Online betting ban a pointless exercise

Time to bring internet betting above ground

Published July 17, 2006 at midnight

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We're certainly sympathetic to the concerns of the opponents of Internet gambling. If placing unaffordable bets becomes as easy as flipping on the home computer, more people than ever are likely to succumb to this corrosive addiction.

But the approach taken by the House of Representatives last week - ban U.S.-based financial institutions from processing online bets - misses the mark in three ways: It is fraught with unintended consequences, fails to acknowledge that adults must be responsible for their own bad decisions, and would fail even to end Internet betting.

House Resolution 4411 passed 317-93, but the Senate has fortunately shown little interest in taking up the measure this year. Odds are it will die without becoming law.

We hope that's the case, because the best way to minimize the personal risks and potential social harms of online betting would be to bring the practice above ground, making it legal, regulated - and taxable.

A 1961 federal law prohibits the use of "wires" to handle gambling transactions; it was designed to stop bookies from taking bets over the phone.

With the onset of Internet gambling, not to mention uncertainty over whether the Federal Wire Act covers Internet dealings, in recent years major credit card issuers, most domestic banks and even PayPal, the electronic payment center, chose to not process any transactions directed to online casinos.

Even so, offshore Web-based gambling sites could generate an estimated $15 billion in revenues worldwide this year, up from $3 billion in 2001. And half the current revenues come from the United States. Online bettors simply use PayPal-like services that are based outside U.S. territory.

Since Internet betting cannot be quashed entirely, and more than 40 states plus the District of Columbia allow some form of gambling - including casinos, race tracks and lotteries - it makes much more sense to devise mechanisms that would allow gambling Web sites to openly transact business under the eye of regulators.

Better to have the U.S. Treasury monitoring the play than some anonymous operator in the Cayman Islands.

Even the American Gaming Association, the casinos' lobbying group, has softened its opposition to Web- based betting. Industry giants like Harrah's and MGM Mirage now see online gambling as a way to build loyalty with the customers who visit their bricks-and-mortar properties.

And by lending their reputations to Internet play, the major casino operators might gain a competitive advantage; bettors who worry about the security of cyberspace transactions might be more comfortable playing online poker at CaesarsPalace.net than at some little- known dot-com site.

Notwithstanding all the chest-thumping from gambling foes about how HR 4411 will crush online casinos, the bill would exempt state lotteries, off- track-betting and fantasy sports leagues from the ban.

All of which suggests the bill is more symbol than substance, and that Washington should focus on ways to make Internet betting a lawful activity that generates revenue for government, too.

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