The Unread Law

Poker Daddy Prof. I. Nelson Rose makes a point by point analysis of the new act. Read it. The law may mean that ISPs will be required to block traffic to unlawful sites and remove hyperlinks to any sites that violate the law. Or it may not. And a sentence at the end makes no sense at all, he says, probably because nobody actually had time to read the law before it was signed.

Breaking news: poor people want to get rich

Lottery player demographics vary broadly by location. Data compiled by Texas Tech in 2005 indicates that it is indeed the poor and uneducated who fund the bulk of that state's lottery income, contrary to what the lottery says. New York information suggests otherwise, but closer analysis of the data shows that areas with high tourist concentration, and typically higher local education and wealth levels, skew the results.

Austrian economists lash out at nanny state

Mark Thornton of the Mises Institute calls the passage of the UIGEA a "cheap election year ploy that purports to protect Americans and maintain moral values." He denounces the new legislation as the "very pinnacle of puritanical nannyism" and claims that internet gambling actually solves many of the negative externalities associated with gambling. By keeping vice in the closet, it does not undermine community values, he says, nor does it "expose women and children to socially undesirable activities, or introduce prostitution into communities."

The sheer naivety of the libertarian argument comes out when Thornton lists online gambling's economic benefits. "It has turned casino gaming into a normal good," he gushes, and "creates good jobs in places like poor island nations in the Caribbean."

Well, really. Gaming, online or off, will never be a "normal good" because it makes no economic sense. Normal rules of competition do not apply to gaming because more competition does not lead to better allocation of resources – the underlying aim of competition – but to an overheated market. In an area where fundamental concerns such as public order and the general interest of society are at stake, it is unreasonable to expect market forces alone to find the ideal balance. Especially without a level playing field for all the players involved.

Flawed arguments give way to plain wrong facts, however, when he singles out state lotteries for targeting low income groups. Most scientific research shows that player demographics match the general population pretty closely. And he ignores the fact that the low payout rates offered by state lotteries are mandated by regulators to ensure that gaming positively benefits communities, outweighing at least some of the risk of an activity that Thornton himself brands as "socially undesirable".

The Ludwig von Mises Institute is the research and educational center of classical liberalism, libertarian political theory, and the Austrian School of economics. Handle with care!

Lottery apologizes after prize rip-off is exposed

The Canadian Broadcasting Corporation reported on October 25 that Ontario Lottery and Gaming Corporation retailers have claimed large prizes around 200 times in the past seven years, raising suspicions of fraud. The network is investigating the case of an 81-year-old who says the store that sold him his ticket tried to cheat him out of his prize. The store later settled out of court without admitting any wrongdoing. The chance of retailers winning 200 times in seven years is about one chance in a trillion, trillion, trillion, trillion, statisticians say. Much more likely is that retailers are on the take. The customer can't see the POS display when the retailer scans the ticket - which sounds like a hole in the security chain and an avoidable risk to the lottery's good name.

On November 9, the Ontario Lottery and Gaming Corporation apologized, vowed to do better and introduced a seven-point trust and security action plan in a bid to claw back its credibility.

Write to your lottery commissioner!

World Poker Tour announcer and poker pro Mike Sexton went to Washington, D.C. to protest the signing of the Unlawful Internet Gambling bill and promote poker as a game of skill that should receive an exemption from the legislation, Casino City Times reports.

"Who is someone in Washington, D.C. to tell somebody who works all day in North Carolina, Ohio, Kansas or anywhere else that they can't go home and play a $20 online poker tournament at night in the privacy of their own home? Who does that hurt?'" said Sexton, who acts as a consultant for Internet poker giant PartyPoker.com.

If online gambling is so popular, and if it's a basic civil right as its proponents claim, then state lotteries clearly have an opportunity - nay, a duty - to fill the void left by the new ban on cross-border flows of gambling money.

Sexton would be better advised taking his case to the state lotteries of North Carolina, Ohio, Kansas or anywhere else. And anyone who feels their rights have been violated should write to their state lottery commissioners, demanding that they provide the kind of games that people want to play, where they want to play them - in the privacy of their own homes.

GTECH lobbyist worked for the lottery

GTECH's lawyers are "very disappointed" after the New Jersey Lottery decided to rebid the 5-year contract to run its $2 billion-a-year operation the Associated Press reports. GTECH had been the favorite - although its offer was $30 million higher than SciGames' - until it transpired that its lobbying firm was also doing PR work for the lottery.

Lottery charged with misrepresentation

Officials with the Texas Lottery Commission say they will study charges that the state's lottery advertising exaggerates both the chances of winning the jackpot and the payoffs they can expect if they do win. The Houston Chronicle reports that a letter of complaint by San Antonio College math professor Gerald Busald has led the lottery to review its policy. His suggestions include printing the odds of winning the jackpot on the front of tickets and in all related advertising. He also wants officials to make public the true value of prizes after taxes when feasible.

Pretoria asked to rule on promotions

South Africa’s National Lotteries Boardis suing one of the country’s largest banks for contravening the Lotteries Act. The special accounts available at the First National Bank make customers automatically eligible for a monthly prize of 1 million Rand. First National argues it is merely trying to attract savings from the "unbanked members of society". For every R100 in the account, the holder acquires one entry into a monthly draw -- so the more money there is in the account, the more chances there are of winning. And in our book that's called paying good money to take part in a lottery.

Bush signs SAFE Port Act into Law

The Associated Press reports that President Bush signed the SAFE Port Act into law this morning as expected. Bush made no mention of the Internet Gambling provision attached to the legislation in his remarks.

Online gambling will survive a nuclear war

How successful will Washington be in its campaign to block cash transfers to unlawful sites once the ban actually begins? MGM Mirage spokesman Alan Feldman's said on WSJ.com that any ban would be like trying to stop waves on the beach. Analysts predict that many Americans will turn to offshore transaction specialists like Neteller in an effort to get around the restrictions. Many are arguing that there is little that Washington can do to stop surfers from gambling if they use a third party service. "It's pretty clear you can't prevent it completely — the Internet was designed to survive a nuclear war," said gaming law expert I. Nelson Rose in the Los Angeles Times.

Lottery lobbying: a high-risk business

Former North Carolina state lottery commissioner Kevin Geddings, who failed to disclose his work for Scientfic Games, was convicted on federal charges Thursday and faces up to 20 years in prison on each of five counts of fraud, News 14 Carolina reported. Prosecutors said Geddings defrauded the state of honest services by failing to disclose more than $250,000 in payments his public relations firm received from Scientific Games, which lost the online lottery contract to GTECH when the North Carolina Education Lottery launched last year.

Antiguan WTO strategy may shift

The international impact of Washington's new Internet gambling law is now being felt. Red Herring reports that Antigua and Barbuda has filed a formal protest with the US State Department. The country's prime minister has sent a letter of complaint to US President George W. Bush. Antigua and Barbuda is said to be in process of "amending its complaint to the World Trade Organization to include the latest US law" which it feels strengthens its case with the WTO.

Last minute lobbying push on Port Security act

With President Bush reportedly set to sign the Port Security Act into law on Friday, rumors are flying that several key components of attached legislation are likely to be vanish from the final product or be watered down. Specifically, some observers think that a requirement that banks block transactions involving illegal gambling sites is likely to disappear. A similar provision that could force internet service providers (ISPs) to block traffic to illegal sites is also said to be the object of a serious lobbying push.

It's hardly surprising, of course, that internet companies and banks are worried that they may have to do the government's dirty work. That's par for the course. American business has a long history of resisting the regulation of cyberspace.

Of course, any serious changes would render Washington's new internet gambling law essentially toothless, making it technically illegal for Americans to gamble online, but providing no mechanism for enforcement.

Internet ban piggybacks its way to the White House

In a surprise move, the US Congress voted to approve a ban on many forms of online gambling, passing the legislation attached to a major port security bill. News of the development triggered a major international reaction as investors fled the online gaming sector.

The legislation, buried inside the Safe Port Act, makes it illegal for banks or credit card companies to process transactions involving illegal online casinos, theoretically starving impacted businesses of the revenues they need to continue operations.

President Bush is expected to the bill into law at some point in the next few weeks.

The market reaction was quick in coming. The Guardian reports "carnage" in the online gaming sector today as investors are hurrying to withdraw their money from companies which do substantial business in the North American market.

The Senate vote surprised many Washington observers, who had expected another postponement in what has been a long and drawn out process.

Arizona Republican Jon Kyl, who co-authored the bill was in a jubilant mood after the legislation passed Saturday. Kyl and fellow Republicans have portrayed the vote as necessary to protect children who might otherwise be victimized over the Internet by unscrupulous web site operators. "If Congress had not acted, gamblers would soon be able to place bets not just from home computers, but from their cell phones while they drive home from work or their Blackberries as they wait in line at the movies," said Kyl.