Bizarro Kyl?

5 April 1999
If Jon Kyl were to dig a hole from his office in Washington D.C., and he kept digging until he saw daylight, there's a slight possibility--if he doesn't starve, suffocate or melt like a marshmallow in the bubbling magma that froths violently beneath the earth's surface--that he would end up in the office of South Australia Senator Grant Chapman. It would be quite a different world there--one with dingoes, koalas and a really big rock--but he would also find some similarities.

Take, for instance, the outlook on gambling and the prospect of prohibition, particularly on the Internet. Australia, which has proven to be light years ahead of the U.S. with its assessment of Internet gambling, still has an opposition, that being Senator Chapman.

Australia has an independent commonwealth agency, The Productivity Commission, that serves as the government's principal review and advisory body on microeconomic policy and regulation. The Commission, at the request of the treasurer, has undertaken a national public inquiry into Australia's gambling industries-sort of a National Gambling Impact Study Commission with a side order of crocodiles and kangaroos.

The Commission has held several hearings which will receive significant coverage from IGN in coming weeks. Testimonies are heavy in the problem gambling and addiction territory, several of them coming from organizations dedicated to helping those with gambling problems and preventing the spread of pathological gambling. The biggest focus of anti-gambling sentiment has been the electronic poker machine, and some are warning that Internet gambling will have even more potent effects on society.

First up to bat is Senator Chapman, who submitted his paper, "Home Gambling: An Australian Perspective," and presented his case before the Committee in Canberra on November 30, 1998.

In his paper, originally presented May 7 at a gambling and technology conference in Sydney, Senator Chapman criticizes legislators from other Australian territories for supporting regulation and player protection instead of prohibition. He refers to the Northern Territory Legislative Assembly Select Committee on Interactive Gaming, in its April 1996 report, as being "blissfully blasé about potentially the detrimental social impact of home gambling." He also criticizes the government of Victory for its "hostile reaction to the proposed Productivity Commission."

One of his premises for qualifying online gambling as being harmful to society is that physical gambling venues will be able to use the Internet to develop highly skilled databases of customer information. According to Chapman, operators will be able take this information and figure out ways to appeal to the customer's psyche and "lure the unsuspecting home gambler."

Naturally, he commends efforts in the U.S. to ban Internet gambling, particularly those of Senator Kyl, although some of the material he quotes from the Kyl Bill, in both his paper and his testimony, is incorrect. (He quotes the maximum penalties as being minimum penalties.)

He also states in his paper a few facts that are less than accurate. He claims that Starnet, which maintains a very high profile in the industry, is based in Antigua, when in actuality it's based in Vancouver. He also reports that gambling in the U.S. is legal "in only a few states." (The term "a few" can be used loosely, but can hardly be applied here, being that gambling is legal in 48 out of 50 states.) Then there was the statistic claiming that a Yahoo search for "on-line gambling" yields 2,108,634 web pages, which neglected to define exactly what qualified as "on-line gambling" and whether those pages existed on exclusive domains.

On the issue of enforceability, the senator testified that a ban would be successful if they hold Internet service providers accountable for the transmission of gambling activity, a stance that Senator Kyl originally took, but abandoned in the 1999 version of his bill. He also emphasized the importance of making it illegal for financial institutions to facilitate payment for Internet gaming activity.

And there are exceptions: In his testimony before the Productivity Commission, Chapman expressed that Internet betting on the existing TAB system could be legal because it's already regulated-an argument that contradicts his report and testimony, which clearly outline the dangers of online gaming, regardless of its legitimacy. Such an argument also justifies allowing companies like Harrah's and Mirage to offer Internet betting, since they're already regulated as well.

He also, in acknowledging that there's a heck of a lot of money to be made, said that he'd consider allowing Australian gaming companies to offer bets to people who aren't in Australia. This is contradicts his earlier statement that, "…Gambling is a zero sum game--whatever someone wins, someone else loses--so it's not an economic activity that facilitates production or creates additional wealth." (Tell that to lawmakers in other commonwealths, where there are taxes of up to 50 percent of gross wagers, minus payout.)

Ultimately, Senator Chapman, like Senator Kyl, has a few holes to fill before his case can be seriously considered. Unlike Senator Kyl, however, he is in amid counterparts who have seen the light and realize that Internet gambling has an upside. If he successfully bans Internet gambling in South Australia, he'll be surrounded by jurisdictions that allow it.

So perhaps Senator's hypothetical excursion through the Earth to South Australia would end in a handshake, a pat on the back and a quick return to his friendlier world, where there are no dingoes or koalas or giant rocks, and everyone is on his side.

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Mark Balestra

Mark Balestra is the Managing Director at BolaVerde Media Group. He previously worked at Clarion Gaming and the River City Group where he was the publisher of iGamingNews. He lives in St. Louis, Missouri.