Alex Massie

Hold the Front Page: Morals Uncorrupted by Sensible, Liberal Policy

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Credit where credit's due, Labour's attitude towards gambling has been vastly more sensible than one had any right to expect. The Economist reports:

New laws which came into force in Britain at the beginning of September allow the creation of licensed internet casinos where people can gamble on games such as poker and blackjack. Until now, gamblers could try their luck at them only on servers located offshore.

The change is aimed squarely at encouraging the development of an internationally competitive internet gambling industry in Britain. The government reckons that online casino operators will be willing to come under the watchful eye of its regulators (and tax collectors) in exchange for more legitimacy with their customers.

A similar approach has already worked with betting firms, which were moving rapidly offshore until the government abolished its tax on wagers in 2001. Since then most British-owned businesses have moved back, and the country is now home to the some of the world's biggest publicly-traded betting firms. Leighton Vaughan Williams of Nottingham Business School reckons the government now garners more from taxing the profits of betting firms than it used to get from taxing the bets directly. And the amount people stake has also increased, from £7 billion in 2001 to an estimated £50 billion this year.

Liberalisation has not proved as damaging to British morals as critics feared. The Gambling Prevalence Survey, released on September 19th, surprised many with its findings, though some contest the figures. Although restrictions have been easing for years, the proportion of problem gamblers in Britain has barely changed since 1999, the survey holds, and, at about 0.6% of adults, it is lower than in more puritanical America.

Contrast this with the loopy approach taken in the United States. Then again, with people such as Congressmen Spence Bachus around, who could expect anything like common sense?

Meanwhile, CATO's Sallie James has the briefing you need on the US's awful dispute with Antigua over online gambling which,  fingers crossed, will result in a resounding victory for the plucky islanders. Here's why the US Congress is an embarrassment to the country:

In response to the adverse ruling, the president of the United States signed the Unlawful Internet Gambling Enforcement Act in October 2006. That act, attached to a law on port security, expands the 1961 Wire Act's prohibition on gambling entities' use of wire-based communications for transmitting bets to include the Internet. The act also forces financial institutions to identify and block gambling-related transactions transmitted through their payment systems...

Doubly irritating for foreign-based Internet gambling providers is the exemption the bill grants for transactions made in accordance with the Interstate Horseracing Act (for example, intrastate online bets made on domestic and some overseas horseracing through U.S. sites such as YouBet.com) and remote gambling conducted by Native American tribal groups. Those exemptions would seem to back the claim by Antigua and Barbuda that the U.S. laws are aimed at discriminating against foreign Internet gambling interests rather than at restricting gambling in general. In short, the new law does not appear to lessen the problem that sparked the dispute in the first place.

There are several things wrong with the U.S. response so far. First, it reeks of hypocrisy. Is online gambling any more or less immoral if the server is located abroad? Allowing state and tribal entities to engage in online gambling (not to mention lotteries and horseracing) but prohibiting foreign operators from running essentially identical operations on "moral" grounds is dubious to say the least.

Second, allowing financial institutions to examine and block transactions that are related to gambling seems a gross trespass on citizens' privacy. To the extent that some aspects of gambling are a government concern at all, surely allowing companies to set up legal sites in the United States, under proper supervision and regulation to prevent, say, children, from accessing sites, is a less blunt way of limiting the "social ills" that politicians insist come from gambling. The British government, for example, has legalized and licensed Internet gambling and recently hosted a gambling summit to discuss regulating the industry to protect children and otherwise prevent fraud and other crimes such as money laundering. The United States did not participate in that summit.

Third, the ban on Internet gambling and the electronic transfer of funds to finance it provides protection from import competition for the domestic gaming industry at the expense of consumers. Offshore online gambling operations would seem, from the domestic industry's point of view, to cut into their market share. Assuming there is a fixed demand for gambling services, presumably domestic gaming interests would prefer to have a captive audience and less pressure from competitors to increase their payout rate to consumers.

More indirectly, eBay was a chief proponent of the new act that prohibits online gambling and monetary transfers to pay for it.

PayPal, a subsidiary of eBay, has already promised lawmakers that it will bar its customers from using PayPal accounts for Internet gambling and other "adult-oriented" goods and services. Having excluded itself from the market for those types of money transfers, PayPal will gain from this act to the extent that it prevents competitors from gaining market share. To be sure they are complying with the new act's provisions on identifying and eradicating gambling payments, it is possible that many of PayPal's competitors will simply ban all transactions with offshore financial payment services. As Radley Balko points out, "Offshore companies like Neteller and FirePay . . . are safe and reliable . . . but aren't subject to U.S. law, and so can be used for all sorts of goods and services the U.S. government has determined American's aren't grown up enough to purchase . . . [including] Internet gambling."Limiting competition in online financial services will be a boon to PayPal but a loss for U.S. consumers.

Written byAlex Massie

Alex Massie is Scotland Editor of The Spectator. He also writes a column for The Times and is a regular contributor to the Scottish Daily Mail, The Scotsman and other publications.

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