The owners and founders of the three largest online poker sites in the United States have been indicted and charged with bank fraud, money laundering and illegal gambling offenses. The websites and executives are accused of crimes ranging from bank fraud to running an illegal gambling operation. The Department of Justice is seeking $3 billion in compensation and up to 65 years of prison time for some of the defendants.
John W. Kindt, a professor of business and legal policy at Illinois, is a leading national gambling critic who has testified before Congress about the societal, business and economic impacts of decriminalizing gambling. He spoke with News Bureau business and law editor Phil Ciciora about the impact of what some online poker aficionados have called the “Black Friday indictments.”
In general, what’s wrong with online gambling? Why should anyone care what someone else does with their money?
See video with Professor Kindt
When we talk about online gambling, we’re not talking about fun and games. We’re talking about real trouble for our economy.
Gambling in its many forms is a force that destabilizes our financial institutions. To take it one step further, the philosophy behind gambling destabilizes capitalism by promulgating artificial risk-taking and financial instability. The classic example of this is the Commodities Futures Modernization Act of 2000. It basically decriminalized gambling on Wall Street by legalizing credit-default swaps, which were illegal for almost 100 years because they had previously destabilized the economy. Special interest lobbyists slipped provisions into this act, eliminating the anti-gambling enforcement mechanisms in other statutes, which then allowed Wall Street financiers to gamble on these credit-default swaps. Congress has called this ‘casino capitalism,’ and rightly so. It’s a major reason why we’re in our current economic mess.
How successful has the Unlawful Internet Gambling Enforcement Act of 2006 been in curbing online gambling?
If that bill had not been enacted, we would have had a huge speculative bubble with widespread gambling on every device connected to the Internet – computers, iPhones, BlackBerrys, Facebook, you name it. You would have had people gambling at every workstation, every bar or restaurant, every school desk and every living room. The people behind these websites want to make it as easy as possible for you to click your mouse and lose your house.
How did the recently indicted poker sites dodge the 2006 law for so long?
They’re basically pushing the legal envelope by looking for legal loopholes and exceptions. History is littered with companies and industries that have tried to push the envelope for their gain. If you pay lawyers enough money, they can create gray areas in just about any law. So Congress needs to pass even more stringent anti-gambling statutes. It’s the smartest thing our representatives in Washington could do for the U.S. economy right now, because it wouldn’t cost the taxpayers a dime.
If you took an even more radical approach and outlawed all gambling, like we did 100 years ago, tens of billions of dollars would be funneled back into the economy as spending on consumer goods. We would have an overnight economic stimulus.
Why not legalize and regulate online gambling? That way, the government gets a potentially lucrative cut of the action.
The bottom line is, you can’t regulate online gambling, because it is so mercurial. You can only prohibit it.
But don’t take my word for it. We had a bipartisan federal commission on this called the United States National Gambling Impact Study Commission, which even included members of the gambling industry. The recommendation of that commission was to keep gambling on the Internet illegal and to strengthen the enforcement mechanisms against Internet gambling. The evidence is indisputable: If you have Internet gambling, it’s going to be a cancer on the economy. It’s going to destabilize the world economy and financial markets, and we’re going to have more speculative bubbles.
You simply cannot gamble your way to prosperity.
Since online gambling is illegal in the U.S., won’t gamblers just be able to go to websites housed in a foreign country to satisfy their gambling fix?
The U.S. government needs to get the word out that it’s illegal to gamble on these sites. And when people gamble on these sites, not only are they breaking the law, they could be cheated out of their money. It’s lose-lose for everyone. Gamblers are now complaining that their accounts have been frozen – but if they win big, what guarantees do they have that they’ll get paid? And then the question is, ‘Who is getting all this money when people lose?’ Well, if you’re playing against a computer, you simply can’t win. Eventually, they’re going to take your entire account.
People who like to gamble are typically business-minded people with Type-A personalities. We need to encourage utilizing those entrepreneurial skills in legal, profitable business pursuits instead of wasting those skills playing Internet poker against computers.
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