Online gambling now billion dollar three-card monte

The wrong ass

Analysis Now that the Unlawful Internet Gambling Enforcement Act has been passed in the United States, those billions of dollars once spent on online gambling will now go to children's recreation centers, programs to care for the elderly, and humble decorations for Mother Theresa's grave. More importantly, those evil mega-casinos that have emerged offshore will finally be swept from the Earth, like Sodom and Gomorrah.

Of course, it could just as easily be said that the Act has its teeth in the wrong ass.

The Act, which was signed into law by President Bush this October, is essentially a modernization of the Wire Act of 1961. It allows criminal prosecution of online sites which accept any money from American gamblers, and promises the creation of regulations which would block banks and financial institutions from engaging in online gambling transactions.

The idea, as enunciated in the House version of the bill, is to stop the "debt collection problems for insured depository institutions and the consumer credit industry." The problem is that these amendments to the Wire Act attempt to legislate morality beyond the borders of the US in a way the 1961 Act never intended, and the consequences will hurt everyone but the fraudsters.

The thrust of the Wire Act has long been to protect innocent victims from the effects of gambling - these historically have come in the form of greater organized crime syndicates, brutal interest rates, and anatomical re-arrangements by a fellow named Rocco. But the current amendment has nothing to do with the fear of organized crime, and more to do with stopping regular Joes from running up lots of credit card debt. The protected parties here are actually those poor, waif-ish credit card companies.

The first effect of this new regime has been intentional: shares of non-US-based internet gambling sites have begun to plummet. UK-based companies like PartyGaming PLC and SportingBet PLC have already declared that they will no longer do business in the US. Other gambling companies in Central America and the Caribbean have taken an even larger hit because they have, in compliance with US law, diverted their business away from US online gamblers.

Mission accomplished, right? Not exactly. First off, the act of criminalizing the acceptance of money by online casinos scares off only one type of gambling enterprise: the legitimate kind that doesn't cheat. What has probably been lost in all the hoopla is the fact that these companies even have shareholders, and refuse to engage in what has become illegal activity, despite the fact that they do their business in the UK and are outside US criminal jurisdiction. The vacuum left can and will be quickly filled by companies who, at the very least, do not share a similar respect for US law. And that is really the start of where this legislation goes horribly awry.