On-line Gambling and Horse Racing

The 130th Running of the Preakness Stakes will occur tomorrow at the Pimlico Race Course in Baltimore, Maryland, and if you are betting, then you already know that Afleet Alex is the 5-2 favorite, while Kentucky Derby winner Giacomo is only the fourth choice at 6-1. And you probably know that this is the first time a Derby winner did not get favorite odds since 2001 (when Monarchos was the slight second choice) .

According to a piece by Norm Frauenheim of the Arizona Republic, about 800 websites are taking bets on the Preakness. Since on-line betting is illegal in many states, those websites are often located abroad, primarily in the Caribbean, Costa Rica, the United Kingdom, and Canada.

So why is on-line gambling illegal in many states, when in those same states, one can go to a racetrack and legally make the same bet? According to an interesting study by Andrea M. Lessani of the UCLA Online Institute for Cyberspace Law and Policy, policy-makers have identified four primary rationales for distinguishing on-line gambling as somehow worse than in-person (or phone) gambling:

(1) the potential for fraud over the Internet;

(2) children's access to gambling sites;

(3) an increase in gambling addictions; and

(4) the need to preserve state revenues generated from legally enforced (and state-run) gambling operations.

But, from my vantage point, a fifth reason appears most salient: racetracks don't like competition from websites, and owners of those racetracks actively lobby legislators to prevent would-be gamblers at racetracks from instead sitting home and making those same bets on-line. And those owners, along with owners of other gambling establishments, have continuously lobbied Congress to pass federal legislation that would outlaw on-line gambling. However, aside from the difficulty of enforcing such legislation, it might also defeat national economic interests: instead of bets being placed with websites owned and operated in the United States, those same dollars instead migrate to foreign websites, presumably owned by foreign parties. And if on-line gambling is indeed a vice, doesn't it make it doubly worse that foreigners are profiting off of Americans?

On the other hand, perhaps on-line gambling is a real social worry, and one that warrants the stigma attached to it being deemed illegal. According to Nielsen/Net Ratings, almost 20 million Americans partake in on-line gambling each month, and do so despite 1) concerns about the legitimacy of foreign websites and, for some, 2) recognition that on-line gambling may be illegal. And not surprisingly, on-line gamblers, like all gamblers, tend to lose more than they gain: According to Christiansen Capital Advisers LLC, American gamblers lost $4.1 billion on-line in 2004, and that number is expected to climb to nearly $6 billion in 2005. But then again, American lost $72.8 billion at legal gambling in 2003, so why should we be more concerned about on-line gamblers when "legal" gamblers are losing much more?

Maybe the real lesson is: Don't gamble, because you're probably going to lose. But that's not much fun.

Relates Posts About On-line Gambling:
Greg, Is Your NCAA Tournament Pool Illegal?
Greg, Feds Going After On-line Gambling