Friday the 13th Was an Unlucky Day for Online Casinos

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Gambling law expert I. Nelson Rose analyzes the Unlawful Internet Gambling Enforcement Act of 2006, which was part of the Safe Port Act (naturally) signed by President Bush on Friday. Based on bills introduced by Reps. Jim Leach (R-Iowa) and Bob Goodlatte (R-Va.), the new law does not extend the reach of the Wire Act, which pretty clearly prohibits online sports betting but may or may not ban other forms of online gambling. Instead it prohibits financial institutions from processing money for "unlawful Internet gambling," defined as gambling that is already banned by federal, state, or tribal law.

Rose notes that "the Act exempts activities that we all know are gambling, but are, by statute, declared not to be gambling. These include securities and commodities, including futures, that are traded on U.S. exchanges." There is also special treatment for closed-system intrastate gambling in states where it's legal, for horse racing (but not dog racing), and for tribal casinos. But unlike earlier versions of the legislation, the bill does not allow state lotteries to go online.

Rose emphasizes that the U.S. government will have a hard time preventing overseas payment processors with no U.S. presence from continuing to help Americans gamble online. He says even U.S. banks are not required to keep track of paper checks to make sure they're not used to settle debts with online casinos. And while the law ostensibly allows the Justice Department to seek court orders compelling search engines to remove links to gambling sites, Rose writes, "what prosecutor would want to be ridiculed internationally for trying to prevent Google from showing links?" I'd guess there are at least a few, since the DOJ is willing to be ridiculed internationally for trying to impose the U.S. government's ideas of decent recreation on businesses in other countries.

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  1. Rose notes that “the Act exempts activities that we all know are gambling, but are, by statute, declared not to be gambling. These include securities and commodities, including futures, that are traded on U.S. exchanges.”

    Yes, buying 100 shares of stock is functionally equivalent to betting at the roulette wheel.

    What an idiot.

    Stupid arguments in support of not-stupid theses do not help those of us who understand the real reasons to oppose the ban.

  2. He says even U.S. banks are not required to keep track of paper checks to make sure they’re not used to settle debts with online casinos.

    This will last about as long as it takes the SEC and the OCC to get a memo from the DOJ saying they need to aid in the enforcement of these laws. Bet on banks having to keep track of paper items and make sure they’re not to online casinos by the end of next year.

  3. the Wire Act, which pretty clearly prohibits online sports betting but may or may not ban other forms of online gambling

    Actually, if you read the Wire Act, it makes clear that receiving bets over interstate wires is illegal. There is nothing illegal about placing such bets. The whole purpose of the original law was as an anti-mafia tool. way back then, and apparently now as well, “they” had no desire to mess with the American citizen’s God given right to gamble via the phone (or internet). This would turn the average Joe into a criminal that needed to be hunted down instead of merely an H&R poster of quasi-libertarian leanings…er, where was I?

    Oh yeah, it is perfectly legal to gamble online, except in Nevada (I shit thee not), and possibly some other states. You just can’t be “the house” online with American’s money. Nor can you be an American bank or credit card company that processes such transactions. But Neteller is a perfectly fine intermediary, so ultimately except for some dopey UK sites that just shot themselves in the foot by prohibiting Americans from gambling on their sites, the law doesn’t do diddly squat.

  4. Kip,

    Roulette, no. But how is buying 100 shares of stock different from betting on a football game? Or a horse race? Or playing poker, or backgammon, or any other game where both luck and skill are a factor?

    jafager

  5. the Unlawful Internet Gambling Enforcement Act of 2006

    Should we feel a little better, at least, that Congress admits the Act is unlawful?

  6. jafa,

    The important difference is that the odds are in your favor when you bet on stock (unless you go short).

  7. By the way, I got the Tigers to win the World Series at 15-1 a few months ago on an online book. Doesn’t really have anything to do with this argument, I am just bragging.

  8. GBMD: Thaaaaaat’s great.

    I’m wondering, does anybody think that the end of this law, would lead to legalized gambling all around, and the end of the public nuisance laws used to stop it?

  9. happyjugglerO:

    You got the whole thing right, I was going to say some of that, but you beat me to it. I predict a good thread here.

    KipEsquire:

    Playing the stock market is very much like poker, which is why many successfull brokers also excell at the game. A player in either arena must understand the numbers as well as the pyschology of the other players.

  10. Kip & GMBMD,
    Odds aside, it is still gambling. If I bet on a stock that I know will perform well, my returns will not be as great as if I take a big chance on some start-up biotech. Same applies to horse-racing. The sure thing doesn’t pay as well as the 50:1 but you stand a better chance of not loosing your shirt. Just because the SEC regulates it doesn’t mean it ain’t gambling. You can do all the homework in the world to try to mitigate your risk but ask anyone who lost out on Tyco or Enron just how well that worked out.

  11. Baylen: Now I get it, good joke.

    Gimme Back My Dog: Good luck. Uncertainty is one of the spices of life, something non-gamblers just don’t understand.

  12. If I buy a 100 shares it is not gambling in the same sense that a football game or any other type of gambling.

    For one thing I have no opportunity with the football game to continue to hold keep my bet in order to see if they win the next game. I also can’t cut my losses on the bet by selling at half time to see, because I believe my prediction is wrong.

  13. There have been some excellent arguments for and against stocks and securities as gambling. They all miss the point. There is a Christian, moral problem with gambling that doesn’t exist with stocks even though stocks are pretty much gambling. It grows out of casinos with the booze and the hookers, the back alley beatings and the loser husband who bets his family’s farm outside of Jackson and loses. In modern times, you are better off gambling on a stock, but the reason it isn’t controlled like gambling is the radical Christian wackos ramming god down your throat. I’m in favor of gambling (though I never do it) on anything, including roulette, stocks, horses, pissing contest, doesn’t matter.

  14. Speaking of bad analogies, is putting your money in an FDIC “insured” bank account considered gambling?

  15. This was ‘the last straw’ issue for me. I was a Republican voter for over forty years. I’ll never vote Republican again.

  16. Astute observers will notice that the Unlawful Internet Gambling Enforcement Act was stuck in the Safe Port Act, thus making our country’s ports safe from Internet gamblers. Politically active Libertarians who are reluctant to give too much emphasis to drug legalization should take up this cause, there are A LOT of pissed-off Internet poker players out there who need a political party they can suport and believe in. Who else can they turn to, the Democrats?

    Good for you, Grizz, the Republicans don’t deserve the votes of freedom loving citizens.

  17. For one thing I have no opportunity with the football game to continue to hold keep my bet in order to see if they win the next game. I also can’t cut my losses on the bet by selling at half time to see, because I believe my prediction is wrong.

    I’m a professional sports handicapper, and I approach it–as do 90% of the other people who are successful at it–the same way an investor approaches the stock market. We look for teams that are “overvalued” and “undervalued” relative to the pointspread. And while the poster is correct that you can’t “hold” a bet over to the next game some of the same concepts of “buy” and “sell” do apply–frequently you’ll see a team that performs poorly one week “undervalued” the next week, which many sports handicappers interpret as a “buying opportunity”. The opposite is also true..

    And every decent sportsbook posts halftime lines, which allow a bettor to modify his full game wager based on the results of the first half. A relatively new trend is betting exchanges, where the price on each team fluctuates over the course of a game based on buying and selling…..

    The advantage of sports over financial markets is that the “performance” of your “investment” is subject to “full transparancy” by its very nature. Every statistic is detailed, and in most cases I can watch it on TV. You’ll never see a sports team “restate earnings” or anything like that…

  18. Citizen D, there are many financial instruments that are time dependent just like a football game, options for example. And there are many ways to hedge sports bets as Mr. Murphy noted. You don’t seem to understand this issue very well.

  19. The important difference between the stock market and gambling is that stock, if it’s working properly, is invested in productive activity. Obviously there is skill in many games, but they are of necessity negative-sum. That said, with my linguistics degree and qualifications for teaching English, and as a somewhat profitable poker player, I’m now looking forward to ditching this country for awhile.

  20. The important difference between the stock market and gambling is that stock, if it’s working properly, is invested in productive activity. Obviously there is skill in many games, but they are of necessity negative-sum. That said, with my linguistics degree and qualifications for teaching English, and as a somewhat profitable poker player, I’m now looking forward to ditching this country for awhile.

    Let us know where you end up–you might have a lot of us gambling types joining you ; )

  21. I’m with Grizz. The GOP says they stand for personal responsibility, but they pass up a chance to prove it by pandering to the evangelicals. I won’t get fooled again. I hope Louisiana will allow local casinos to provide some intrastate online gambling. At least I still have my TVG. Unfortunately, knowing the number of damn fools playing poker these days, horse racing odds are not even close to as good as Hold-em odds.

  22. If I buy a 100 shares it is not gambling in the same sense that a football game or any other type of gambling.

    For one thing I have no opportunity with the football game to continue to hold keep my bet in order to see if they win the next game. I also can’t cut my losses on the bet by selling at half time to see, because I believe my prediction is wrong.

    Wrong.

    Check out if-betting and live in-game betting. Also, betting on futures (like the aforementioned Detroit 15:1 WS Win bet) provides ample opportunity to hedge. Then there’s scalping and middling, other great guaranteed-profit opportunities for shrewd sports investors.

  23. This is much ado about nothing. Just use something like E-Gold and gamble till you drop.

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