Five Years in Prison for Online Gambling

Next week, a law takes effect in Washington State that makes Internet gambling a Class C felony, punishable by up to five years in prison. It's the same class of felony reserved for child pornographers, animal torturers, and people who make threats on the governor's life.

Lawmakers and state officials say the intent of the law isn't to go after gamblers themselves. One wonders, then, why the bill was necessary. The "bet taking" side of online gambling is already a federal crime, and has been for years. That's why gambling sites are incorporated and located overseas.

The only conceivable reason why a bill might be needed would be to clear up the ambiguity on the "bet placing" side of the transaction. No one seems to know whether the user-end of online gambling is legal. This bill is quite clear on that -- the placing of bets via the Internet is now a felony in Washington. Indeed, one official conceded to the Seattle Post-Intelligencer that vice agents have already begun breaking into the homes of people gambling online to warn them that the activity is illegal. They'll now be able to arrest them too.

In addition to the usual paternalistic objections, the bill also raises significant privacy concerns. How will state officials know who's gambling unless they're closely monitoring citizens' online habits? Will they begin snooping through ISPs?

The other option would be to track the finances of suspected gamblers. That's even more troubling. Most gaming sites now conduct transactions with U.S. customers through offshore payment services like Neteller or FirePay (U.S.-based PayPal was threatened out of the business by federal prosecutors via the PATRIOT Act). In industry jargon, these are called "ACH" transactions. They're more commonly known as a "virtual check." But banks can't trace the nature of ACH transactions. They can only trace the name of the vendor. A customer could be using Neteller or FirePay to purchase just about any good or service online. But it's conceivable that merely using either service could be enough to set off red flags for state investigators.

Though predicated on concerns about problem gambling and children's access to gaming sites (virtually impossible, by the way), it's probably worth noting that the Washington law has been pushed with heavy backing from the state's bustling bricks-and-mortar casino industry. Sort of undercuts the notion that moral aversion to gambling is motivating all of this. The politically powerful horseracing industry won an exemption from the ban too.

If there's a bright side to the bill, it's the public reaction to it. Comments posted on the state legislature's website aren't just overwhelmingly negative, they're scathing. In fact, polls show most Americans are by and large opposed to state and federal attempts to prohibit Internet gambling.

More on the folly of Internet gambling prohibitions here and here.