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Massachusetts Governor Deval Patrick is the latest person in US public office to take aim at online gambling, though his bill seems doomed to failure if you look at the numbers.

Patrick, who is essentially a leftist with an otherwise right-on record, has suggested that internet gamblers should be fined and jailed, marking a shift from the usual ‘prosecute the gambling companies, not the punters’ line.

Nothing unusual in that, you might think, but Patrick’s recommendation appears within a bill aimed at making room for three more casinos in the state that he currently oversees. A thoroughly bizarre move, if he is concerned about his reputation, and savagely hypocritical given the main thrust of the bill.

To paraphrase, our man at the top believes that gambling is ok in an offline casino, but damn you if you have a wager online! Punishment is clearly the only option worth considering. He suggests a fine of up to $25,000 and up to TWO YEARS in jail. Seems totally reasonable, right?

Wrong! Keep in mind that The Poker Players Alliance reckons a quarter of a million people in Massachusetts regularly play poker online. And that's just poker. Criminals all, according to Patrick’s bill. It’s just as well that he is anti-capital punishment. Talk about alienating the proles…

To put this into some much-needed perspective, three casinos is worth something close to $1bn in licensing fees to the state, over a decade. In fact, I think that’s all the perspective we need right now. Although if you read on, you’ll see that the numbers don’t remotely stack up, assuming that the theory of enforcing such a bill becomes a reality (it won’t, it’s totally unworkable).

Regulate!
Meanwhile, another Democrat - Barney Frank - is lobbying for online gambling to be legislated in the US. Good luck, Barney. Not that he needs it, not with Peter Mandelson on his side. Regulation will happen sooner or later, although I’ve been saying that for about seven years now (Anyone care for a bet on the matter?).

Why regulate it? Well, it doesn’t seem to make any sense not to. Policing / enforcement is virtually impossible, and criminalising millions of otherwise law-abiding Americans (while turning a blind eye to offline gambling) is thoroughly indecent / stupid / self-harming. Besides, the US has a poor record when it comes to prohibition.

The upside? The US would reap many billions of dollars in taxes were it to approve a bill aimed at regulating the online gambling sector. Many, many billions.

Ok, so maybe some offline casinos would lose a little business if the country / state takes the route to regulation. But maybe they won't, since the casino experience is more than just gambling and it continues to thrive. The American Gaming Association suggests casino revenues have more than doubled since 1995, roughly the lifespan of the commercial internet.

If the bill takes effect, then what happens next? It won’t be the casinos who pay to lock up online gamblers, when Patrick marches them all to the state prisons. It will be the taxpayer.

So how much will this cost, potentially?
A little bit of digging finds that Massachusetts currently supports less than 12,000 prisoners at a cost of around $460m in 2007. We should now let the numbers do the talking…

If Patrick’s bill succeeds and he successfully rounds up all of the 250,000 online poker players in his state, then he’ll need to find another $10bn a year to incarcerate them. And he wants people in prison for up to two years, remember, so double that.

The fines these people would have to pay could cover maybe a third of the cost to jail them (based on the maximum $25k fine). I make that a sweet $20bn in costs, over two years, less a maximum of $7.5bn in fines. That’s a loss of $12.5bn. Or $11.5bn, if we factor in the effects of the $1bn in licensing fees paid by the three offline casinos.

All of this assumes that the state could house another 250,000 prisoners. Naturally, it can’t do this, so there will be additional development costs to build new prisons. See, the numbers just don’t work... 

Neither does Patrick’s proposal. May it fail, and fail miserably, lest he becomes known for bankrupting the state of Massachusetts on the ridiculous notion that he believes gambling is both good and evil.

Further Reading
Internet gambling is a target of Patrick bill - The Boston Globe

Chris Lake

Published 14 November, 2007 by Chris Lake

Chris Lake is CEO at EmpiricalProof, and former Director of Content at Econsultancy. Follow him on Twitter, Google+ or connect via Linkedin.

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