Interview with Jesse Hathaway of the Heartland Institute
I am a research fellow with The Heartland Institute’s Center on Taxes and the Economy. I work with free market-oriented experts to discuss the good and bad of national, state and local government policies in the tax and spending arenas, such as income, sales and excise taxes; economic development; targeted tax incentives; government pension and health costs; and other influences on taxes and spending.
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The Restoring America’s Wire Act (RAWA) is a response to a policy shift by the Obama administration. In December 2011, the U.S. Department of Justice (DOJ) issued a letter reversing 21 years of policy regarding the scope of the Wire Act of 1961.
In the letter, Deputy Attorney General James Cole wrote, “The Department’s Office of Legal Counsel has analyzed the scope of the Wire Act, 18 USC § 1084, and concluded that it is limited only to sports betting.”
The Act’s language itself explicitly refers to prohibiting “the placing of bets or wagers on any sporting event or contest” via “a wire communication facility.”
In addition to the Wire Act’s reference to outlawing sports betting, the bill’s sponsors specifically said the Wire Act was limited to sporting events.
In testimony in 1961, Sen. Estes Kefauver (D-TN) asked then-Assistant Attorney General Herbert J. Miller why the Wire Act was limited to sports betting, as opposed to all forms of betting.
“I can see that telephones would be used in sporting contests, and it is used quite substantially in the numbers games, too,” Kefauver said. “How about laying off bets by the use of telephones and laying off bets in big-time gambling? Does that not happen sometimes?”
Speaking of the proposed Wire Act, Miller replied, “This bill, of course, would not cover that because it is limited to sporting events or contests.”
Before DOJ’s 2011 return to the Wire Act’s roots, though, the federal government was using the law to ban forms of online gambling unrelated to sports.
Why An Unregulated Market Is Not Good
If passed, the Restoration of America’s Wire Act (RAWA) will definitely create a black market for online gambling. The Internet’s global, interconnected nature makes these prohibitions almost impossible to enforce, especially when gaming websites’ physical servers are located in foreign countries, outside of American law enforcement agencies’ jurisdiction.
Every new law just brings on innovative ways of avoiding detection and prosecution.
The federal government’s determination that states should set their own regulations for cybergambling is a good thing.
State governments should be empowered, whenever possible, to set regulations and policies more closely reflecting the wishes of their citizens. States could copy and modify regulatory frameworks found to be successful in other states, to replicate that success.
Businesses and individuals in states with poorly crafted frameworks would be able to “vote with their feet” by relocating to states with better regulations, thus sending a message to the state government and voters in the state. Those processes would enable each state to find the blend of regulation and liberty its citizens want.
I don’t want to attribute motives to why Adelson supports this or that bill. I’m not a mind-reader, so I can’t comment on what motives he may hold. However, Competitive Enterprise Institute research fellow Michelle Minton has addressed this issue in her work, suggesting Adelson’s support for RAWA is spurred by his belief that online gaming competes with physical casinos. Generally, online gaming is not a direct substitute for physical casinos, though.
In general, the large amount of uncertainty in the online gambling market is discouraging players in these states from playing online, but online gambling is still in its infancy.
See previous question.
No, I disagree. Generally speaking, there is little reason to prevent people from choosing to do things that don’t violate other citizens’ rights. Instead of engaging in a nationwide War on Fun, federal lawmakers should clear the way for state legislatures do their jobs and carry out the wishes of their constituents.
In my opinion, online gambling does not directly compete with physical gambling. Casinos are full of exciting sights and sounds, and people go to casinos to have fun. People working in the gambling industry should not be concerned that they’ll be replaced by an app, because gambling is about more than just the game itself. If physical casinos provide stimulating multisensory experiences that people enjoy, people will continue to visit casinos.
I have not visited Las Vegas, but I hope to have the opportunity to do so some day.
Online gaming simulates the experience of playing a poker game or a slot machine, bringing the casino to gamers’ computer desktops.
To avoid UIGEA’s restrictions on directly transferring monies for gambling, players deposit money into general-purpose online-based accounts physically hosted in countries with fewer restrictions on voluntary exchange, and cashed-out winnings are transmitted to players.
Ironically, by forcing American gamers to play on foreign servers, UIGEA prevents states from better serving their citizens, as disputes between gaming sites and players are subject to the laws of a foreign nation, instead of state or federal laws.
States should take the lead on regulating online gambling, executing the wishes of their constituents. Letting Congress do the heavy lifting leads to setting up a one-size-fits-all policy for 50 diverse states, each with a citizenry with their own respective needs and wants.
For example, Utah residents may approve of a comprehensive ban on online gaming but Nevada or New Jersey residents may chafe under such restrictions.