Worldwide Confusion in Internet Gambling Law: Digging for the Root Causes

1 April 2006

It has often been observed on these pages that American law is in a state of almost complete confusion regarding Internet gambling. But when we look around the globe, we see that the other countries of the world are in almost as bad a shape. The powers that be are engaged in contradictory and contrary activity all over the place.

The United Kingdom has just authorized the licensing of online gambling within its borders, but is going all out to campaign against advertising it. France, the Netherlands and Italy seek to isolate their home I-gambling markets, in defiance of good market sense, and contrary to the spirit, if not the actual letter, of the laws of the European Union. Germany seems about to lose its state monopoly of online gambling through the action of its own courts. China supposedly bans Internet gambling, but has already experimented with online lotteries at least at the provincial level, and I- gaming through the Hong Kong Jockey club. On the other hand, South Africa has just moved to legalize Internet gambling with few restrictions in sight, and the industry is once again expanding in Australia to Tasmania- but these are relatively small markets.

In fact, it is so hard to draw a correlation between a given country's I-gambling activity, and its laws and policies about I-gambling, that we are forced to examine the proposition that these two things may have nothing to do with each other. Of course the United States is Exhibit "A" for that theory. While millions of Americans defy the wishes of the administration by gambling online, some States pass laws against it - laws that can't find the gamblers and have no effect on the operators--while others seek to legalize it. Meanwhile the Federal government responds by declaring advertising it to be a crime--but according to statutory language and case law that does not exist! In the meantime Internet gambling revenue has grown from zero in 1995 to over $10 billion in 2005.

If the fortunes of online gambling are not a function of the law, what determines the industry's success or failure? For over a decade now, the question has defied analysis. Finally, the first break came in early 2006, with the close coincidence of two case settlements in the USA; the Sporting News case and the Casino City Press case.

The outcomes of the two cases could not been more different if they had been conducted on separate planets. The Sporting News, which carried the occasional advertisement for online gambling, was forced by the U.S. government into a "settlement" which cost it over $7 million. Casino City Press, on the other hand, does nothing but advertise online gaming in print and electronically. They went out of their way to sue Uncle Sam--but the government demurred, assuring them that they were not a target. The case was dismissed, and Casino City Press was not fined a dime. In both cases, we were talking about the same subject, advertising I-gambling; in the same country; it was the same government agency, the U.S. Department of Justice, that was the opponent in both, supposedly applying the same laws and cases to essentially the same problem. But one got skinned and the other was waved through. It seemed we were looking at the usual crazy contradiction

Then someone noticed the time frame. The Sporting News case was settled on Jan. 23. But the Casino City case was dropped during the first week of February. What had changed in the interim? There seem to be no difference whatever. Even the weather had remained the same, that is, bad. Weather! That was it! Between the 23rd of January and the 6th of February, the groundhog saw his shadow!

The groundhogs were asleep at the end of January, and woke up to check the weather on Groundhog Day as they always do. During the time they were hibernating, the Sporting News was beaten about the head and shoulders by a vengeful government. After they woke up, Casino City Press was in the clear, able to drop their case against the government and go their way. And there is an additional proof: when groundhogs see their shadow they go back to sleep for six weeks. On Feb. 16--just two weeks later--Rep. Goodlatte introduced the 2006 Internet gambling prohibition bill, HR 4777. It would seem, then, that the fortunes of Internet gambling directly depend on the level of activity of large burrowing mammals! When you think about what an underground success the industry has become, it makes a lot of sense. More sense than what the various governments are doing, anyway.

When checked against this theory, the facts finally begin to take on some sort of order. The decision to pass the U.K. Gaming Act was essentially finalized during warm weather- the same time that such animals as badgers and hedgehogs are active in England. The government campaign against I-gaming advertising, on the other hand, was a product of the following winter- when those animals are slowed or dormant. The rest of Europe continues in a confused state for I-gaming, not because of any governmental policies- there don't seem to be many on hand- but because of the scarcity of such creatures in those countries, whose wildlife has suffered greatly in past centuries.

Turning to other continents, we see further confirmation of our hypothesis. The African aardvark, which resides in the southern end of that continent, was taken off the endangered species list in 2003. Sure enough, in 2004 the Republic of South Africa authorized Internet gambling, reversing a long tradition of anti-gambling laws and policies in that country. So rapid and sudden was the change in law that the South African Internet providers are racing to catch up.

In Australia the correlation between the fortunes of Internet gambling and the fortunes of burrowing mammals is positively eerie. Australia, as everyone knows, is the home of three species of wombats- marsupials built on the general plan of the groundhog, only twice as big, and they don't hibernate. Australian Internet gambling began to grow in 1997, just at the same time that the wombats began to rebuild their population after long decline. A moratorium on betting exchanges Down Under was declared in 2001- just as the Northern Hairy-nosed Wombat's prospects took a sharp turn for the worse. Wombat numbers had recovered by 2003 - the same year the moratorium was lifted. Coincidence can only be stretched so far! (You can look it up, it's on the Internet. All of it. Honest. ). Further, last year, Betfair gained approval to open in Tasmania--the last real stronghold of the wombat, and in a year when Australian wombats were prospering nicely.

Finally, this theory explains the otherwise puzzling lack of I-gaming growth in modern societies such as the South American nations, China, and Russia. Their underground critter populations are confined to guinea pigs and gerbils respectively. Not only do these hibernate, they have no particular size to them, and thus cannot exercise very much beneficial influence even when awake.1 Likewise, back in the USA, when North Dakota lost its chance to host online poker rooms, there was very little logic to the legislature's refusal. Far more rational to link it to the fact that prairie dogs aren't all that big.

Now that we know the decisive factor, what can we do?

It is clear we must begin to encourage burrowing mammals - big ones, for it is their presence, not government policy, that is the key to the expansion of Internet gaming They will be grateful for our efforts, another point on which they differ from governments. It may even be necessary to import large numbers of wombats and aardvarks into key areas, particularly the USA, where rapid progress is important. Airlifting strange life forms into the country makes every bit as much sense as most other government programs, particularly compared to what government does in relation to gambling.

In any case they may be more acceptable than we would first think. Aardvarks, for instance, eat termites, and since the termites are eating what's left of New Orleans, importing aardvarks would qualify as disaster relief down South. Wombats would be a problem in most States- but they could be easily slipped into California disguised as illegal aliens. Nobody cares anymore over there, and at least this lot wouldn't vote.

Until these creatures were able to establish resident populations, however, we would still have the problem of groundhogs hibernating. Fortunately, in these days we have the perfect solution: surveillance. An anonymous tip to the Department of Homeland Security that groundhogs were in contact with certain foreign governments would result in all their holes being staked out with cameras, starlight scopes, microphones, infrared scanners- in short, with enough heat and light to keep them going year round, and work their beneficial magic for us all.

So in conclusion, anyone who ever thought that government gambling policy was a matter for shovels is completely correct. We should use those shovels to build homes for the only parties that seem to be able to guarantee the expansion of this industry, and take advantage of the fact that Internet gambling has powerful friends in low places.

1 It is true that South America has armadillos; however, these animals seem to spend at least as much time above ground as below it, and so probably don't qualify as true burrowers. Did you actually think you were gonna see a serious footnote in an April Fools article?

Mr. Owens is a lawyer in Sacramento, Calif., specializing in Internet gambling law. Released in 2005, he coauthored "Internet Gaming Law" with Professor I. Nelson Rose, America's senior authority on gambling.