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Expert: States leveraging gambling on social media sites

John Kindt
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L. Brian Stauffer

University of Illinois emeritus professor John W. Kindt warns that Internet gambling through social media sites, already enormously popular outside of the U.S., could lead not only to an entire new generation exposed to gambling at an early age, but also to greater worries for the economy.

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2/27/2013 | Phil Ciciora, Business & Law Editor | 217-333-2177; pciciora@illinois.edu

CHAMPAIGN, Ill. — Recent efforts by Nevada and New Jersey legalizing some forms of online gambling could create virtual casinos on social media websites such as Facebook, a leading national gambling critic says.

University of Illinois emeritus professor John W. Kindt warns that Internet gambling through social media sites, already enormously popular in Great Britain, could lead not only to an entire new generation exposed to gambling at an impressionable age, but it could also intensify the economic recession for the U.S.

“All signs are pointing to an Internet gambling gold rush, but the gold rush ultimately will be to the detriment of young people and the national economy,” said Kindt, a retired professor of business administration at the U. of I. who maintains an active research and publication agenda.

“Sites like Zynga are already unethically marketing gambling toward young people by using cartoon figures to entice them. Billionaire casino moguls want to put Internet gambling on social media sites like Facebook despite the continued ban on Internet gambling demanded by the National Gambling Impact Study Commission sponsored by the U.S. Congress.”

As a result of a controversial 2011 opinion from the Justice Department’s Office of Legal Counsel, which ruled the Wire Act of 1961 did not prevent states from selling lottery tickets over the Internet to adults, some states are now making the questionable legal move of trying to decriminalize online gambling, Kindt says.

“For 50 years, the U.S. Justice Department used the Wire Act, initiated by then-U.S. Attorney General Robert F. Kennedy, to stymie organized crime and its financing through gambling,” Kindt said. “That legislation has served us well as an authoritative precedent. But then all that was changed overnight when one government bureaucrat issued a new interpretation of the law, essentially trying to reverse 50 years of precedent.”

According to Kindt, one well-known social media website already generates about 30 percent of its overseas revenues from casino-style Internet gambling through Web applications that can run on any desktop computer, tablet or smartphone.

“That’s overseas – so far they haven’t been able to do it in the U.S. because technically it’s still illegal,” he said. “However, by arguing that there are legal ambiguities, gambling interests are trying to bypass the U.S. ban by mixing social media and Internet gambling, which would turn every computer and smartphone into a virtual casino.”

Because of the contentious Justice Department ruling, Kindt says there are now three states rushing to bring gambling online: Delaware, Nevada and New Jersey.

“But Delaware is probably out of the loop because they don’t have the technological assets of the established gambling interests in Nevada and New Jersey,” he said.

Kindt says the law that should give the governors of Nevada and New Jersey pause is the Unlawful Internet Gambling Enforcement Act of 2006.

“With an 80 percent bipartisan vote, Congress enacted the Unlawful Internet Gambling Enforcement Act to strengthen the prohibitions against gambling on the Internet – and by extension, to protect children and teens from being exposed to gambling on social media sites,” he said. “The fact that the gambling industry is now using state governments as fronts to challenge federal legislation at taxpayer expense is a disturbing misuse of public money.”

Kindt notes that the Revel Casino of Atlantic City is expected to file for Ch. 11 bankruptcy.

“New Jersey Gov. Chris Christie committed over $260 million of taxpayer dollars to try and revive that casino,” he said. “Well, Gov. Christie flopped on that, which was a complete misuse of public funds, and Internet gambling in New Jersey will flop as well as a public initiative.

“The lesson is that governments should not be promoting programs that are designed to hurt the public health, safety and welfare, nor should they be subsidizing them with taxpayer dollars.”

Although there is plenty of money to be made from Internet gambling, Kindt says little of it will benefit state treasuries – despite politicians’ promises to the contrary.

“Moreover, any monies from Internet gambling would go to the wrong parties,” he said. “The dollars are certainly not going to go into the public coffers. They’re primarily going to go to billionaire casino moguls who are then just going to use it to build more casinos, which will continue to fuel recessionary economic trends.”

Municipalities and states cannot gamble their way to prosperity – whether it’s in a real-life or virtual casino, Kindt says.

“State governments are promoting a ubiquitous gambling philosophy, where gambling is always at your fingertips whether you’re at home, at work or at school. In particular, Internet gambling is very destructive because it shrinks the consumer economy,” he said. “People don’t buy new computers, tablets or smartphones when they’ve already lost their shirts.”

Kindt is a senior editor of the United States International Gaming Report, a multi-volume series released between 2009 and 2012. The most recent publication in the series is titled “The Gambling Threat to National and Homeland Security: Internet Gambling.”

Editor's note: To contact John W. Kindt, call 217-433-0075; email jkindt@illinois.edu.
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