have to "pull the plug" on every international Internet connection. He might as well demand a ban on horseless carriages.
Given those constraints, Kyl's bill cannot work as intended. It would, however, sorely compromise the cost, efficiency, and security of Internet communications; it would bring legal trouble to several otherwise innocent gamblers; and it would mock the rule of law.
Fortunately, no full ban on Net gambling would likely survive, especially after cooler heads in the nation's revenue departments recognize the prohibited pastime as a new breed of cash cow. Prohibition, after all, merely ensures that bettors will ship their money to gambling sites based abroad; state governors and legislatures in the United States will soon demand a share of that bounty. The same political forces that have led to the widespread legalization of lottery, casino, and riverboat gaming will thus eventually embrace online gambling too. We can get there quickly and easily or slowly and painfully, but get there we almost certainly will.
By the same token, some in the existing gaming world do not fear competition from the Net as much as they want to take it on. The industry has thus taken the somewhat awkward position of demanding that Internet competitors share its regulatory burdens. "We cannot support it without tough regulation," American Gaming Association President Frank Fahrenkopf told the Las Vegas Review-Journal last year. Fahrenkopf and his allies prefer not to dwell on whether Internet gambling poses a competitive threat, nor do they publicly demand that it share their shackles simply to keep it from speeding ahead. They instead argue that the absence of regulation could lead to a scandal tainting the entire industry. It seems far more likely, however, that an Internet scandal would reaffirm the distinction between honorable old-timers and naughty onliners.
In all likelihood, the domestically licensed gambling industry simply wants to slow down its Internet competitors until it can join the race. Big-name casinos already sport some of the flashiest sites on the Web. Some, such as Caesar's Casino, run real sweepstakes online. The Hard Rock Casino has already set up space on its site for a virtual casino. Naturally, Kyl's bill includes an exemption for such online advertising and promotion. If and when U.S. lawmakers finally legalize Internet gambling, the incumbent industry will stand ready to cash in.
And so will the rest of us. Despite what you've been told about the evils of the betting life, legal gambling on the Internet would cause far less harm than you probably suppose--and it would provide some remarkable benefits.
Real-world casinos, we hear, lure gamblers into windowless caverns far from the real world, with money traps at every turn and free-flowing booze. Sadly, they give customers places to socialize, creating little communities that console losers and--for a price--minister to the lonely. True or not, such criticisms certainly do not apply to Internet gambling, which must vie with slamming doors, barking dogs, and other household distractions. Online gamblers have to buy their own drinks, too, and console themselves when they lose.
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