Archives for the 'Sin on the 'Net' Category
Comcast resists pressure to drop Usenet access
Facing threats of legal action from New York Attorney General Andrew Cuomo, many ISPs have curbed newsgroup access in the name of fighting child porn. Now, it looks like a big fish is holding out: Comcast.
Good for them. While it’s understandable that other ISPs elected to fold under intense pressure from an overzealous AG with a powerful bully pulpit, Comcast is entirely justified in standing its ground.
It’s not the responsibility of network providers to police their servers for potentially illegal files, as the Communications Decency Act makes clear. The only legal obligation of an ISP is to remove illegal content upon gaining knowledge of its existence on their network. But that hasn’t stopped Cuomo from sending a harsh letter to Comcast threatening to pursue “legal remedies to stop child pornography” if the cable giant doesn’t comply with his terms.
Cuomo wants ISPs to go far beyond merely removing illegal content as it’s discovered. The “voluntary agreement” that New York is pushing on ISPs has already resulted in many providers dropping newsgroup access completely, causing millions of subscribers to lose access to Usenet. Even among users who haven’t been completely cut off from newsgroups, the popular alt.* hierarchy has been disabled, making it nearly impossible to acquire anything larger than text files. The worst part is that the “bad guys” are unaffected by the crackdown on child porn—third-party Usenet servers with uncensored newsgroup access are a dime a dozen these days.
A legal battle with Cuomo might not be cheap, but it’d be worth fighting nevertheless. As I pointed out last month, suppressing speech through so-called “voluntary agreements” likely runs afoul of the First Amendment, and ISPs enjoy immunity under the Safe Harbor provisions of the Communications Decency Act.
Like his notorious predecessor, Andrew Cuomo seems bent on building his image as a crime-fighter through meaningless publicity stunts, even if it means extorting legitimate businesses to the detriment of consumers.
Let’s hope Comcast forces Cuomo to put his money where his mouth is—the future of free speech online may hang in the balance.
Net gambling & online speech / commerce enforcement challenges in general
I have long been intrigued with the effort to regulate online gaming activities because it represents the most sophisticated effort by our government yet to eradicate a specific class of online speech or commerce. (My TLF colleague Tom Bell has done seminal work in this field). In her weekly “The Regulators” column, The Washington Post’s outstanding regulatory columnist Cindy Skrzycki writes about the enforcement challenges at work here:
It’s not easy making rules for a U.S. law intended to deter illegal Internet gambling by choking off the flow of funds to offshore sites. That’s because no one seems to agree on what the law covers. Officials at the Treasury Department and the Federal Reserve found that out after sifting through more than 200 comments from banks, gamblers, church groups and members of Congress on recommendations for the Unlawful Internet Gambling Enforcement Act of 2006. The basic sentiment was that their Oct. 4 proposal, which depends on financial institution enforcement, won’t work.
The outcome will affect 23 million online gamblers, some 2,500 Internet sites and the growth of an industry with an estimated $15 billion in annual global revenue. The law bars financial institutions from processing payments involving Internet gambling — with the notable exceptions of Indian gaming, state gaming and horse racing. “If the federal agencies themselves cannot agree on the law, what hope is there that banks can resolve these confounding legal issues?” the American Bankers Association said in commenting on a conflict between the Treasury and Justice departments on the legality of betting on horses. The Washington trade group said the suggested rules are more likely to catch its members in a compliance trap than stop profits from illegal gambling from escaping offshore.
PurePlay’s Patented Legal Hack
Some months ago, I noted that Betzip.com (since rechristened “PurePlay.com”) employs an intriguing legal hack to avoid anti-gambling regulations. It charges its customers a flat monthly fee, which qualifies them to win large prizes for winning online poker games. Non-paying customers can play the same games for free, too—though without qualifying for the largest prizes.
Why adopt that business model? Presumably, because it allows PurePlay to argue that it does not offer a gambling service. Specifically, PurePlay could claim that, because the amount players win has no relation to how much they stake, it dodges the “consideration” element of the legal definition of gambling. Query whether that claim would survive the devoted attentions of a prosecutor and court. I set that question aside, though, and here focus on PurePlay’s claim that they have patented their business model.
Curious about the scope of PurePlay’s patent, I searched its website for details. It offered none. I wrote to PurePlay asking for the patent’s number. PurePlay refused to say. So I put my able research assistant, Mr. Sherwood Tung, on the case. He found PurePlay’s patent, and more.
State Lotteries & Selective Morality about Gambling
We’ve done a lot of writing about Internet gambling issues here at the TLF over the years. (Complete archives here). One of the things that always intrigues me about these debates is how passionate some policymakers can get about the supposed “evils” of private online gambling even though many of them support state-run lotteries.
What got me thinking about this again was an article in Sunday’s Washington Post entitled, “Officials Laud D.C. Lottery as Success.” The D.C. Lottery turns 25 this week and, in the article, one local lawmaker after another celebrates the fact that more than $1.4 billion has been generated by the lottery for the city treasury. “Every time you buy a lottery ticket, the city wins,” says the current DC Lottery director. And former DC mayor Marion Barry, who currently serves as a DC council member, argues that, “Nobody makes anybody play the lottery… It’s a voluntary contribution to the D.C. treasury. It was a great vision.”
OK, so what’s wrong with people playing for their own enjoyment? Nobody makes anyone play private games of chance either. But because the money goes to private interests instead of the State, apparently it’s immoral and “evil.” Stupid.
A Second Look at Second Life Analogies
My letter to the Washington Post regarding Michael Gerson’s “Where the Avatars Roam,” which appeared in the Post last week:
Michael Gerson’s July 6 piece “Where the Avatars Roam” shows that his understanding of libertarianism isn’t nearly as deep as his understanding of online games.
Mr. Gerson describes Second Life as “large-scale experiment in libertarianism,” citing the game’s lack of community structure and long-term consequences. He describes this “libertarian” world as one in which there is not human nature, only human choices.
This doesn’t describe a libertarian world, but one of fantasy. Libertarianism, as envisioned by the founding fathers or Friedrich Hayek, is predicated on an understanding of the world that’s very different from Second Life. Common sense agrees with this libertarian understanding–the world is one of consequences, community institutions are vital to human life, and human beings have an innate nature that we should harness, not deny.
True, libertarians believe in the idea of spontaneous order, but Mr. Gerson treats this idea unfairly. Libertarianism holds that society is not the product of uncoordinated human choice, but of human choice coordinated by the institutions of liberty. Rule of law, private property, and a robust civil society together create rules within which markets operate to ensure the greatest possible outcomes, both for individuals and for society as a whole.
Denying human nature and basic economics is the forte of the modern left, not libertarians. Perhaps Second Life would be a good testing ground for the left’s pet theories–they may work better there. As for libertarians, we’ll stick to the real thing.
Betcha.com’s Hack of Anti-Internet Gaming Laws
Betcha.com recently began offering a U.S.-based, P2P, honor-based betting service. Its FAQ claims that Betcha.com avoids the reach of domestic state and federal anti-gambling laws because, “Unlike any other betting venue on the planet, Betcha bettors always retain the right to withdraw their bets . . . . Therefore, they are not ‘risking’ anything. No ‘risk;’ means no ‘gamble.’” Will Betcha’com’s hack of anti-internet gaming laws work?
Radley Defends Internet Gambling Before Congress
My friend and former colleague Radley Balko makes the case for the repeal of the online gambling ban:
Net gambling: None of the government’s business
Ever since the “Unlawful Internet Gambling Enforcement Act” passed during the last session of Congress, Rep. Barney Frank has been pushing to repeal it. Good for him. It’s a silly law for reasons Radley Balko of Reason magazine pointed out during testimony at a hearing Rep. Frank hosted last Friday. The hearing was held by the House Financial Services Committee, which Rep. Frank chairs, and it was entitled: “Can Internet Gambling Be Effectively Regulated to Protect Consumers and the Payments System?” In his testimony, Balko, a former colleague of mine at the Cato Institute, made the moral case against the law:
What Americans do in their own homes with their own money on their own time is none of the federal government’s business. Take online poker, by far the most popular form of online gambling. Poker has enjoyed a surge in popularity over the last several years. The game is about as mainstream and uniquely American as baseball. Poker evolved from similar card games in the early 1800s, then flourished in popularity on Mississippi’s riverboats, winning over such iconic American aficionados as Mark Twain.
Today, most daily newspapers have a poker column, including the New York Times. The game saturates cable television. Until recently, even several of the Supreme Court justices held a monthly poker game. Online poker is merely a new evolution of the game, similar to the way Civil War poker games introduced the straight, and gave us variations like draw and stud poker. The Internet merely removes the geographic barrier preventing those who love the game from finding opponents of similar skill who are willing to wager similar amounts of money.
Give IRS the Keys to the Internet?
The IRS likes to talk about how it’s primarily concerned with improving taxpayer services, particularly this time of year. But don’t be fooled. Earlier this year, the Bush Administration proposed to require “brokers” to report online sales of tangible personal property to the IRS.
This is really another giant surveillance program, like the trial balloon the administration has previously floated to require internet service providers to retain customer data to combat crimes committed against children (as I’ve discussed here and here). In both cases, the government is trying to harness the unique capacity of the Internet to identify and document conduct in ways that were never feasible nor possible before — in this case ordinary commercial transactions that just happen to be conducted online. According to press coverage, the proposal is specifically aimed at online auctions (see this and this).
Barney Frank Pushing for Net Gambling Repeal
Rep. Barney Frank is continuing his effort to repeal the U.S. ban on online gambling, which he calls “one of the stupidest things I ever saw.” The law, the “Unlawful Internet Gambling Enforcement Act,” was passed during the last session of Congress. Now that he’s the chair of the House Financial Services Committee he certainly has a better chance taking this silly law off the books, but he still faces an uphill battle.
Back in October 2003, when I was still with the Cato Institute, my colleague Wayne Crews and I brought Rep. Frank to Cato to deliver some keynote remarks on this issue during an event we hosted. He was amazing and his speech that day remains to the most principled (and highly entertaining) thing I’ve ever heard anyone say on the issue to date. And, luckily, the video is still on the Cato website here. Make sure to check it out and listen to the excellent Q&A session in particular. Great stuff.
Business Week on Net Gambling Going Underground
James recently pointed out that The Economist had editorialized about how America’s recent Internet gambling ban, The Unlawful Internet Gambling Enforcement Act of 2006, would actually do little to deter online betting. This week, Business Week picks this silly law apart. As Business Week’s Catherine Holahan reports:
Indeed, the new law will do little to stop online gambling, say gamblers, betting companies, and industry analysts alike. Instead, the law will drive out regulated, publicly traded companies like PartyGaming, the Gibraltar-based parent of PartyPoker, and make way for private gambling companies and banks based in nations where such industries are loosely policed at best. As a result, the new law could ultimately make billions of dollars in U.S. online gambling transactions more difficult to trace, and increase the likelihood that funds end up in criminal hands. “It leaves an opening for some of the more unscrupulous companies coming in from unregulated places,” says Frank Catania, past director of New Jersey’s Division of Gaming Enforcement and president of Catania Consulting Group.
The exodus is under way–and the companies that are on the way out are those with the most financial transparency. PartyGaming, 888Holdings, and SportingBet, all of which are traded on the London Stock Exchange, have said they’re exiting the U.S. market. Roughly 70% of PartyGaming’s $319 million in second-quarter sales and 50% of 888 Holdings’ revenue came from the U.S.
Private online gambling companies, on the other hand, have been defiant in the face of the new law, arguing it does not apply to them and cannot be enforced. Bodog Entertainment Group, which operates a Costa Rican online gambling site, has no plans to bar U.S. customers. “We’ve structured our business in such a way that we’ll have no problems adapting to any changes in the online gaming environment,” says Bodog founder Calvin Ayre. Similarly, PokerStars released a statement saying its lawyers had “concluded that these provisions do not alter the U.S. legal situation with respect to our offering of online poker games.
Now you know why our TLF colleague Tom Bell labels the measure “The UnInGEn-ious Act.” Read his excellent analysis here and here.
One Step Closer to Legalizing Online Gambling?
The Economist has an interesting editorial and feature article this week on the online gambling bill passed by Congress recently. The article makes the case–also made here–that the bill will do little to stop online gambling. It goes on, startlingly, to argue that the law could actually make legalization of online gaming more likely. The logic is that the bill has depressed the value of British online gaming firms, thereby making them more vulnerable to takeovers by their American cousins. The feature article concludes:
If such acquisitions come to pass, it seems more than likely that American online gambling firms would begin to lobby American politicians to legalise online gambling. Thus, America’s prohibition may ultimately have the unexpected consequence of moving the country one step closer to legalising online gambling.
I’m not sure this is a likely outcome, but it’s an interesting take nonetheless. Worth reading.
How the UnInGEn-ious Act Will Encourage Internet Gambling
I earlier described why the Unlawful Internet Gambling Enforcement Act of 2006 (the “UnInGEn-ious Act”) will put the domestic financial services industry at the disadvantage of overseas competitors capable of escaping U.S. regulations. How will Mastercard, Visa, and their ilk react to the resulting loss of business? More likely than not, by seeking shelter in one of the UnInGEn-ious Act’s safe harbors. The result: legal Internet gambling will increase in the U.S.
A Tip or Two for (former) Rep. Maf54
Probably most people woke up last Saturday morning to the shock that a Member of Congress had resigned over some filthy instant message exchanges with an underage page. I wasn’t so shocked. Well, it’s about time, was my first thought.
No, I don’t have any inside dirt on former Rep. Foley’s peccadillos or those of any other Member. But I have done a lot of research into how the legal system treats instant message evidence and recently put forward the first real set of guidelines as to how it ought to. (Find my full analysis here.) One thing I learned: there are a lot of sickos on the Internet. (This is news?) And so it boggles the mind that this is the first high-profile instant messaging case.
Another thing I learned: plenty of the instant message evidence that makes it into courts is obviously forged junk. That doesn’t stop it from being incredibly persuasive, especially to juries.
A few bare text files–easily falsified by a ticked-off youngster–have proved enough to wreck Foley in the public’s eye (er, well, outside of his district, anyway) and send him into rehab and “crystalized recognition” and confession even if not quite accepting “full responsibility.” But now that the FBI’s on the case, Foley’s got to be wondering whether this evidence will stand up in court. There’s no easy answer.
And the answer isn’t foreordained, either. Instant message logs are about the least reliable evidence that a prosecutor can bring into a criminal court, and in this age of AIM, MySpace, and the like, they may be the most convincing to the jury, especially when the “crimes” committed took place solely online–an increasingly frequent occurrence. Defendants have a great incentive to try to keep this stuff out of the courtroom, and they’ve got ample legal tools to make that happen. But few have even tried because getting into the technology of IM can be daunting, and understanding the technology is necessary to make the argument that IM logs should be kept far, far away from the jury. There’s little persuasive judicial precedent, then, on what courts should do about IM evidence. Still, a lawyer who’s prepared to make the argument that IM evidence is junk may stand a good chance of getting the judge to agree.
It looks like the Foley camp is already planting the seed for a vigorous defense. Foley’s lawyer has been “requested by me to fully and completely cooperate regarding any inquiries that may arise,” but stories about the genesis and purpose of the now-famous IM logs are already rife. Certainly Foley and his team have done nothing to quell the rumors that the conversations were somehow part of a prank or game–in other words, that there’s some larger story going on that the IM chat logs, as now available, don’t reveal for one reason or another. Tampering? Could be.
Then again, his post-revelation behavior makes Foley look guilty, guilty, guilty, which in the current caselaw is more important than whether the proffered evidence is like completely bogus.
(And if you want to Digg this, please do.)
The UnInGEn-ious Act’s Non-Impact on Internet Gambling
With the Unlawful Internet Gambling Enforcement Act of 2006, Congress took aim at Internet gambling, pulled the trigger, and shot the domestic financial services industry. The regulatory bloodshed might temporarily put off American consumers of Internet gambling services. Very quickly, though, foreign financial services will step into the breach. More likely than not, Internet gambling will continue unabated. Federal lawmakers will have done little more than won a sound-bite for the upcoming elections and encouraged the widespread use of Internet-based financial systems capable of wholly escaping U.S. control. Hence my moniker for the new law: The UnInGEn-ious Act.
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