Wanna Make a Bet? How the ‘Net can improve your odds
Tuesday, July 6, 1999
Did you hear the news that the National Gambling Impact Study Commission recently recommended a moratorium on new gambling establishments?
The commission cited all the familiar, valid concerns: the toll gambling takes on lives, families, and the work ethic. According to the commission, the $50 billion-a-year industry has produced an estimated 2.5 million “pathological gamblers” and millions more “problem gamblers.”
Ironically, by recommending a moratorium, the commission did the gambling industry a huge favor. I have no evidence the commission was corrupted by the gambling industry. But even if the commission was owned lock, stock, and barrel by the Las Vegas mob, it could not have served their interests any better.
Their proposal, if enacted, would protect the gambling industry’s current malignant practices from the competition they fear most: fair online games with better odds.
What the commission missed is that the most realistic way to address the real and growing social problems created by the gambling industry is to use the Internet, and new technologies, to create less damaging forms of gambling.
Instead, a moratorium on new forms of gambling would stop online gambling in it’s tracks. Why would the existing gambling industry be pleased to see that happen? Because of the potentially industry-crippling disintermediation process properly regulated online gambling could unleash.
By now, you’ve probably heard about disintermediation. The word describes how the Internet, by eliminating middlepersons, is beginning to change the structure of many industries, leading to lower prices and more consumer power.
The gambling industry must be absolutely terrified they’ll be the next industry caught in the ‘Net’s crosshairs. Here’s how it might happen:
Using the power of the Internet, gamblers could form the kinds of pari-mutuel pools that are common in lots of offices around the time of the NCAA Finals. One of the key advantages these little betting pools have over casinos and other forms of legal wagering, of course, are the vastly improved odds enjoyed by those placing bets.
That’s because, in these friendly (and illegal) games, there is no house. All of the money wagered goes back to the wagerers. Most of those betting still lose, of course, but, as a group, they win all their money back. Unlike legal sucker games, no one is shaving more than half the money off the top and using it to entice more players/victims.
Up until now, these little parlor games haven’t been much of a threat to big time legal gambling operations. That’s because they’re hard to organize, sporadic in nature, and often not available when gamblers get the urge. The Internet could change all that. Gamblers could get online access, around the clock, to more-friendly, and less exploitive, games.
Some major changes are required to make fair, online gambling work. First, we need to ignore the gambling commission’s do-good moratorium recommendation and instead enact a new law that legalizes no-house, online games.
Next, we’d need to authorize some kind of fiduciary body, say an accounting firm, to hold the bets and distribute the winnings. Thanks to automation, the cost of performing this service is so small we could restrict the fiduciary body to some tiny, negligible vigorish, say .0001 percent — and forbid it from using any of that money to advertise the games.
Some might say using the Internet to fight the growing scourge of gambling with more gambling is like fighting fire with fire. But, in this case, fewer people would get burned. Sort of like the way the forestry service starts controlled fires in order to prevent a more catastrophic fire.
It’s also similar to the way most antibiotics work. Most people think antibiotics hunt down germs and kill them. In reality, antibiotics work in a far more clever way. Most antibiotics are themselves germs, but they are benign, do-no-damage germs. As they grow and feast inside a body, they take nutrients away from the infections they are sent to fight. Given enough antibiotics over a long enough period of time, the harmful germs starve.
Legalized and carefully regulated Internet gambling could do the same thing to the organized gambling industry. It wouldn’t vanish overnight. But it might stop growing so fast, and taking increasing numbers of people over the cliff with it. That’s a much better strategy than the one recommended by the gambling commission, which, in a kind of shell game, merely protects the status quo.
This approach might also hurt state lotteries. But that might not be a bad thing, since lotteries (17 million-to-one odds?) are the biggest sucker bet of all. If state lottery revenues do dry up, we might have to return to other ways of supporting schools and the public infrastructure. Say, for example, a system of progressive taxation.
Legalized, well-regulated online gambling won’t solve all gambling-related problems. But it might help us avoid the nightmarish landscape now taking shape around the country, one that has begun to look like the casino-centric hell hole created after Biff stole the sport score book from the time-traveling character played by Michael J. Fox in Back to The Future Part II.
The gambling commission was correct to recognize the dangers involved in this evolving scenario. But their prescription was dead wrong. In this case, more is less.
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