Newsweek’s Cover Story on Internet Gambling Plays Fast and Loose with Facts
Newsweek’s recent cover article on online gambling, “How Washington Opened the Floodgates to Online Poker, Dealing Parents a Bad Hand,” by Leah McGrath Goodman, has elicited a wide range of deservedly negative responses. The title alone indicates its blatant bias. However, Goodman’s one-sided article presents a good opportunity to dispel many of the falsehoods and unwarranted fears swirling around the online gambling discussion.
Until 2011 the Federal Wire Act “had been viewed by U.S. courts—and the DOJ’s own Criminal Division—as prohibiting all forms of online gambling.”
According to Goodman, in 2011 the DOJ’s Office of Legal Counsel (OLC) singlehandedly changed the meaning of a law passed by Congress in the 1960s when she issued an opinion on the Federal Wire Act. Goldman absurdly asserts that the OLC’s 2011 decision “came down to the placement of a comma,” when even a superficial skimming of the 13-page memo demonstrates a careful analysis of the Wire Act’s language and a thorough consideration of legislative and case law history—all of which show that the longstanding understanding of the Wire Act, by the author (Attorney General Robert F. Kennedy), Congress, and the Courts was that it only applied to sports betting.
For example, at a 1951 hearing of the Senate investigative committee that came to be known by his hame, Sen. Estes Kefauver (D-Tenn.), asked Assistant Attorney General Herbert J. if the bill would prohibit the use of telephone for “numbers games.” Miller replied, “This bill, of course, would not cover that because it is limited to sporting events or contests.” [Emphasis added]
As for the courts, only one published opinion has found that the Wire Act applies to non-sports gambling.
It’s even questionable as to whether or not the Wire Act should apply to Internet wagering. Obviously, the Internet did not exist when the law was enacted, but importantly, a year after it became law Congress attempted and failed to expand the law to emerging technologies. Despite this, the DOJ under Clinton and subsequent administrations believed the Wire Act applied to online gambling.
It was in 2002, during the administration of George W. Bush, that the DOJ first “reinterpreted” the Wire Act as prohibiting all online gambling, regardless of whether the bets took place entirely within one state (see tab 3).
The DOJ “opened wide the door to online gambling”
Seitz’s decision did not open a “Pandora’s box”—the box had been open for two decades. There is and never has been a federal prohibition on online gambling, which took off as soon as the Internet and personal computing became a staple in American life. In 1999 Scott Olson writing for the Journal of Technology and Law Policy noted that by 1997 consumers spent an estimated $1 billion worldwide on net gambling, with around 60 percent coming from the U.S. (even Kenny Rogers had an online casino in 1998). And during the years when the DOJ was arguably strictest against online gambling, Americans continued to spend billions—$30 billion between 2003 and 2010—gambling on foreign-operated sites. The OLC’s opinion simply dispelled some of the ambiguity in federal law and allowed state authorities to begin regulating the activity within their borders.
Experts “warn that online gambling is dangerously addictive for some, especially children.”
Goodman never names these experts. Later in the article she quotes “experts” (it’s unclear if they’re the same experts) who claim that the demographic most at risk for problem gambling are people between the ages of 18 and 25. While 18-25 isn’t exactly a tot, I’ll give her the point: Pathological gambling, like other addictive behaviors can ruin lives. The question Ms. Goodman fails to ask is: What impact will the DOJ’s 2011 memo have for these at-risk gamblers?
It seems intuitive that as gambling becomes more available the rate of problem gambling will increase. But research has shown this is not the case. While greater opportunity for gambling does correlate with a temporary increase in disordered behavior, it is just that: temporary. Worldwide rates of problem gambling have been declining since the late 1990s. And according to Harvard addiction expert Howard J. Shaffer, the U.S. rate of pathological gambling remained relatively stable over several decades, and has actually decreased since the 1970s, despite a significant increase in gambling availability.
And while there always will be a small portion of the population who show signs of pathological behavior, it is not a reason to ban an activity for everyone, especially in light of the fact that online casinos are better equipped to address such problems than their brick-and-mortar counterparts.
Many studies, including from Harvard Medical School’s Division on Addiction Studies, have found that online gambling is no more addictive than on-site gaming (see also page 403). In fact, some found that addiction rates were lower for online gambling than some off-line games. One reason could be that online games have substantially more avenues through which they can identify and address compulsive gambling behavior.
For example, behavioral tracking tools like PlayScan and Observer utilizes a combination of behavioral science, psychology, mathematics, and artificial intelligence to compare players’ behavior against known patterns of problem gamblers. If a player’s behavior marks him or her as “at risk” they get a warning letter with a guide on steps they can take to address their possible disorder. The technology is utilized by Sweden’s state-run online gambling outfit, France’s national lottery, and Finland’s Slot Machine Association.
In addition, the three states with regulated online gambling require sites to recognize “self-exclusion lists.” Problem gamblers can add sign on to these exclusion lists which block their access to gambling sites and ensure they won’t receive enticements to play.
Prior to legalization, pathological gamblers, players—including minors and problem gamblers—could only play on websites operated from abroad with uncertain levels of oversight. By contrast, sites licensed by states have an economic incentive to guarantee that their players are of age, are who they say they are, and are not suffering from gambling addiction.
The Internet is a Stateless Territory
In a twitter follow-up to her article, Goodman observed that Jason Chaffetz (R-Utah), author of a bill that would rewrite the Wire Act, “is wary of claims that geolocational technology, which works better in cities than in rural areas and vast expanses of desert … can keep poker out of his state.”
Yet, there are many effective strategies being utilized in the U.S. and other countries to determine the precise location of online players. For example, during New Jersey’s “soft launch” of online gambling, there was not one instance of a tester being able to bypass the geo-location block. Within a few short months, New Jersey’s monitoring success rate was around 95 percent, according to GeoComply.
Rep. Chaffetz also asserts that geolocation technology will not work well in areas with vast expanses of desert “due to their reliance on hot spots and cellular towers to triangulate player.” This argument falls flat on its face. While no security measure is 100% full-proof, in this case the only likely harm resulting from inability of technology to identify a user’s location is that a person who is genuinely in a state where online gambling is legal may be accidentally locked out. Services may or may not have trouble identifying player location due to deserts or lack of hotspots, but that wouldn’t grant that person access to online gambling. In fact, the opposite is true. If location cannot be determined, websites block users. The consequences for accidentally allowing someone in an unauthorized jurisdiction to gamble online are severe and could represent a violation of federal law, fines or even the loss of the company’s license.
Finally, in a Twitter follow up to her story, Goodman asserted, that “the internet is a stateless territory, simply allowing each state to decide was not enough.” This raises the worrying precedent that the Chaffetz/Graham Wire Act rewrite could set. To hold that online gambling is always interstate commerce simply because of the nature of the Internet concedes that no online commerce is purely intrastate and therefore Congress has the right to intervene in all internet commerce. That would, indeed, be a “game changer.” Do we really want to give legislators from Utah the power to outlaw online wine sales in Texas?
People fear the unknown and Goodman’s article highlights the strong anxiety a new industry like online gambling provokes in those unfamiliar with its long history in other nations. While such fear is understandable, it is without question that any harms associated with online gambling will be harder to address if we continue to push it into the black market.
Those who claim to care about minors, crime online, or pathological gamblers should be the ones shouting the loudest in favor of legalizing online gambling.