Protecting gamblers or protecting gambling: The economic dimensions of borderless online ‘speech’

Abstract

The globe is a patchwork of laws on various “sin” activities: alcohol, drugs, prostitution, pornography, and gambling. Separately, the globe is a patchwork of laws on free speech. Many times, these categories of activities and speech are even more blurred. Prior to the internet, however, citizens of the world could only avail themselves of other jurisdictions’ looser laws by being physical travelers between these patches. Tourists could travel from gambling-free states in the United States to Las Vegas, Nevada to gamble, or even to foreign jurisdictions such as Monte Carlo. College students from the U.S. could study abroad in Europe, where the drinking age was lower than 21 years of age, and drink without impunity. The occasional American tourist venturing into the Amsterdam “Red Light District” would also not face penalties in his home jurisdiction for engaging in activity that would be illegal in the U.S. Home jurisdictions rarely were concerned about this type of tourism, even though some modest amount of dollars was exiting the jurisdiction. Writers and thinkers in countries with anti-free speech laws could emigrate to other countries to voice opinions, but could rarely freely move back and forth without reprisal at home. The valuable speech the authors created could also not be freely distributed in the home country, making speech tourism less practical or even valuable.

The advent of the internet and the ubiquity of computers have created the ability to be “virtual vice tourists” and well as “virtual speakers.” In the former instance, web-surfers engage in activities online that are illegal in the country in which they are sitting, but not in the country in which the computer server sits. In the latter instance, speakers with legal rights in the country in which they sit are projecting their speech into jurisdictions in which such speech is restricted. In addition, physical forms of speech, such as books, may be read or purchased online by residents of countries with stricter speech laws. Citizens of nations with strong free speech rights and histories wish to export that culture and demand that all countries respect the rights of the speaker. In other words, the speech law of the internet should be that of the country that respects speech the most.

Though the U.S. government urges foreign jurisdictions to protect internet speech to the fullest extent, the U.S. does not protect fully internet activity, such as online gambling. In fact, the U.S. would like to spread the reach of its online gambling regime beyond its own borders. Perhaps this is consistency: our laws, whether they relate to free speech or online gambling, should be respected everywhere. Or, these policies could be incompatible: the laws of the internet should mirror the jurisdiction with the most liberal speech laws and the jurisdiction with the most restrictive online gambling laws.

In 2005, the World Trade Organization’s Appellate Body ruled that the United States was violating the General Agreement on Trade in Services by prohibiting online gambling sites headquartered in foreign jurisdictions (and domestically) while allowing certain kinds of internet gambling, namely horserace betting. Though the U.S. had argued that it had the ability to prohibit internet gambling under the exception for public morals and public safety, this argument was specious at best due to the fact that other types of gambling are legal and available in almost every state: casino gambling, tribal gambling, state lotteries, and video gambling, to name a few. Moreover, the next year the U.S. passed a federal law explicitly prohibiting online gambling and the processing of payments and credit to online gambling operators under the Unlawful Internet Gambling Enforcement Act of 2006, which was appended to the Safe Ports Act, legislation focusing on homeland security. This act made online gambling by U.S. residents harder by forcing U.S. banks, credit card companies and online payment processors to decline to transfer payments to offshore gambling companies, but not impossible. However, in 2011, the U.S. Department of Justice unsealed eleven indictments against individuals associated with the largest offshore gambling sites – sites that operated completely offshore but that also enjoyed a clientele comprised of U.S. citizens. These defendants faced charges associated with fraudulent practices aimed at bypassing the restrictions placed on banks by the UIGEA. After this so-called “Black Friday,” the illicit online gambling by U.S. residents through convoluted payment systems was severely curtailed.

The U.S. stance prohibiting online gambling has toughened substantially since the WTO’s 2005 ruling, yet the U.S. government’s public morals argument has grown even weaker. Since 2012, three states, Nevada, New Jersey and Delaware, have passed laws legalizing intrastate online gambling. Other states are contemplating the same revenue-generating move. To say that offshore online gambling must be prohibited for public morals and public safety reasons is particularly disingenuous when domestic online gambling is becoming widespread. However, as domestic online gambling grows, the pressure to keep offshore online gambling illegal also grows as U.S. states attempt to preserve their market among their own citizens. To add to this disconnect, the U.S. takes the stance that U.S. speakers should not be subject to tighter anti-speech laws of other jurisdictions when citizens of those jurisdictions access that speech, whether the speech is a book or a blog post. The U.S. should revisit its off-shore online gambling position in light of its free speech policies.

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