Paul's Blog September 15th

Internet gambling is different from all other forms of gambling with respect to the enforcement of the regulatory laws because states do not have legal authority over remote operators.  The assistance of the U.S. federal government is needed to enforce state law against internet operators based outside of the U.S.  That is the primary purpose of UIGEA and the reason why the UIGEA should not be “overturned” without a clear and workable system to replace it.   These advocacy groups (including the ones mentioned above) seem to push in whatever direction seems to be consistent with the end result of allowing people to gamble online.  I would propose that internet gambling won’t (and shouldn’t!) happen until these issues over how tax and regulatory laws are to be enforced, and who exactly gets the benefit of the tax revenues, are clearly resolved.  We can get some clue as to how these conflicts play out by looking at Europe, where they’ve been wrestling with them for many years.  There really is no reason why it needs to be as difficult an issue in the U.S. as it is in Europe.  But without recognition that these issues exist and need attention, I think it unlikely that anyone will feel good about the end results (including the advocates for legalizing internet gambling).

The Remote Gambling Association of Europe insists that the potential for fraud in internet gambling is minimal.  Common sense would dictate that’s not true.  Evidence of that is found in today’s news about a fraud that resulted in players being cheated out of many million of $, over the course of four years, by insiders at Ultimate Bet.  (Actually, this is not new news, other than discovering just how extensive it was.)

Look carefully at the way this whole situation has been handled from start to finish because it provides an object lesson in how NOT to configure a regulatory framework. Even now you have conflicts of interests and a beehive of self-dealing.  Without boring you with all the details, let’s just say that UltimateBet and Absolute Poker are two licensees of the Kahnawake Gaming Commission, have both been found guilty of defrauding their customers, are both owned by Tokwiro Enterprises ENRG which is or at least was until recently owned by Joe Norton who is former Grand Chief of the Kahnawáke Indian Tribe, and that Tokwiro has now been exonerated with a small fine.  Now let’s just leap to the point:  The most basic and fundamental concept being contested by the Remote Gambling Association, and North American Indian tribes, is that the interests of the regulatory agents need to be vested squarely with the people whose interests are being protected and not with the gaming operators and the people who benefit by the revenues generated by those operators.  This would seem to be a simple and common-sensible truism that can be applied everywhere.  The government of Gibraltar which is due to enjoy huge tax revenues from Ladbrokes and William Hill should not be the agent charged with protecting the interests of people in the UK.  The Remote Gambling Association is  indignant because the European Court of Justice just ruled that Portugal has the right to enforce its regulatory laws in the ways that it sees fit.  Bwin and the RGA contend that’s not necessary because Bwin is based in an EU member nation (you guessed it Gibraltar) which is perfectly capable of enforcing effective regulatory policy upon Bwin.  They may be capable but this conflict if interests would obviously undermine the integrity of the system.  Likewise with the Kahnawake Gaming Commission, the California Indian Tribes and governments everywhere whose interest affiliate more with the operator than the player.  It is the government of the players themselves and the public that constitutes the market which should do the regulating.