By Ann Woolner
April 13 (Bloomberg) — As friends whom I shall not name gathered Saturday night at an undisclosed location, I looked around the table and realized it was surrounded by criminals.
The evidence was everywhere. The cards, the poker chips, the bowl of money that served as the bank showed these solid citizens to be lawbreakers. As for me, I plead the Fifth.
The state where this game occurred calls it a misdemeanor to play poker for money, punishable by up to a year behind bars. I have searched state statutes for a nickel-ante exception and found none. Moreover, if you profit from the mere hosting of the game, it is commercial gambling and it is a felony.
That is, unless you are the state itself. The same state where my friends gather to commit misdemeanors runs its own lottery. It even advertises to persuade people to bet which numbered ping-pong balls will pop out of a bowl for winnings that can run into the millions of dollars. You can watch the drawing on TV every night before the news.
This game of pure chance is blessed, even encouraged, by the same legislature that made it a crime for my friends to win a couple of bucks betting on their skills at a round of seven-card, high-low, pass-the-trash, roll-your-own.
As I pondered the criminality of the miscreants around me and the $37 in that night’s bank, I thought of Gary Kaplan, the Betonsports Plc founder and fugitive arrested in the Dominican Republic two weeks ago. He and 10 others are under federal indictment in St. Louis on charges of violating laws the feds say forbid Internet gambling, at least on sports events.
A Grander Scale
Kaplan and his codefendants were playing on a much grander scale than my friends, to be sure. Internet gambling rakes in $6 billion to $12 billion worldwide, including sports betting, online poker and the rest. U.S. residents contribute about half, law or no law.
Americans love to bet on sports, as anyone who works in an office during March Madness knows. But that is the one form of online gambling that courts have said is prohibited by federal law.
As for online poker, it’s more complicated.
“Operating an unlicensed gambling site is illegal under the laws of every single state,” says Chuck Humphrey, a Colorado lawyer whose Web site, http://wwww.gambling-law-us.com , tracks gaming laws.
No state authorizes virtual casinos, which are based and licensed in places like the United Kingdom and the Caribbean.
And yet, few states have gotten around to specifically outlawing Internet gambling. Plenty of Americans still do it, especially poker enthusiasts.
“It’s a gray area,” says Michael Bolcerek, president of the California-based Poker Players Alliance, which claims 320,000 members.
Congress tried to get tough in a late night, pre-election session last fall. With no debate, then-Majority Leader Bill Frist, who was courting conservatives for a possible run at the presidency, let a House-passed crackdown on Internet gambling slip into an unrelated bill on port security. The bill passed sometime after midnight, and President George W. Bush signed it into law on Oct. 13.
The Unlawful Internet Gambling Enforcement Act of 2006 forbids virtual casinos from processing illegal gambling payments made through U.S. banks and credit card companies.
Lack of Regulation
It leaves pre-existing law to say what is illegal. As for whether the financial institutions can be prosecuted for processing the payments, no regulations have been written.
“What you’ve seen are the largest public companies get out of the market,” says Bolcerek, leaving smaller, less transparent operations to take up the slack.
It’s not as if Congress opposes all gambling. It specifically allows betting on horses if the state with the track and the state where the bettor is located both permit it. Nor has Congress bothered to forbid lotteries, which 41 states now host.
None of this is remotely consistent.
That’s why the World Trade Organization found the U.S. in violation of a trade agreement.
When the U.S. used moral grounds to justify its anti- gambling laws, the WTO pointed out that Congress and various states don’t find gambling immoral enough to outlaw lotteries or betting on horse races.
Ruling on a complaint filed by the tiny Caribbean country Antigua and Barbuda, which hosts lots of Internet casinos, the WTO said in 2005 that if U.S. law permits betting on horses, it must allow those same Americans to bet on horse racing through Antigua, where such betting is also legal.
Two weeks ago, the WTO said the U.S. has failed to abide by the earlier ruling. Sanctions come next.
As for last year’s law, it’s “one of the stupidest things I ever saw,” Representative Barney Frank, chairman of the House Financial Services Committee, said this week.
He says he will try to get it repealed.
“If you decide with your own money to engage in an activity that harms no one else, you ought to be allowed to do it,” Frank argued in last year’s House debate.
Problem gamblers can already legally bet on horses and lotteries. With Internet gambling, playing can be monitored so that they can be weeded out. Tax revenues could fund treatment.
“The fundamental principle of the autonomy of the individual is at stake,” Frank said in last year’s House debate.
If individual rights prevail, my friends will become honest citizens again.