In early December, I stumbled on an article slamming legalizing online gambling that really disturbed me. I didn't have the time to look at it closely, so I 'favorited' the link so I could return at a more opportune time. The sensational title of the article sums it up succinctly "Online gambling a threat to global economy." The entire article is essentially the opinion of one University of Illinois professor and national gambling critic - John W. Kindt. He feels that legalizing online gambling (I will focus mostly on poker for the sake of this blog) "would fuel an epic surge of betting in the U.S. leaving lives in tatters and the world's economy in jeopardy." I found every one of his assertions so far fetched and ludicrous, I thought I would put together a blog with his statements and my brief counterpoints in bold. Each one of his statements could be argued against much more deeply, but I don't have the time or inclination to invest any more time on his confused perspective.
1. He says "U.S. Rep. Barney Frank’s renewed push to overturn the decades-old ban on online gambling would put the nation at risk of an economic collapse rivaling the 2007 sub-prime mortgage crisis that sparked a deep and lingering global recession." This is the worst kind of hyperbole. His comparison to legalizing online gambling as having a similar to the much bigger economic issues and government policies have led us to our present struggles is laughable. How can you call for more regulation and supervision in other industries but less in another makes no sense. Sub-prime mortgages, cheating/derivative company failures undercut jobs and wealth to millions. Legalizing and regulating a recreational area like online gaming wouldn't have nearly the same impact or potential downside.
2. He says "Barney Frank has been railing against the lack of regulation on Wall Street and now he’s trying to create an even more dangerous threat by throwing the prohibition against Internet gambling into the toilet". That is not the case at all. The idea is to legalize and regulate openly the business of online gambling so that Americans can pursue their given rights to play games of skill and chance with their own resources in a trusted environment.
3. He says "Legalizing online gambling and the firms that run it would create a potentially disastrous speculative bubble in U.S. financial markets similar to the sub-prime mortgage crisis, spawning fast-growing companies with exaggerated earnings expectations that far outstrip real value." He clearly doesn't understand how the US government works. A measured system would be put in place over time to introduce approved companies to participate in this newly regulated industry. There are numerous publicly traded and experienced international companies presently profiting off this international industry. This would finally allow American companies to do the same. It is absurd to single out online gaming when the US has had numerous speculative bubbles in regulated and unregulated industries previously.
4. He says "I actually think a speculative bubble on Internet gambling would be worse because it’s based on nothing. With the sub-prime crisis, there was at least some real property involved. With online gambling, there’s nothing but people dumping money into their computers.” Poker uses money to determine the results of a card game of skill with significant elements of chance. It redistributes wealth, but doesn't destroy it. It is entertainment for others, and many business reporting on poker are based off the top players. Sports betting is based on your assessment of an outcome, which is similar to futures trading and stock trading.
5. He says "Global markets have already seen the consequences. The London Stock Exchange, which permits trading of online gaming company shares, saw its value plunge by $40 billion in one day after the U.S. strengthened its ban on Internet gambling in 2006." His supposedly shocking statistic is very misleading. As one commenter stated...The LSE has an estimated value of 2.9 Trillion Pounds. That makes his mentioned "plunge" roughly 1%, even with the best possible currency conversion rate. The DOW and S&P 500 fluctuate more than that regularly, off little more than individual earnings statements, or less. The valuations of companies are based on their perceived worth, so adverse news would negatively affect a company, regardless of its industry. If a company is consistently profitable, its valuation will increase. There is nothing alarming about his stated history of their valuations tumbling when they lost access to the largest market.
6. He says "Online gambling also would “throw gasoline” on a recession that has already cut deeply into Americans’ savings and put more than 7 million people out of work." I have heard that lottery ticket sales increase in a recession, so he may feel that people would gamble more in similar times, but they also have less money to risk at it as well. The truth is that the regulation of the online gambling industries would increase employment in the US, by encouraging home grown companies to profit off this industry instead of just foreigners.
7. He says "Money that should be spent on cars, refrigerators and other goods that build the economy and create jobs would instead be wasted on Internet gambling in every living room, at every work desk and at every school desk." He doesn't understand human nature. Firstly, there is a long standing stigma against gambling that wouldn't disappear. Secondly, people don't like to lose. If you lose at something, you call it quits. It stops being fun. Most people are not compulsive and are in control of their decisions using fundamental and responsible parameters with their financial resources. The money isn't wasted and doesn't disappear, but is simply redistributed.
8. He says "Frank’s bill flies in the face of research that supports maintaining a ban that traces to the 1961 Federal Wire Act, pushed through by then-Attorney General Robert F. Kennedy to curb the flow of money for organized crime. In today’s world, that money-laundering threat also applies to terrorist organizations." These are absurd claims. The Internet did not exist in 1961 and there is no ban on Internet Gambling. Prohibition never stops an activity that people enjoy. It only somewhat minimizes the access, but increases the societal cost by increasing the crime elements and unscrupulous tactics in an unregulated environment. His thinking is backward. Money laundering and terrorism funding would be more prevalent in the present unregulated environment.
9. He says "The threat of addiction is especially high among younger people, who studies show are already twice as prone to gambling problems as older Americans. It’s getting worse and worse as gambling spreads and would soar if online gambling is legalized. Internet gambling is known as the crack cocaine of creating new, addicted gamblers because it’s so accessible. Bankruptcy and crime rates also would balloon as people deplete family finances or raid their employers’ accounts to cover online gambling debts." Yet again, absurd conclusions. I have yet to see studies that have concluded that online gaming in other countries where it is fully legal and regulated has had this affect. It's the same failed argument as the US insistence on having 21 be the legal drinking age. With his logic, Europeans, who can drink at any age, would all be alcoholics/out of control addicts. If anything, you see a more reasoned approach to handling an issue by introducing it more reasonably. While in sports betting, everyone can lose, in poker, for every loser, there is a winner (assuming the rake isn't outrageous) so while one family may deplete some finances, another would benefit. The idea is to create a responsible environment in which to view the gaming industry and its role in our lives.
10. His final summation... "Online gambling should not be legalized for the same reasons that hard drugs remain banned. The social and crime costs are enormous and if gambling is easy to access more and more people will get hooked.” The argument that you should ban an activity because 5% (big assumption to even say that much) of the population can't handle it responsibility is both unfair to the responsible 95% and historically a failed one. Education and proactive solutions can be introduced to address the vulnerable population. The reason to regulate something is to remove the crime costs that presently influence the nether regions of sports betting and online gaming. The comparison to drugs, that physically affect our bodies, is an unfair one. We are all capable of addiction to almost anything in our lives. To single out online gaming as worse than the others is irresponsible. Online gaming is a enjoyable, stimulating, and challenging activity for many millions.
While I accept different perspective regarding online gambling, this professor seems very misguided and misunderstands most of the fundamental issues surrounding it. Thankfully, Congress and the US government is slowly coming around to the perspective that online gambling should be legal as a matter of personal liberty and that it could gain significant tax revenue while gaining employment and new business if Internet gambling is properly regulated. We should encourage healthy discussion of the best ways of regulating and supervising a fair playing field for players and operators, not fall into confused and incorrect assumptions that this professor mistakenly asserts.