Should Washington Ban Internet Gambling?

June 13, 2002 • Commentary

Your after‐​tax income belongs to you. You’re free to spend it, invest it, waste it, burn it, or tithe it, and none of that is the business of politicians. But if some legislators have their way, you won’t be able to use your money to gamble on the Internet.

The House Judiciary Committee is set to approve a bill to ban online betting by such means as banning the acceptance of credit cards or other instruments to process gambling transactions.

In this post‐​September 11 era it’s understandable that politicians would be concerned about shady financial goings‐​on on the Internet. Gambling operations can be a tool for money laundering. But passing such all‐​encompassing, all‐​monitoring legislation is the wrong approach.

In this privacy‐​sensitive era, the obvious question arises: Assuming you were gambling on the Internet, how would the government ever know about it? For the government to know about such personal, consensual behavior requires spying. And that’s what anti‐​gambling legislation would require. Banks and Internet Service Providers would be drafted into the role of snooper, sifting all financial transactions. The notion of government mandating surveillance of private computers is repugnant.

And to impose federal surveillance on consumer financial transactions before consumers have even universally embraced Internet banking and commerce as such has serious implications for people’s willingness to welcome online finance.

Not surprisingly, credit card companies don’t want to be deputized as hall monitors in this crusade, responsible for assuring that companies for which it processes card services are not involved in gambling operations.

But the bottom line is that even if one were gambling, government has no right in principle to know about it, or to force disclosure of that information. Lawmakers need to be questioned intently on the privacy implications of this crusade.

Another rationale for gambling restrictions is to target, not the gamblers, but shady dealers who run phony, fraudulent operations. But consumers have the incentive to look for endorsements and seals of approval of the gambling operations with which they transact, and to avoid fly‐​by‐​night operators. Most people realize that gambling is a pastime in which the house usually wins. (Of course there are always risks. Even upstanding games of chance like those offered at McDonalds restaurants have had problems with manipulation by insiders.)

While gambling is a problem for some who have trouble controlling themselves, others enjoy the challenge or just think it’s fun, and are able to contain their addictive impulses.

And legislation is notoriously slippery. What constitutes “gambling” is often in the eye of the beholder — or legislator. Fantasy sports gets a limited exemption, as do horseracing and jai alai. Even investing can be a “gamble” in the sense that “the opportunity to win is predominantly subject to chance” — as the legislation defines gambling. Yet the anti‐​gambling proposals exempt “any over‐​the‐​counter derivative instrument,” though these clearly are not for the faint of heart.

Only some gambling is bad, apparently. One gets the impression that the real motive of anti‐​gambling legislation isn’t protecting against crime or protecting vulnerable individuals against the unscrupulous, but the desire to legislate behavior and control others. But it’s not the job of politicians to hector constituents about morality or finances.

Rep. Barney Frank (D‐​Mass.) rightly opposed the idea of government regulation of consensual behavior: “It is all motivated by the fact that a good number of people think gambling is something people shouldn’t do…I don’t think we should set ourselves up as the national household budget manager.”

Similarly, Rep. Ron Paul (R‐​Tex.) summed up the matter well early on. “[T]he overriding freedom issue [with respect to gambling] is whether or not government should be involved in trying to improve personal behavior by an authoritarian approach by the use of law. This really falls into the category of legislating morality. I don’t happen to like gambling, and I think it is rather dumb, to tell you the truth, but in a free society, people should have the right to do dumb things.”

Government shouldn’t turn vices into crimes — even granting the notion that gambling is a vice, which is open to question. Perhaps pork barrel spending is a more serious vice, one to which Congress should direct its attention. Are gambling losses significant compared to pork barrel and other extravagant spending, to which citizens are forced to contribute?

Once we travel down the road of regulating behavior on the Internet, there’s basically no limit to government’s ability to regulate voluntary speech and interaction and to substitute its moral vision for those of individuals. Washington should mind the federal budget casino instead.