PROHIBITION II: GOOD GRIEF

When government restricts Americans' choices, ostensibly for their
own good, someone is going to profit from the paternalism.

Perhaps Prohibition II is being launched because Prohibition I worked
so well at getting rid of gin. Or maybe the point is to reassure
social conservatives that Republicans remain resolved to purify
Americans' behavior. Incorrigible cynics will say Prohibition II is
being undertaken because someone stands to make money from
interfering with other people making money.

For whatever reason, last Friday the president signed into law
Prohibition II. You almost have to admire the government's plucky
refusal to heed history's warnings about the probable futility of
this adventure. This time the government is prohibiting Internet
gambling by making it illegal for banks or credit-card companies to
process payments to online gambling operations on a list the
government will prepare.

Last year about 12 million Americans wagered $6 billion online. But
after Congress, 32 minutes before adjourning, passed its ban, the
stock of the largest online-gambling business, Gibraltar-based
PartyGaming, which gets 85 percent of its $1 billion annual revenue
from Americans, declined 58 percent in one day, wiping out about $5
billion in market value. The stock of a British company, World Gaming
PLC, which gets about 95 percent of its revenue from Americans,
plunged 88 percent. The industry, which has some 2,300 Web sites and
did half of its business last year with Americans, has lost $8
billion in market value because of the new law. And you thought the
109th Congress did not accomplish anything.

Supporters of the new law say it merely strengthens enforcement; they
claim that Internet gambling is illegal under the Wire Act enacted in
1961, before Al Gore, who was then 13, had invented the Internet. But
not all courts agree. Supporters of the new law say online gambling
sends billions of dollars overseas. But the way to keep the money
here is to decriminalize the activity.

The number of online American gamblers, although just one sixth the
number of Americans who visit real casinos annually, doubled in the
last year. This competition alarms the nation's biggest gambling
interests--state governments.

It is an iron law: When government uses laws, tariffs and regulations
to restrict the choices of Americans, ostensibly for their own good,
someone is going to make money from the paternalism. One of the big
winners from the government's action against online gambling will be
the state governments that are America's most relentless promoters of
gambling. Forty-eight states (all but Hawaii and Utah) have some form
of legalized gambling. Forty-two states have lottery monopolies.
Thirty-four states rake in part of the take from casino gambling,
slot machines or video poker.

The new law actually legalizes online betting on horse racing,
Internet state lotteries and some fantasy sports. The horse-racing
industry is a powerful interest. The solidarity of the political
class prevents the federal officials from interfering with state
officials' lucrative gambling. And woe unto the politicians who get
between a sports fan and his fun.

In the private sector, where realism prevails, casino operators are
not hot for criminalizing Internet gambling. This is so for two
reasons: It is not in their interest for government to wax
censorious. And online gambling might whet the appetites of millions
for the real casino experience.

Granted, some people gamble too much. And some people eat too many
cheeseburgers. But who wants to live in a society that protects the
weak-willed by criminalizing cheeseburgers? Besides, the
problems--frequently exaggerated--of criminal involvement in
gambling, and of underage and addictive gamblers, can be best dealt
with by legalization and regulation utilizing new software solutions.
Furthermore, taxation of online poker and other gambling could
generate billions for governments.

Prohibition I was a porous wall between Americans and their martinis,
giving rise to bad gin supplied by bad people. Prohibition II will
provoke imaginative evasions as the market supplies what gamblers
will demand--payment methods beyond the reach of Congress.

But governments and sundry busybodies seem affronted by the Internet,
as they are by any unregulated sphere of life. The speech police are
itching to bring bloggers under campaign-finance laws that control
the quantity, content and timing of political discourse. And now, by
banning a particular behavior--the entertainment some people choose,
using their own money--government has advanced its mother-hen agenda
of putting a saddle and bridle on the Internet.

Gambling is, however, as American as the Gold Rush or, for that
matter, Wall Street. George Washington deplored the rampant gambling
at Valley Forge, but lotteries helped fund his army as well as
Harvard, Princeton and Dartmouth. And Washington endorsed the lottery
that helped fund construction of the city that now bears his name,
and from which has come a stern--but interestingly
selective--disapproval of gambling.