WASHINGTON, DC, June 29, 1999 --  

When a Senate committee voted to outlaw Internet gambling two weeks ago, senators justified their decisions largely on the moral and financial pitfalls of associated with easy access to gambling.¹ As Sen. Jon Kyl (R-AZ), sponsor of the legislation, said in his press release on the issue, "Internet gambling magnifies the problems generally associated with gambling and poses a particular threat to children."²

How nice. Perhaps Americans should thank Kyl as well as other moral, upstanding politicians who create a government that protects us from ourselves. Or maybe not.

Truth be told, American governments are the largest profiteers in the gambling industry. Since the first state lotteries appeared in the mid-60s, state-sponsored gambling has expanded to be the most widely-practiced form of legal gambling in the United States. Think this isn't a problem? Think again.

The National Gambling Impact Study Commission, a congressionally-appointed panel that recently concluded its report, found that poor families with incomes under $10,000 wasted three times as much on the lotteries as wealthy and middle class families with incomes over $50,000.³ This comes as no surprise to anyone who has visited a 7-Eleven on the day welfare checks arrive. Good luck getting that Big Gulp—the line for lottery tickets likely stretches out the door.

The ignorant souls who stand in that line aren't likely to know that their chances of winning money at state lotteries is lower than any other form of legal gambling.⁴ Desperate for hope and seeing few other ways out of poverty, these people buy into high-dollar government advertising campaigns that target poor people and inspire them to waste their meager income on what are almost always worthless scraps of paper. It is exactly this kind of situation that inspires fierce opposition to all forms of gambling from groups on the like the Christian Coalition on the right to Public Citizen on the left.

The point, though, is not that all gambling is wrong. Gambling can be a benign form of entertainment for responsible people and should be allowed in the marketplace by private industry. But because it has a potential dark side, governments have absolutely no business running such operations. This is especially true considering that government-run operations are among the destructive forms of gambling in the country.

Some people, including many anti-tax activists, defend state lotteries on the grounds that they are a better alternative to taxes. There is some truth to their claim. Government lotteries are voluntary; the barrel of a gun ultimately enforces most other forms of taxation.

But this argument is beside the point for two reasons. First, confiscatory taxation hasn't been replaced by lotteries. Since state lotteries began appearing 35 years ago, the percentage of the U.S. economy involuntarily confiscated by governments has increased steadily. Greedy politicians have simply increased the amount of money they can take out of the productive economy without suffering political fallout.

Second, government lotteries are successful in generating large amounts of revenue only because they can outlaw competition. No private gambling operation in a competitive market could stay in business offering 50 percent payout rates like the state-run lotteries do. If government were to allow private competition, this voluntary alternative to confiscatory taxation would disappear overnight. Gambling, therefore, is not a true alternative to other forms of taxation.

If politicians like Sen. Kyl truly wish to make a difference on the issue of gambling, then they need to radically change course. First, drop the rhetoric about protecting children. It is this same irresponsible rhetoric that justified the creation of the state lotteries as a means to fund schools. Second, forget the global Internet and look within. The time for politicians to address the evils of state-supported gambling is long overdue.

Notes:

1. The New York Times, Senate Committee Approves Net Gambling Ban, June 17, 1999
2. Senator Jon Kyl Press Release, Kyl's Anti Internet Gambling Legislation Mirrors Gambling Commission Report Recommendations, June 18, 1999
3. National Gambling Impact Study Commission, Final Report, June 18, 1999
   
4. Ibid.