Prohibition, Privacy & Protection: The Real Online Gamble

On August 10, Jay Cohen was sentenced to 21 months in prison and a $5,000 fine. His crime? Taking bets on American sporting events through his Antigua-based company, World Sports Exchange. Jay is the first person to be convicted on federal charges of operating an illegal, offshore Internet gambling business under the 1961 federal Wire Wager Act that prohibits placing bets or sharing betting information over phone lines. Cohen’s case sets the dangerous precedent that it can and will be used to prosecute those who attempt to evade the law by operating overseas.

Efforts to prohibit gambling over the Internet leave the door open for government abuses of privacy. Inevitably, some form of government monitoring of individuals’ conversations and electronic correspondence will be proposed under the auspices of intercepting illicit bettors and bookies. It is honest citizens who will likely receive the most harassment from these measures. Law enforcement officials will have the probable cause needed to rifle through email and telephone conversations in order to find illegal bettors, but they may find other sensitive information as well. Unlike information collection in the commercial sector for promotional or marketing purposes, law enforcement agents will not need to seek a citizen’s consent before amassing personal information.

But anyone really wishing to conduct any form of illegal activity online can do so with relative ease, even under the strictest monitoring. Criminals have every incentive to use encryption, code words, and proxy servers in order to evade detection. So is this unnecessary and potentially harmful monitoring of citizens worthwhile, merely because the government ostensibly wants to prevent you from throwing away some of your money on a ballgame?

The Wire Wager Act and recent legislative attempts at prohibiting online gambling, far from protecting ordinary citizens, really would just protect bricks-and-mortar casinos from competition. These casinos are afraid their patrons will just stay home and gamble on the Web. Congress, with all of its moral rhetoric, isn’t trying to protect children or families or anyone else with these laws; it is merely endangering your privacy and subsidizing an industry by eliminating competition.

Thomas Pearson is an administrative and research asistant at the Competitive Enterprise Institute.