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Gambling, Freedom, and Federalism

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The United States Congress Joint Select Committee on Deficit Reduction, better known as the supercommittee, was created back in August by the Budget Control Act of 2011, which raised the debt limit. The committee consists of twelve members of Congress, evenly divided between the House and the Senate and between Democrats and Republicans.

By the day before Thanksgiving, the committee is supposed to come up with $1.5 trillion in deficit-reduction measures (to be applied over a ten-year period). These measures don’t necessarily have to be in the form of spending cuts; they can also include real revenue increases and the elimination of tax deductions and loopholes.

One proposal being entertained by the supercommittee is to legalize Internet poker and other forms of online gambling currently illegal under federal law — not just legalize them, of course, but legalize them and then tax them like the government taxes alcohol, tobacco, and other “vices.”

Maryland governor Martin O’Malley recently urged the leaders of the deficit-reduction supercommittee to reject any proposal to increase federal government revenue by legalizing Internet poker and gambling. In his October 20 letter to the supercommittee chairs, Sen. Patty Murray (D-WA) and Rep. Jeb Hensarling (R-TX), O’Malley said in part,

I am writing to ask you to oppose proposals to federalize Internet poker and casino gambling. Such proposals would diminish significant sources of revenue for the states when we have already had to endure significant revenue reductions.…

Many of us in the states already face significant budget deficits. Federalizing internet poker and casino games would serve to widen these deficits — and therefore threaten our nation’s fragile jobs recovery. (PDF)

The federal government currently has a myriad of laws regarding gambling:

  • The Transportation of Gambling Devices Act of 1951
  • The Wire Act of 1961
  • The Travel Act of 1961
  • The Interstate Transportation of Wagering Paraphernalia Act of 1961
  • The Gambling Devices Act of 1962
  • The Illegal Gambling Business Act of 1970
  • The Racketeer Influenced and Corrupt Organizations Act of 1970
  • The Interstate Horseracing Act of 1978
  • The Professional and Amateur Sports Protection Act of 1992
  • The Illegal Money Transmitting Business Act of 1992
  • The Interstate Wagering Amendment of 1994
  • The Gambling Ship Act of 1994
  • The Indian Gaming Regulatory Act of 1998
  • The Unlawful Internet Gambling Enforcement Act of 2006

Basically, most forms of gambling are illegal except at Indian casinos, state-approved casinos like in Las Vegas and Atlantic City and along the Mississippi River, at horse-racing tracks, or on cruise ships in international waters.

How serious is the federal government about relaxing some of its gambling prohibitions?

Back when the Democrats controlled the House before the 2010 midterm elections, the House Financial Services Committee, under the leadership of then-chairman Barney Frank (D-MA) did approve a bill (H.R.2267) to legalize, license, and regulate online gambling. The Internet Gambling Regulation, Consumer Protection, and Enforcement Act was never voted on by the full House, and it died when the 111th Congress came to an end.

After the Obama administration cracked down on online poker sites in April of 2011, Representative Joe Barton (R-TX) introduced a bill (H.R.2366) in June to legalize and regulate online poker. The Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2011 would establish an Office of Internet Poker Oversight in the Department of Commerce and allow “a licensee to accept an Internet poker bet or wager from U.S.-located individuals and offer related services so long as the license remains in good standing.” The bill is presently under review in the House committees of the judiciary, energy and commerce, and financial services.

The House Energy and Commerce Committee’s Subcommittee on Commerce, Manufacturing, and Trade held a hearing last month on October 25 entitled “Internet Gaming: Is There a Safe Bet?” The purpose of the hearing was “to examine the status of Internet gaming in the United States and to consider how consumers and other stakeholders would be affected if current legal restrictions were eased.” (PDF)

In her opening statement at the hearing, the subcommittee chair, Mary Bono Mack (R-CA), said that this was an issue that she would be “following very closely to make certain Americans are dealt a fair hand, regardless of the outcome.” (PDF) She mentioned the arguments of both proponents and opponents of legalized Internet gambling.

Proponents argue that the prohibition on Internet gambling has merely driven gambling underground and offshore, that legalization would allow the government to provide greater consumer protection, and that the federal government would realize significant tax revenues.

Opponents argue that repealing the ban on Internet gambling will expose more Americans to serious problems such as compulsive gambling; it will increase fraud, money laundering, and organized crime; and it will harm state budgets because of the loss of revenue from state lotteries and other legal gambling activities.

Six witnesses were invited to testify at the hearing:

  • Parry Aftab of FairPlayUSA wants an “online gambling policy solution that has three principal elements — strong law enforcement and strict regulation, consumer protection, and the rights of U.S. adult consumers to engage safely in legal pastimes.” (PDF)
  • Ernest L. Stevens of the National Indian Gaming Association is opposed to liberalization of federal gambling laws because of the impact that might have on Indian gambling operations. (PDF)
  • Keith Whyte of the National Council on Problem Gambling focuses on the negative social consequences of gambling. (PDF)
  • Former senator Alfonse D’Amato represents the Poker Players Alliance. Along with supporting legislation to license Internet poker, he wants Congress to “finally clarify the laws governing Internet gambling and create effective enforcement against whatever is illegal.” (PDF)
  • Kurt Eggert, a law professor and director of the Adolescent Communication Institute, focused on consumer protection and regulation. (PDF)
  • Dan Romer of the Annenberg Public Policy Center believes that “by controlling online gambling the federal government could minimize the harm that this activity can inflict on the young and their families and could also make the use of these sites safer for them.” (PDF)

No one mentioned freedom or federalism. But they are the two most important things that relate to federal oversight of gambling.

Some feel that gambling is a bad habit, a vice, or a sin. Others believe gambling may be addictive, financially ruinous, and harmful to children and families. But these things are all irrelevant. As negative as any of these things may be, there is one thing that is more important: freedom. In a free society, consenting adults are free to engage in any voluntary activities that are peaceful without government supervision, licensing, or regulation as long as they don’t infringe upon the freedom of anyone else to not participate. A free society can’t have it any other way. It is simply not the business of government to mind everyone’s business.

But even if someone still believes that because gambling is a bad habit, a vice, or a sin the federal government should prohibit or regulate it — and even if someone still believes that because gambling may be addictive, financially ruinous, and harmful to children and families the federal government should control or discourage it — they still have an insurmountable problem. The U.S. Constitution gives the federal government no authority whatsoever to pass laws and regulations that have anything to do with gambling.

As James Madison explained in Federalist no. 45,

The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.

Our very simple federal system is not working as the Founders intended it, because the federal government has unconstitutionally usurped powers never intended for the national level, and it has made the states mere appendages of the central government.

Although he is a liberal who rarely meets a federal program he doesn’t like, Maryland’s Governor O’Malley was correct when he said in his letter to the supercommittee, “Historically, states have had the right to make their own decisions about whether to offer gambling and how to regulate the industry. These proposals would strip states of those rights.”

The federal government has no authority to prohibit, license, regulate, control, or discourage gambling, online or otherwise. None whatsoever. The states have the sole authority to prohibit, license, regulate, control, or discourage any and all forms of gambling. Whether they should do so, is, of course, another issue.

Those who nevertheless still contend that we should have gambling laws at the federal level are contending in vain. Their argument is with the Founding Fathers, the framers of the Constitution, the Constitution itself, and federalism.

No committee in Congress needs to waste even five minutes on any hearings on gambling or the opinions of any witnesses about gambling. Freedom and federalism both demand that the federal government repeal all laws that relate in any way to gambling.

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