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Why Is Gambling Illegal?

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Every Wednesday and Saturday night at 10:59 p.m. five white balls are selected out of a drum containing 59 white balls, and one red ball is chosen out of a drum containing 35 red balls. The jackpot is won by matching all five white balls in any order and the red Powerball. Tickets cost $2.

After rolling more than 16 consecutive times without a winner, the Powerball jackpot shot up to $587.5 million, the second-largest in U.S. history, and the largest for Powerball, before two winning tickets with the numbers 5, 16, 22, 23, 29 and a Powerball of 6 were announced by the Multi-State Lottery Association, which has run the Powerball game since 1992.

The first winning ticket belonged to the Hill family of Dearborn, Missouri. They have already appeared at a press conference where they were handed an oversized check made out for their share: $293,750,000 (before taxes). Although the chances of any single ticket’s winning the jackpot were 1 in 175 million (making it more likely that someone would die from a lightning strike or a bee sting than win), the Hills bought five tickets on the day of the Powerball drawing at the Trex Mart gas station in Dearborn, a town of 500 north of Kansas City. “Tickets sold at a rate of 130,000 a minute nationwide — about six times the volume from a week ago. That pushed the jackpot even higher,” said Chuck Strutt, executive director of the Multi-State Lottery Association.

The other winning ticket was sold at a 4 Sons Food Store in Fountain Hills, a suburb of Phoenix, Arizona. The winner has come forward, but as of this writing his name has not been released.

About the same time the Powerball frenzy was taking place, the peaceful and voluntary actions of Americans who prefer another gambling medium were ended — thanks to the hypocritical and oppressive actions of the U.S. government.

The U.S. Commodity Futures Trading Commission (CFTC) filed a civil complaint in federal district court in Washington, D.C., on November 26 seeking an injunction against Intrade, a prediction market for non-sports-related events. Intrade is an exchange market that allows its customers to make predications (by buying and selling shares) on the yes or no outcome of real-world events: candidate x to win an election, actor x to win an Academy Award, contestant x to win on American Idol.

According to a CFTC press release, the complaint charges Intrade “with offering commodity option contracts to U.S. customers for trading, as well as soliciting, accepting, and confirming the execution of orders from U.S. customers, all in violation of the CFTC’s ban on off-exchange options trading.”

Said David Meister, the Director of the CFTC’s Division of Enforcement,

It is against the law to solicit U.S. persons to buy and sell commodity options, even if they are called “prediction” contracts, unless they are listed for trading and traded on a CFTC-registered exchange or unless legally exempt. The requirement for on-exchange trading is important for a number of reasons, including that it enables the CFTC to police market activity and protect market integrity. Today’s action should make it clear that we will intervene in the “prediction” markets, wherever they may be based, when their U.S. activities violate the Commodity Exchange Act or the CFTC’s regulations.

In its continuing litigation the CFTC seeks civil monetary penalties, disgorgement of ill-gotten gains, and permanent injunctions against further violations of federal commodities law, as charged, among other relief.

This is the same government agency that earlier this year rejected an application by the North American Derivatives Exchange to operate a market for contracts relating to the U.S. elections. The commission argued that political event contracts constitute “gaming” that is “contrary to the public interest.”

Because of the CFTC complaint, Intrade issued this statement to its U.S. customers: “We are sorry to announce that due to legal and regulatory pressures, Intrade can no longer allow US residents to participate in our real-money prediction markets. Unfortunately this means that all US residents must begin the process of closing down their Intrade accounts.”

With lotteries in more than 40 states and the District of Columbia, one would think that customers of Intrade would have no trouble finding another gambling option. But aside from state lotteries, Americans’ gambling options are somewhat limited unless they live near, or are willing to travel to, Las Vegas, Atlantic City, or the Mississippi River. True, some states have casinos run by Indian tribes, some have horse or dog racing that one can wager on, and some have legalized slot machines or poker rooms in selected areas, but Nevada is the only state that has legalized casino-style gambling statewide.

All forms of gambling that have been legalized throughout the United States have one thing in common: they all exist only with government permission. It is the state governments that license and regulate casinos, pari-mutuel wagering, slot machines, and poker rooms. It is the state governments that maintain a monopoly on lotteries. In most areas of the country, private, unlicensed gambling is simply illegal.

For example, in my state of Florida: “Whoever plays or engages in any game at cards, keno, roulette, faro or other game of chance, at any place, by any device whatever, for money or other thing of value, shall be guilty of a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083” [s. 849.08]. An exception is made for a penny-ante game of “poker, pinochle, bridge, rummy, canasta, hearts, dominoes, or mah-jongg in which the winnings of any player in a single round, hand, or game do not exceed $10 in value” [s. 849.085, 2, a].

And no one in Florida had better try to compete with the Florida Lottery, for it is unlawful in Florida to set up a lottery; dispose of property by a lottery; conduct any lottery drawing; assist in conducting a lottery; attempt to operate, conduct, or advertise a lottery; possess any lottery implement; sell or offer for sale any lottery ticket; possess any lottery ticket; assist in the sale of a lottery ticket; possess any lottery advertisement; or possess any “papers, records, instruments, or paraphernalia designed for use, either directly or indirectly, in, or in connection with, the violation of the laws of this state prohibiting lotteries” [s. 849.09, 1, a-k].

But why is that the case in Florida and elsewhere? Why are the peaceful, voluntary actions of consenting adults prohibited? Why is gambling illegal?

We are told by opponents of legalized gambling that gambling is psychologically addictive, that it leads to financial ruin, that it leads to compulsive gambling, that it harms families, that it leads to criminal activity to support one’s gambling habit, and that it increases crime in areas where gambling venues are located. Religious people add that gambling is immoral, that it is a vice, or that is it a sin. Even economists weigh in on the subject, telling us how great the odds are against winning the lottery and that gambling is a type of regressive tax that hurts low-income people. Every time someone wins a substantial lottery jackpot, there are news stories about how bad it is to win such a large sum of money.

Those things may all be true, but none of them can legitimately be said to be a reason for gambling to be illegal.

Forty-three states and the District of Columbia have state-run lotteries. Forty-seven states allow charitable gambling such as bingo. Thirty-nine states permit pari-mutuel wagering. Nineteen states have legalized commercial casinos. Thirty states have Indian casinos. Only the states of Hawaii and Utah forbid all forms of gambling.

If gambling should be proscribed by governments because it is harmful, ruinous, crime-fostering, or immoral, then governments — to be consistent — should outlaw all forms of gambling and certainly not be running lotteries. How can the 48 states that allow certain forms of gambling justify any of their laws that make other forms of gambling a criminal activity?

The real reasons so many forms of gambling are illegal in so many states are that governments are grossly hypocritical and arbitrary when it comes to their gambling laws and governments see themselves as nanny states with their citizens as children who need to be protected from vice and their own stupidity.

In a genuinely free society (as opposed to a relatively free one), people have the freedom to make any wager or bet any amount of money they choose on sporting events, horse races, casino gambling, pari-mutuel wagering, lotteries, prediction markets, private poker games, or any other gambling activity.

That does not mean that gambling is good or that it has no negative consequences. There is a distinction between favoring a thing and favoring the legalization of a thing. It is perfectly consistent for someone to disdain some or all forms of gambling and yet fully support the legalization of all gambling enterprises and activities. The issue is one of freedom, not preference.

It goes without saying that there should be no federal or state laws that relate to gambling in any way. Not because the gambling industry provides people with jobs or the states with revenue, but for the simple reason that there should be no federal or state laws prohibiting any voluntary activity between consenting adults.

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