| Hall of Fame |
| |
| Tom W. Bell
Ass. Prof. Chapman University School
of Law |
| |
Professor Tom W. Bell takes the Hall Of Fame podium this
time: "Since the Founders certainly gambled--and legally,
too--the Ninth Amendment guarantees that we, too, retain the
right to gamble." Take a front row seat and listen as the
Internet law and telecommunications expert relates Internet
gambling's legal past, present, and future.
|
| |
| |
| |
| Can you tell us about your background
and your current employment? |
| |
 |
"Those early (anti-gambling)
bills triggered my interest because they managed--incredibly--to
combine technical ignorance with hypocritical prudery."
|
I earned my J.D. at the University of Chicago School
of Law in 1993, after which I practiced law in Silicon
Valley and Washington, D.C. My areas of practice included
intellectual property and telecommunications law, so
I felt quite at home when I joined the Program in Law
and Technology at the University of Dayton School of
Law. I taught courses on intellectual property, both
domestic and international, and on Internet law. After
a couple of years of teaching at UD, I took an academic
leave of absence to serve as director of telecommunications
and technology studies at the Cato Institute, a policy
think tank based in Washington, D.C. Last fall I joined
the faculty of Chapman University School of Law, where
I again teach courses in intellectual property and Internet
law.
Congress first began to draft legislation banning Internet
gambling while I was working at the Cato Institute.
Those early bills triggered my interest because they
managed--incredibly--to combine technical ignorance
with hypocritical prudery and a demeaning disregard
for our rights to peaceably dispose of our income as
we alone see fit. I spoke out against those and subsequent
proposals to ban Internet gambling, and began work on
a detailed analysis that the Cato Institute will soon
publish.
|
| |
| |
| Is the question of banning Internet
gambling in the U.S. a constitutional question or a consumer
protection question? Or is it another question altogether? |
| |
|
"As regards consumer protection,
to ban Internet gambling would do worse than nothing."
|
Proposals to ban Internet gambling involve both those
issues--and others, too. Much of what Congress does
wrongly interferes with local matters under the guise
of regulating Interstate commerce. With regard to Internet
gambling, however, Congress really does have a plausible
claim that the Constitution empowers it to preempt state
laws that might otherwise interfere with national or
international commerce in gaming. The error, however,
lies in reading "regulate interstate commerce" as "ban
interstate commerce." If the current Congress were to
hew to what the Founders intended, it would understand
that to regulate interstate commerce means simply to
make it regular. Therefore, even if Congress does have
Constitutional authority to regulate Internet gambling,
it does not necessarily have authority to ban it. Indeed,
the Ninth Amendment of the Bill of Rights strongly suggests
that Congress has no authority to ban Internet gambling.
That amendment reserves to the people all rights not
expressly sacrificed to the federal government. Since
the Founders certainly gambled--and legally, too--the
Ninth Amendment guarantees that we, too, retain the
right to gamble.
As regards consumer protection, to ban Internet gambling
would do worse than nothing. Nobody seriously contends
that Internet gambling will disappear if banned by federal
statute. To the contrary, U.S. consumers will continue
to gamble online--but without enjoying the protections
afforded to legal commerce. A gambler cheated over the
Internet would, for instance, lose the right to bring
tort or contract claims against rogue casinos. Legalizing
Internet gambling would not only bolster the legal rights
of consumers but also benefit them by increasing competition
in gambling services. Proposals to ban Internet gambling
thus aim less at protecting consumers than they do at
protecting the various public and private parties that
currently monopolize real space gambling services.
|
| |
| |
| Do you think that online gambling
will be prohibited in the U.S.? If so, when? |
| |
|
I currently put at about 75% the chance that the federal
government will pass a law that bans the provision and
consumption of online gambling services, but which exempts
certain special interest groups from prosecution.
Senator Kyl has said that he will attempt to resurrect
his Gambling Prohibition Act in the current congress,
so I expect any federal ban to issue in
|
| |
| |
| Why the ban? |
| |
| I could write tomes on that question!
To put it in very brief, proposals to ban Internet gambling
reflect the overriding flaw of federal governance at the
close of the 20th Century: Diffuse costs, concentrated
benefits, and pervasive political power. Consumers have
only an inchoate and disorganized interest in the benefits
that would flow from legalizing Internet gambling, whereas
the various parties who would benefit from a ban--including
state lotteries, real space casinos, and overeager prosecutors--have
vested interests and established lobbies. That salient
discrepancy would not matter were the federal government
limited to its few and small constitutional duties. But,
alas, politics has become the art of not only the possible
but the improper. |
| |
| |
| Will the ban be enforceable? |
| |
| In large part, no. Federal prosecutors
might target a few unfortunate domestic consumers to serve
as examples for the rest of us, and they might seize the
assets of online casinos that fail to fully withdraw to
foreign havens. But most U.S. citizens will continue to
enjoy full access to overseas gambling sites. |
| |
| |
| What approach do think players like
the major ISPs, land-based gambling enterprises, and financial
institutions will take? |
| |
|
"In the long run, however,
the land-based industry could leverage its brand
name capital to do quite nicely online."
|
ISPs (and OSPs) will not eagerly assume the burdens
of preventing their members from gambling online. To
the contrary, they should welcome the increased traffic
that would flow from legalized Internet gambling. The
land-based industry has a vested interest in the status
quo and does not welcome relatively unregulated competition
from online sources. Furthermore, it finds it difficult,
for public relations reasons, to publicly advocate yet
another expansion of gambling opportunities. In the
long run, however, the land-based industry could leverage
its brand name capital to do quite nicely online. The
problem is getting from here to there. It has chosen
the clever strategy of decrying unregulated online gambling
while experimenting with "dry-runs"--non-paying online
games. With the advent of legalized Internet gambling
in the U.S., the land-based industry will stand ready
to seize the field.
Financial institutions face similarly conflicting goals.
Being heavily regulated, they can hardly afford to upset
the federal government. At the same time, legalized
Internet gambling would afford them with ample new opportunities
to advance online financial tools, especially at the
consumer level.
|
| |
| |
| What consequences do you think prohibition
will have on the online gambling industry in general? |
| |
| It would certainly force gambling services
to move operations and assets to overseas havens. It may
also complicate access to domestic financial services,
such as if prohibitionist legislation made credit card
debts for online gambling services unenforceable. Apart
from these deterrents to Internet gambling, however, domestic
prohibitions may end up promoting the industry. Real space
gambling services, relegated to mere experiments, will
fall farther and farther from the cutting edge of software
development. Operating software will, moreover, almost
surely come to rely on encrypted transactions that federal
regulators cannot detect, much less stop. As a result,
by the time that federal and state governments decide
that they want to regulate and tax Internet gambling (as
I think they eventually will), they may well find that
they have nothing to offer online gambling services--neither
carrot nor stick. |
| |
| |
| What would prohibition mean to the
social player? |
| |
| Social players will of course worry
about being caught if a federal ban extends to include
mere consumers. At the margin, at least at first, that
might slow growth of the industry. But because the consumer
base will grow as more and more people get Internet access,
the overall number of domestic Internet gamblers will
probably continue to increase. Eventually, as prosecutors
find a new fad, as online gambling services teach their
consumers to avoid detection, and everyone learns to regard
fusty prohibitions with a wink and a nudge, social players
will regard Internet gambling as no worse than (officially
illegal) office betting pools. |
| |
| |
| Is regulation possible? |
| |
|
"A ban on Internet gambling
would encourage the development of overseas havens,
legal and business strategies, and software capable
of evading U.S. law."
|
Of course it is. But with regard
to Internet gambling as with regard to any activity, the
power of regulators varies inversely to the freedom of
exit. Internet gambling services already have a great
deal of freedom to exit from domestic restrictions. Prohibition
will encourage them to polish their strategies for evading
U.S. law. Were the federal government to launch an Internet
Gambling Regulatory Commission today, it would probably
not be able to impose the same level of intrusive and
detailed regulations that state gambling commissions impose
on their subjects--at least not without offering some
sort of carrot in return for such an easily dodged stick.
The longer that the federal government waits to legalize
Internet gambling, moreover, the more quick and clever
online gambling services will grow. |
| |
| |
| If the law also bans the promotion
of online gambling, how would such a law be interpreted
by U.S. courts? |
| |
| U.S. courts have, sadly, already shown
little interest in defending citizens from outrageously
burdensome financial regulations and criminal bans on
gambling. It would take quite a lot for any prohibition
on Internet gambling to trigger a court's ire. |
| |
| |
| What would a ban mean to laws that
apply to the Internet in general? Will other areas be
threatened as well? |
| |
| On the one hand a ban on Internet gambling
would set a dangerous precedent for the power of the U.S.
government to invade consumers' privacy and to dragoon
Internet access providers into serving as prosecutors'
tools. On the other hand, a ban on Internet gambling would
encourage the development of overseas havens, legal and
business strategies, and software capable of evading U.S.
law. In the long run, therefore, a ban on Internet gambling
would not only fail itself; it would drag down with it
a good deal of federal authority over the Internet in
general. |
| |
| |
| Would you like to add any comments? |
| |
|
The looming prospect of a federal ban in Internet gambling
should not blind us to the fact that, in the long run,
prospects look very good for legalization. States will
find it very hard to sit back and watch potential tax
dollars flow to overseas havens, especially when the
futility and unpopularity of prohibition grows evident.
Just as states have legalized and taxed a great many
other gambling services, they will eventually want to
legalize and tax Internet gambling. This time, though,
they may find the federal government elbowing for a
place at the trough. The real question is not whether
but when Internet gambling will win legalized status.
In closing, it bears noting that George Washington,
Thomas Jefferson, Benjamin Franklin, and a great many
other Founders not only enjoyed legal gambling, but
helped to promote in on behalf of their fledgling republic.
Parties interested in learning more should check out
my forthcoming Cato Policy Analysis, "Internet Gambling:
Popular, Inexorable, and (Eventually) Legal." The facts
I've uncovered make clear that the Founders took the
"Pursuit of Happiness" seriously--and that modern legislators
should be ashamed to treat us as undeserving of similar
rights.
Tom W. Bell
Assistant Professor
Chapman University School of Law
Homepage
|
| |
|
|
|
| |
|
|
