Sin on the ‘Net

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.

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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.)

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I was about start a long rant about the absurd new anti-Internet gambling bill that Congress just passed but then I read Mike’s post over at TechDirt and realized there’s not much more I can add beyond what he’s already said there.

I have to admit though that the “shoot the middleman” approach the government used here could be quite effective at shutting down online gambling in the U.S. in the short term. No major financial intermediary will want to risk violating the new law’s prohibition against the use of credit cards or other financial instruments as a clearance mechanism.

What will be interesting now, however, is the extent to which alternative online financial mechanisms develop to fill the void. After all, I hope that members of Congress aren’t so naive as to believe that this bill will actually eradicate all online gambling. If there’s one thing we know from history it’s that humans have an insatiable appetite for wagering (an appetite that government is all too willing to take advantage of through state lotteries and heavily-taxed casinos). But whenever unsanctioned gambling is in question, government officials turn the debate into a morality play and claim that their regulatory efforts are meant to protect us (or our children, of course) from the supposed evils of using one’s money to enjoy one’s self.

So, what will happen now that all the “mainstream” financial intermediaries are being run out of town? It remains to be seen. But I’m willing to bet (pun intended) that some crafty, innovative people out there in the online world will find ways to get around this ban. Sadly, however, a lot of people will probably have to go completely “underground” to do it. And we shouldn’t be surprised if a shady element enters the scene to try to get a cut of this business. (New Jersey mafia members, call your office!)

Update: After writing this last night I picked up Washington Post this morning and found this interesting article by Mary Jordan about how cell phones are making money transfers instantaneous and dirt cheap for people across the globe. Could this be an evasion technique for determined Net gamblers? Perhaps, but I suppose the feds will then just threaten all domestic cellular companies with serious liability if they assist in completing those financial transactions.

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Mike Masnick points to a story about the latest front in the federal government’s obsessive crusade against online gambling: advertising companies. Apparently, creating an ad for an offshore gambling web site could lead federal fraud and racketeering charges. Because they conspired “to develop a scheme to defraud gamblers in the United States by inviting, inducing and persuading them to place bets.” The ads apparently “falsely stated that internet gambling on sporting events and contests was ‘legal and licensed.'”

I think it’s a safe bet that the feds haven’t arrested any of the American gamblers who supposedly broke the law by using BetOnSports. And it’s an even safer bet that most of them feel don’t feel “defrauded” by the ads. Unfortunately, the use of fraud and racketeering charges to punish actions that aren’t otherwise illegal is a growing trend.

As Mike says, don’t the feds have better things to do with their time? I thought there was a war on terrorism going on–maybe these officials can help out with that.

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