SOURCE: New Yorker Magazine

Cont'd from page 1

Incoherent public policy is nothing new in Washington, of course. But our crazy-quilt approach to gambling leads to a raft of perverse consequences.

In the first place, it means that the worst forms of gambling—from an economic perspective—are legal in most of the country, while a better form is outlawed. Lotteries and most casino games are games of pure chance; the house has an ineradicable advantage and, over time, the inevitable outcome is that gamblers lose. Mathematically speaking, as the saying goes, no one wins the lottery.

Sports betting, by contrast, involves skill, and it is possible, although very difficult, to consistently win money on it. Sports bettors are closer to stock or commodities buyers than to people who buy lottery tickets. How much difference is there, after all, between betting on the future price of wheat (an activity banned in some states in the nineteenth century) and betting on the performance of a baseball team?

Furthermore, the ban on online betting is hindering the development of new markets that could predict far more important outcomes than that of the NBA finals.

In the past few years, a host of prediction markets, as they’re usually called, have appeared online, offering people the chance to speculate on subjects ranging from the box-office performance of Hollywood films to the outcome of Presidential elections and the spread of bird flu. These markets’ forecasts have proved remarkably accurate—just as bettors collectively do an exceptionally good job of predicting sports results. (In 2004, for instance, Tradesports, a Dublin-based prediction market, called thirty-three out of thirty-four races in the Senate correctly, and called all fifty states correctly in the results for the electoral college.)

But in the U.S. these markets have to use play money, because using real money would constitute gambling. The online gambling ban prevents these markets from getting bigger and more accurate.

That might seem an acceptable cost if the war on Internet betting looked set to accomplish its goals. Instead, it’s likely to make the problems it was designed to solve worse. Online bookmakers have been portrayed as shady operators, but the biggest of them are far more transparent and easy to regulate than illegal bookies, many of whom have ties to organized crime. David Carruthers, before he was arrested, had been actively calling for the regulation of his industry. Congress may think that driving bettors back underground can curb underage gambling and money laundering, but don’t bet on it.

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