More Shortsighted Law-Making

Robert X. Cringely says that the new law against Internet gambling is unenforceable and will eventual fund outlaw groups who can exploit this law. Excerpts below.

Link: PBS | I, Cringely . October 6, 2006 – Risky Business

Last Saturday the United States Congress passed a port security bill that carried an amendment banning Internet gambling. This was a huge mistake, not because Internet gambling is a good thing (it was already illegal, in fact), but because the new law is either unenforceable or — if it can be enforced — will tear away the last shreds of financial privacy enjoyed by U.S. citizens.

…The amendment was a surprise late addition, pushed by Senate Majority Leader Bill Frist, who has presidential ambitions and reportedly sees this battle against Internet gambling as part of his eventual campaign platform.

Only the new law isn’t really against Internet gambling at all, since it specifically authorizes intrastate Internet gambling, imposing on the net the artificial constraint of state boundaries. So the law that is supposed to end Internet gambling for good will actually make the practice more common, though evidently out of the hands of foreigners, which in this case includes not just operators from the UK but, if you live in South Carolina as I do, it also includes people from Florida and New York. Let a million local poker hands be dealt.

What the new law actually tries to control is the payment of gambling debts through the U.S. banking system, making such practices illegal (except, of course, for intrastate gambling, which probably means your state lottery).

Is the end here really worth the effort? The United States already has strict, even draconian, controls over fund transfers that might potentially be used to pay for terrorist activity. Buy a house or open a brokerage account and see how deep an interest the bank takes in where the heck your money is coming from. Now it is proposed that they apply the same diligence to transactions as small as one dollar.

This is ridiculous, not just because it is an unwarranted invasion of privacy, not just because we as consumers will ultimately have to pay for the cost of snitching on ourselves, but because the system of regulation ultimately won’t work. With an Internet gambling market approaching $20 billion per year, there is a huge incentive for new enterprises to spring into being specifically to get around this law. Frankly, it ought to be easy.

Any random group of 535 nerds is smarter than the 535 members of the U.S. Congress and able to circumvent ANY regulation if there is enough profit incentive to do so. Well the U.S. Congress has just created such an incentive where there was none before. And once these various payment schemes start appearing, what’s to say some of them can’t be equally used to finance terrorism? Of course they can be used for that purpose. Thanks a lot Senator Frist.

Here’s a law that purports to end Internet gambling but will instead enable it, a law that is intended to make certain types of financial transactions harder to do but will ultimately make them easier, a law that says nothing about terrorism but will ultimately abet it, making us all less secure in the process.

There is, to my knowledge, no center for Al-Qaida hacking, nor is terrorism as an industry big enough to attract much third-party software development. But ally the interests of terrorists and Internet gamblers who all want to be paid, that’s a $20 billion incentive to corrupt the world financial system — an incentive that didn’t exist before last week.

And what will be our institutional response to these obvious flaws when they come to light? More regulation of course! More scrutiny of financial transactions, not less. But as we’ve seen in recent years, this greater scrutiny often comes with lax or unequal enforcement, depending on your campaign contributions.

Once again, Congress is proposing to regulate something it ought not to — something that in any practical sense is probably beyond its power. And the result will be only bad, not good. And Congress’s response will probably be even more regulation, not less. And all this to push one man’s presidential ambitions?