What Do Al D’Amato and Steve Levitt Have in Common?

They would both like to see the new Federal ban on Internet gambling overturned. At least D’Amato is getting paid to do something about it.

Am I the only one surprised at how easily Congress enacted the ban? One day it seemed as though Internet gambling was a quasi-legal, hugely profitable, generally accepted practice. Then, all of a sudden, Congress pulled the trigger and the CEO’s of gambling sites started getting arrested.

Where did the pressure for the ban come from? I assume some powerful combination of the casino industry, the gambling-is-immoral crowd, perhaps the state lotteries. Regardless, I am also surprised it has taken so long for a lobbyist of D’Amato’s stature to have been employed in a fight to overturn the ban. It is interesting to see how D’Amato invokes his own powerful combination of fear, economics, and even the high moral ground:

The money being spent to outlaw poker and enforce the ban, Mr. D’Amato said, could be better spent “in the battle against money laundering, trafficking in drugs, or trafficking in terrorism.”


TheQuitter

well, if the ban can keep off-sure companies away, they could just as easily pass a law that only allows these companies to run if they operate in the U.S. then tax the hell out of them. sounds like free money for the gov't.

prosa

It seems doubtful that the casino industry would have really cared much about Internet gambling. It's not as if casinos were struggling.
Much of the debate in favor of the legislation outlawing Internet gambling was couched in terms of protecting children. That makes me suspect that the anti-(all)gambling people were the primary supporters, figuring that the casinos were too strong to fight but the Internet gambling operations were more vulnerable.

steelhop

Prosa,

It is likely that casino's were partly behind the movement to eliminate on-line gaming (no casino calls it gambling) because the overbroad law would likely get overturn at the WTO or by Congress that would allow them to partake in on-line gaming that they are currently procluded under current laws. So it is something like one step back to move 3 steps forward.

As for struggling, go look at casinos debt load to understand their need to increase their marketing reach for new customers.

brettpeven

I also wondered who was behind the Online Poker Jihad. It's pretty clear to me that Casino's had the most to lose, and while I don't think they were afraid of Poker, I think they were afraid of games like Blackjack and Craps, etc. going online, which might really affect their businesses. The amount of lobbying needed to get a bill passed in an already religious right leaning country was minimal given that on the other side of the argument was a disparate group of individuals who wanted to toil in anonymity (the players) and the companies running the sites tried to remain equally anonymous given that they were operating in the "grey zone".

What really surprises me, is that states have lotteries with far worse odds, far worse pay outs and that represent much more egregious regressive taxes. I doubt the data is available, but I'd be willing to bet (not online of course) that a far greater percentage of income is gambled on the lottery (due to its appeal to the lower class) than is wagered in online poker.

Read more...

prosa

"As for struggling, go look at casinos debt load to understand their need to increase their marketing reach for new customers."

Judging by what I saw in my first-ever trip to Las Vegas last August, the casino industry sure looks healthy. New hotel-casino developments seem to be shooting up everywhere.

pkimelma

brettpeven, the lotteries dump money into State coffers (usually for schools). Online gambling money does not go to States at all and generally not even to the Federal government (since many are off-shore). So, the preference for State lotteries is local revenue.
Prosa, tearing down hotel/casinos every 10-12 years and building newer and fancier ones tends to create quite a debt load.

nphebel

didn't the U.S. lose a WTO case to Antigua over this issue? seems like an impediment to free trade to me.

stenz

There were two senators behind the push to ban online gambling, both from the religious moral ground. They tried multiple times to get it passed through, failing each time. So they waited until the last day and pushed it through on an anti-terrorism bill that nobody could vote against since they would be labeled as anti-terrorism.

So it went through, Bush never vetos, and there you have it. Immediately after one of the senators was shown to be into the young boy pages, and the other one was shown to be taking bribes from both the horseracing lobby and casinos (Harrah's was the main one I believe).

So I guess the morals are that you can take money from casinos, but giving them money is immoral. And children should not gamble, but being raped by men can slide.

The two senators of course being the doctor who diagnosed Terry Schiavo via the TV as being fit as a fiddle, Bill Frist, and the other being the now resigned (mmm, pages) Mark Foley.

Morals are great as political devices, but actually following them yourself is kind of annoying, right?

Read more...

steelhop

Prosa,

I didn't say they were struggling - those fancy new casinos you saw in Vegas have to be financed which has driven up casinos debt load only have a high debt burden. Harrah's was recently tender an offer to go private by a private equity firm for an offer somewhere in the $25 billion range and probably half of that was sheer debt.

prosa

It makes me wonder why Las Vegas casinos keep trying to outdo one another. Having fancy rooms and spas and restaurants and showrooms is all well and good, but as far as their core businesses - namely, the actual gambling casinos - are concerned, all this overbuilding seems unnecessary. Physical surroundings don't make much of a difference when you're in a casino. I have a suspicion that the casino operators _think_ that ultra-opulent facilities attracts big gamblers, but have not really researched the issue.

rafe

ROFL, stenz, well said!

brettpeven

pkimelma,

Tax online poker at the state level and you'd raise some revenue. My broader point is, that lotteries are regressive and rob from the poor to make an infinitesimal portion of the poor, rich. Whereas online poker has a much more indiscernable negative impact on society, and whatever impact that is will generally hit higher income individuals. The comparison is completely unscientific, but lotteries do far more harm to society than the benefits they bring.

pkimelma

brettpeven, although I agree that taxing online gaming at the State level could do what you want, there are serious logistical problems. For one, how do you police which online sites are valid and sending the money the right way, etc (especially if offshore)? Next, I assume you mean that the State of residence or the State where the person is physically located? But, you cannot always tell that, given the person may be traveling and they may be using a proxy site. In fact, I can see that the online gaming companies would encourage use of a proxy site so they could avoid any taxes (or at least get the lowest).
Further, if you go protectionist and say only US companies are allowed, you create new free-trade problems as someone commented above.
Yes, lotteries are regressive taxation. But, other than people with a gambling problem, most "invest" very little, and likely not the rent money. That is why many working class people use lottery pools, since they would be happy with a portion of a winning vs. the big prize.
I have not seen any studies showing lotteries doing harm in the sense I think you mean. The poor and lower-middle class are not so because of lotteries; I am not aware of anything showing changes in economic levels after a lottery is introduced (I know this has been looked at). One study at Carnegie Mellon a number of years ago seemed to imply that many just bough a few less sodas or candy bars and bought lottery tickets instead. So, think of it as more of a "luxury tax".

Read more...

TheQuitter

well, if the ban can keep off-sure companies away, they could just as easily pass a law that only allows these companies to run if they operate in the U.S. then tax the hell out of them. sounds like free money for the gov't.

prosa

It seems doubtful that the casino industry would have really cared much about Internet gambling. It's not as if casinos were struggling.
Much of the debate in favor of the legislation outlawing Internet gambling was couched in terms of protecting children. That makes me suspect that the anti-(all)gambling people were the primary supporters, figuring that the casinos were too strong to fight but the Internet gambling operations were more vulnerable.

steelhop

Prosa,

It is likely that casino's were partly behind the movement to eliminate on-line gaming (no casino calls it gambling) because the overbroad law would likely get overturn at the WTO or by Congress that would allow them to partake in on-line gaming that they are currently procluded under current laws. So it is something like one step back to move 3 steps forward.

As for struggling, go look at casinos debt load to understand their need to increase their marketing reach for new customers.

brettpeven

I also wondered who was behind the Online Poker Jihad. It's pretty clear to me that Casino's had the most to lose, and while I don't think they were afraid of Poker, I think they were afraid of games like Blackjack and Craps, etc. going online, which might really affect their businesses. The amount of lobbying needed to get a bill passed in an already religious right leaning country was minimal given that on the other side of the argument was a disparate group of individuals who wanted to toil in anonymity (the players) and the companies running the sites tried to remain equally anonymous given that they were operating in the "grey zone".

What really surprises me, is that states have lotteries with far worse odds, far worse pay outs and that represent much more egregious regressive taxes. I doubt the data is available, but I'd be willing to bet (not online of course) that a far greater percentage of income is gambled on the lottery (due to its appeal to the lower class) than is wagered in online poker.

Read more...

prosa

"As for struggling, go look at casinos debt load to understand their need to increase their marketing reach for new customers."

Judging by what I saw in my first-ever trip to Las Vegas last August, the casino industry sure looks healthy. New hotel-casino developments seem to be shooting up everywhere.

pkimelma

brettpeven, the lotteries dump money into State coffers (usually for schools). Online gambling money does not go to States at all and generally not even to the Federal government (since many are off-shore). So, the preference for State lotteries is local revenue.
Prosa, tearing down hotel/casinos every 10-12 years and building newer and fancier ones tends to create quite a debt load.

nphebel

didn't the U.S. lose a WTO case to Antigua over this issue? seems like an impediment to free trade to me.