Washington, DC, October 31, 2006 --  

Government efforts to squash online gambling are morally bankrupt so long as government lotteries continue to prey on the poorest Americans.

The line at the urban 7-Eleven store can often be quite long. Customers waiting to pay a dollar or two for their coffee or newspaper have to wait behind others engaging in much longer transactions -- picking numbers for lottery tickets and scratching fields off of their game cards. But the mostly poor urban residents who fritter away their meager incomes on convenience store gambling will still be there next month. A new law said to protect Americans from the evils of online gambling does absolutely nothing to address the $52 billion per year spent on government-sponsored lotteries sold at brick-and-mortar gambling dens frequented by the poor.¹

This ugly reality eviscerates any moral credibility that Congress and the President could have had for banning American banks from processing online gambling transactions. While the Christian right has long opposed the expansion of the vice of gambling throughout American society, a law targeting online ventures does little to protect those most vulnerable to this perceived sin. The poorest Americans may be the most likely to buy lottery tickets at the corner market, but lack of Internet access makes them far less likely to bet online.

The truth is that attacking online betting is a safe political stunt for American politicians because it doesn't go against the interests of powerful lobbyists from brick-and-mortar casinos and lottery-running state and local governments. Major casino operators have stayed neutral on the issue of banning online gambling transactions² . They know that they offer competition on the one hand, but also an opportunity to get in the business, should the $6 billion online market continue to double in size each year.³

Will online gambling in America bounce-back despite the ban? It is possible that the law will inspire creative countermeasures such as foreign-based pre-paid credit cards that could be used to get around the ban. The Internet, afterall, is a truly global medium that is not easily regulated. Hard-core online gamblers will undoubtedly pioneer such countermeasures, and if they become convenient and widespread enough, casual gamblers will surely follow.

One company already in this business is Neteller, based in the British tax haven of the Isle of Man, taking credit card payments and wire transfers to help Americans pay their gambling debts.⁴ It remains to be seen whether the new law will cause Neteller to creative solutions or withdraw from the market. Even if the answer is the latter, other operators will surely step in.

Unless and until this happens, gamblers will continue to be victimized by greedy government-run lotteries, which have some of the worst payout rates in the industry. One of the sponsors of the new online gambling restrictions, Arizona Senator Jon Kyl, regularly compares online gambling to "crack cocaine."⁵ This is ironic, because online operators have some of the best payouts in the country, unlike the government lotteries that largely target the poor. And partly as a result of this legislation, these same predatory government operators are preparing to legally take over the American online gambling market by setting up online lottery outlets.

For now, politicians and government bureaucrats are the biggest winners, while consumers and the poor are the biggest losers. In other words, it's business as usual in Washington.

First Do No Harm
The Evil of Government-Sponsored Gambling, June 29, 1999

1. North American Association of State and Provincial Lotteries, Lotteries Sales and Profits, 2005 sales figures as posted October 31, 2006.

2. The New York Times, Interest Groups Lining Up to Lobby on Web Gambling, July 4, 2006

3. The Economist, Ace In a Hole, October 7, 2006

4. Ibid, Busted Flush, October 7, 2006

5. Senator Jon Kyl, Press Release: Congress Approves Kyl Internet Gambling Ban, September 29, 2006