Felix Salmon on Internet Gambling

He writes:

But it’s insane to legalize an activity on the grounds that some tiny fraction of the people doing it are very successful at it. After all, the vast majority of poker players never go pro, and the vast majority of poker pros never become champions. Overall, the number of people who lose money playing poker is much larger than the number of people who make money at it.

It’s equally insane to outlaw an activity on the grounds that some tiny fraction of the people doing it are very unsuccessful at it. I realize he was responding to Steve Levitt, but the argument for the legalization of online gambling has very little to do with the fact that a subset of poker players are “professionals” who are able to make money consistently through gambling. The argument in support of online gambling (aside from the whole we live in a free society thing, which he casually tosses aside) is that its an activity that a large number of Americans clearly want to participate in. Gambling is a form of entertainment. I haven’t heard of many moviegoers who consistently turn a profit after a night at the cinema, yet we seem to still allow Americans to watch movies (these days you can even watch them online, which is again, something you lose money doing).

Continuing on:

The point here is that it’s the job of the government to look after the weakest members of society. Ultimately, if someone becomes a drug addict or loses their life savings gambling, it’s society as a whole which has to pick up the pieces and support that person. And so the government has an incentive to circumscribe such activities and even make them illegal — even if a handful of people could engage in them successfully.

It’s also the job of the government to protect the basic rights and freedoms of Americans. The paragraph here also implies that only a “handful” of people can engage in Internet gambling successfully, which is nonsense. Successful Internet gambling does not necessarily mean you won, it means you voluntarily choose to participate because its an enjoyable activity, just like regular casinos, which if Felix hasn’t checked are still quite popular in America. This link indicates that less than 1 percent of the adult population can be defined as having problems with gambling, so even if that’s off by a large amount its still a small fraction of the population.

I’ve tried playing online poker myself, and didn’t enjoy it all that much: for me, the pleasures of a poker game are first and foremost social ones, rather than being mainly gambling-related. Gambling serves very little in the way of public utility, and it makes sense to regulate it. Should online poker be banned entirely? Unless and until there’s a robust regulatory infrastructure in place, yes. Casinos are very carefully regulated, and I’m not sure it’s even possible to regulate online poker sites that assiduously. But certainly up until now those sites have been operating more or less outside any regulation at all. Which is why it makes sense to me that they were shut down.

Many people do enjoy the gambling-related pleasures (competition, critical thinking, etc.) that go into Internet poker. One could also argue that almost any pleasurable activity “serves very little in the way of public utility,” and if that is the basis for allowing Americans to live their private individual lives, its not an America I want to live in. As many of the commentators on his site pointed out, its quite easy to regulate online poker to restrict access to minors and apply the same gambling addiction services that are offered by casinos. This has already been done successfully in a number of European countries. Do some people suffer from gambling problems? Absolutely, but the same is true of almost any activity on earth when taken to the extreme.

Finally, its worth noting that though “those sites have been operating more or less outside any regulation at all,” Armageddon has yet to arrive (aside from the DOJ restricting access to the funds of American players). Internet gambling has seen one large issue with a well populated site, as discussed here by my colleague Michelle Minton.  And remember, regulated industries in the United States don’t exactly have track records of perfection. The two largest sites serving U.S. players, Pokerstars and Full Tilt, were well liked by American players and did the best they could to restrict access to minors (this is actually a place where U.S. regulation might help), offer self-exclusion services, etc. Enormous resources were employed to ensure the games were fair and very sophisticated methods were developed to catch collusion among players, all done on a voluntary basis.

Online poker was working quite well without the U.S. government. Perhaps that’s why they got involved.