Why is on-line Gambling Illegal?

    March 12, 2006

I was reading an article called Catch Me If You Can in which Forbes discusses the success of Calvin Ayre and his Costa Rica based Internet gambling business:

From this tropical oasis, Ayre has dodged and taunted those enemies, the main one being the U.S. Department of Justice. His Bodog Entertainment Group is in the not very kosher business of Web gambling. It takes bets from 16 million customers, most of them in the U.S. And that appears to violate the law–Title 18, Section 1084 of the U.S. Code–which forbids using telephones or other communication devices “in interstate or foreign commerce” in order to take bets. “Online gambling, whether it is located offshore or not, is illegal when it comes to the United States and its citizens,” says a Justice Department official who works on Internet gambling crimes.

On a financial basis, he seems to be doing quite well:

Last year the privately held Bodog handled $7.3 billion in online wagers, triple the volume of 2004. Ayre says all this betting gave him sales of $210 million, and that he took 26% of the revenue to the bottom line. What’s his business worth? Two similar ventures that are publicly traded (in Europe) go for well over 18 times trailing earnings. At that multiple, Bodog, along with other assets, gives Ayre a net worth of at least $1 billion.

That got me wondering… What’s the big deal about letting someone gamble without flying to Las Vegas, Atlantic City, etc. to play slot machines or blackjack? Is it actually a danger to society or is this the remnant of some economic policy whose goals elude me?

We have state lotteries (i.e. “the tax on people with poor math skills”) all over this country. What’s wrong with using a computer to try to win some money?

Jeremy Zawodny is the author of the popular Jeremy Zawodny’s blog. Jeremy is part of the Yahoo search team and frequently posts in the Yahoo! Search blog as well.

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