Commentary

Internet Gambling Ban Faces Losing Odds

The Communications Decency Act treated Internet users like second-class citizens. Because the legislation criminalized online expressions that would have remained legal if in print, the Supreme Court ruled it unconstitutionally discriminated against Internet speech. Now Congress has targeted Internet gambling for discriminatory treatment, apparently undaunted by the harsh lesson in lawmaking.

The Internet Gambling Prohibition Act, sponsored by Republican Sen. Jon Kyl of Arizona, would ban every sort of online commercial contest, everywhere in the United States, for everyone involved. The Senate Judiciary Committee recently reported Kyl’s bill to the full Senate for debate and a final vote. It already has 11 cosponsors, while its companion bill in the House, introduced by Republican Reps. Bob Goodlatte of Virginia and Frank LoBiondo of New Jersey, has 43.

Kyl has defended the Internet Gambling Prohibition Act as merely an update of the Wire Act, the federal statute that already regulates wagering over the telephone wires. “Our gambling laws must be consistently written, applied and enforced so that activity which is illegal in one forum is not allowed in another,” Kyl’s news release trumpets.

Yet his act would repeat the errors of the Communications Decency Act by treating Internet users like second-class citizens. The Internet Gambling Prohibition Act would penalize online gambling more harshly than off-line gambling in several respects.

The act would, for the first time, subject amateur bettors to federal liability for gambling. The existing Wire Act, by contrast, applies only to people “engaged in the business of betting or wagering.” E-mail your picks to the office football pool, and under Kyl’s bill you would face a $2,500 fine and six months in jail. Phone in your picks and you would remain free.

The act would also, for the first time, make interstate gambling illegal between states that have legalized the games in question. The existing Wire Act, by contrast, exempts from prosecution “transmissions” that assist “in the placing of bets” between two states, or a state and a foreign country, so long as both jurisdictions permit such betting. The Wire Act rightly keeps the federal government out of otherwise legal business, whereas Kyl’s bill would create a whole new class of federal crimes.

The act reaches beyond the Internet — and even interstate communications — to interfere with matters better left to state and local authorities. The act’s coverage includes “any information service” that “enables computer access by multiple users to a computer server.”

Even an office e-mail system could fall within that broad a definition. The Wire Act that Kyl claims to take as his model modestly, and properly, limits its scope to transmissions “in interstate or foreign commerce.”

Could this blatant attempt to discriminate against Internet users actually become law?

At first glance, the political odds seem to favor it. After all, few left-wing activists will raise First Amendment objections on behalf of Internet gambling. And conservatives, while nominally in favor of free markets, make notable exceptions for activities like gambling that smack too much of the pursuit of happiness.

Powerful lobbies favor a ban on Internet gambling. The established, off-line gambling industry has huge overhead costs and a corresponding fear of new competitors. It also brings very deep pockets to the debate. In 1996 the (legal) gambling industry raked in over $500 billion — more than the revenues of new and used car retailers or of food stores.

State and municipal authorities, having grown fond of nurturing and taxing local gambling, worry Internet gambling will put their cash cows out to pasture. Their lottery monopolies, which brought in $43 billion in 1996 (up 11 percent from 1995), give state and local authorities a direct stake in preventing citizens from shopping for better odds on the Internet.

Regardless of the political forces working in its favor, though, the Internet Gambling Prohibition Act would make for poor public policy. We do not need a new law that specially targets Internet gambling because, as the Department of Justice has admitted, the Wire Act already applies.

The Justice Department has, moreover, confessed it cannot enforce a broader ban on Internet gambling. In mid-1996, the National Association of Attorneys General urged the Justice Department to interpret the Wire Act along the lines of Kyl’s bill. The Justice Department declined, explaining, “The department does not agree that federal law should be amended so broadly as to cover the first-time bettor who loses $5.”

Despite the special interests pushing for its prohibition, most Americans would embrace Internet gambling. At least 56 percent of Americans gambled in 1996, and legalized gambling represents the fastest-growing sector of the entertainment business. Internet gambling can help to satisfy the huge demand for new gambling services and provide competition to ensure that existing services treat consumers well.

Indeed, Americans already have shown they support the nascent Internet gambling industry. Analysts calculate that of the $1 billion wagered online in 1997, about $600 millionwill have come from the United States. If not stymied by special-interest legislation, the Internet gambling industry by most accounts will grow into a $10 billion business by 2000. In fact, because the Internet offers individual bettors instant access to overseas gambling sites and relative safety from prosecution, Internet gambling will grow regardless of what lawmakers and prudes want.

Whether you regard gambling as good clean fun, a social disease or the devil’s handiwork, the Internet Gambling Prohibition Act faces losing odds in the long run. Lawmakers lost an awful lot of political capital in the Internet community by supporting the Communications Decency Act. That spectacular failure holds a lesson about laws like the Internet Gambling Prohibition Act: Given a chance to vote on an unenforceable law that discriminates against Internet users, lawmakers should walk away from the table.

Tom W. Bell is director of telecommunications and technology studies at the Cato Institute in Washington.