Public Gaming Magazine January/February 2016

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January/February 2016 // PUBLIC GAMING INTERNATIONAL // 39
pear to be in one place while operating from another, sites have the
technology to detect and defeat attempts to bypass these checks
by utilizing Wi-Fi, GSM, and cell tower triangulation, as well as
searching computers and mobile devices for software intended to
hide a device’s location.
For example, New Jersey requires sites to make sure a player’s
device does not contain features that compromise the integrity of
the device or the data stored on it. If the player’s location cannot be
determined or is suspect in any way, sites will automatically block
that player. Evidence indicates sites are complying. By January
2015, New Jersey online gambling sites had a 98 percent verifica-
tion success rate, with the 2 percent being false negatives—players
denied access despite being within the state’s borders. To date, there
has not been a single documented case of underage or out-of-state
gamblers gaining access to New Jersey online gambling sites.
Online gambling does not fund terrorist groups
like Al Qaeda and ISIL.
While no system is infallible, it makes little sense for terrorist
organizations to attempt to draw funds or launder money through
regulated online gambling sites in U.S. states. The difficulties of
proving location and identity and the requirement to report any
deposit or withdrawal over $10,000 or suspicious transactions over
$5,000 to the feds creates a virtual trail that makes it an inefficient
and risky route for moving money clandestinely.
Moreover, intrastate gambling markets are too small to launder
significant amounts of money. For example, in Germany—Eu-
rope’s largest gambling market—all gambling accounts for a mere
0.5 percent of total money laundering activity, according to Profes-
sor Friedrich Georg Schneider, a respected economist and expert
in money laundering at the Johannes Kepler University of Linz,
Austria. His research led him to conclude that online poker was “by
no means relevant for money laundering.” In fact, other avenues,
such as physical casinos, seem to be less risky and more effective
for laundering money. According to the Congressional-Executive
Commission on China Annual Report in 2013, a $202 billion in
“ill-gotten funds are channeled through Macau casinos each year.”
Regulated online gambling will reduce crime.
While it is possible that crimes like money laundering could
occur within the online gambling market, there is simply no in-
centive for criminals to choose sites regulated by American states
to scrub their money. The deposit limits, oversight, and reporting
requirements within the U.S. pose too much risk for far too little
gain. Criminals have many other options for laundering cash that
are easier, cheaper, and leave less of a paper trail. It would be easier
to simply walk into a physical casino and exchange chips with
another player.
The risk of money laundering within a regulated online gam-
bling market in the U.S. does not justify the prohibition of an
entire industry or federal encroachment in what should be a state
matter. States have proven capable of preventing crime and keep-
ing online gambling within their borders. Rather than push the
activity back into the black market, Washington should continue
to allow states to license and regulate online gambling as their
own residents see fit. ■
Michelle Minton is the Competitive Enterprise Institute’s fellow spe-
cializing in consumer policy, including the regulation of alcohol, food,
and gambling. Michelle prefers to write about the “sindustry” because,
apart from her personal interest in beer and gambling, it is an enter-
taining way to explore basic economic principles and the consequences
of government interference in the economy and our personal lives. She
has coauthored several studies, including topics like sin taxes, reforming
state beer laws, and the negative consequences of an Internet gambling
ban. Her analyses have been published and cited by nationally respected
news outlets like the Wall Street Journal and USA Today as well as
university and industry publications.
She earned her B.A. at the Johns Hopkins University. In her free
time, she enjoys playing poker, studying economics, and learning about
the art and history of making beer.
NOTES
1. Letter to Rep. Bill Young from Britt Johnson, Deputy Assistant of the FBI’s
criminal Investigative Division,
September 20, 2013,
d/0B1AgyozaET8BbEJzZTFSeGVSZXM/edit?pli=1.
2. New Jersey Gambling Enforcement Regulations 13:690-1.2,
3. David Rebuck, “New Jersey Internet Gaming One Year Anniversary –
Achievements to Date and Goals for
the Future,” Office of the New Jersey Attorney General,
4. “Jeffrey Haas on New Jersey Online Poker.” Casino Connection Atlantic City.
October 31, 2014
5. Friedrich Georg Schneider, “Online Poker—Need for European Safety Stan-
dards?” Presentation at the
Workshop Online Poker at the EU Parliament, March 2013, -
online-poker-at-the-eu-parliament-does-europe-need-uniform-safety-standards-
experts-attest-providers-
effective-control-mechanisms-against-fraud-attempts/.
6. FTI Investigations Global Risk and Investigations, “Macau Remains a Money
Laundering Hotbed,”
macau-remains-a-money-
laundering-hotbed.pdf.
7. How China’s Filthy Rich Use Macau to Launder Their Money, Business
Insider, November 11 2013,
ey-2013-11.