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***GambLux EDITOR ARTICLES*** |
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Prohibition then and Prohibition now
[Monday, October 16, 2006]
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Every few generations, people in the United States seem to go through some sort of spiritual revival where they 'see the light' and are determined to change society's basic mores. Such is the case with the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), which has just been passed into law by the US Congress. UIGEA forbids any financial institution from processing any money destined for online casinos. In effect, the US government wishes to limit gambling to the landed casinos (Las Vegas, Atlantic City etc), to horse and dog-racing and to various national lotteries.
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In response, most online gambling companies/ casinos are scrambling to refocus their business in Europe and the Far East and exclude the American customers who until today comprised 50% of their clientele. Companies like 888.com have already lost a large chunk of their Stock Exchange value.
What are the chances that this new Prohibition will hold fast and achieve its desired results (i.e. no online betting in the States, no US gambling money slipping away into foreign pockets)? Many people today say that online gambling should be carefully regulated, but say that banning it is "a senseless attempt to enforce the impossible". These words, incidentally, are not from 2006 but from the 1920s!
Exchange drinking of alcoholic beverages for gambling and you have the National Prohibition Act of 1920. This was America's noble experiment to ban liquor and it was an abysmal failure because most people wanted to keep drinking. After 13 years, the law was repealed.
In the three months before the 18th Amendment became effective, liquor worth half a million dollars was stolen from Government warehouses. By midsummer of 1920, federal courts in Chicago were overwhelmed with some 600 pending liquor violation trials.
Lack of access to alcohol encouraged many people to start producing it on their own. The number of illicit distilleries, stills and fermentors rose from 95,933 in 1921 to 282,122 in 1930. Convictions for liquor offenses in US federal courts almost doubled in 9 years, from 35,000 in 1923 to 61,383 in 1932.
To satisfy the nation's thirst, an illicit alcohol production industry arose often managed and financed by gangsters. People would go to 'speakeasies' instead of saloons. It was estimated that at their height, there were 500,000 speakeasies in the United States. In the big cities, Prohibition was flagrantly defied and in the smaller towns, populated by miners and industrial workers, it was simply ignored. During 1920 to 1933 (the date that Prohibition was repealed) the country lived under an illusion: those who were 'dry' had their law and those who were 'wet' had their drink.
Will Prohibition of Online Gambling in the USA fare any better? It's highly unlikely.
Firstly there are models of other countries, like the UK, whose UK Gambling Act 2006 takes effect in September 2007. Its purpose is to use licenses, permits and registrations to regulate the whole gambling industry, both online and offline. It has the support of all the major casinos. The UK Department for Culture, Media and Sport says that this law "Will ensure that all operators are required to abide by tough new rules relating to the protection of children and vulnerable people." Without doubt, the UK plans to derive financial benefit from the revenue received from all these licenses and permits. USA authorities will be looking in envy at all the money they are losing.
Secondly, as with Liquor Prohibition, people will not stop gambling just because a law tells them to do so! Many of them don't have the time or energy to visit formal betting arenas like Vegas. So they'll continue to seek out new ways to keep playing from their armchairs either legally or illegally.
Our guess is that before too long, the UIGEA law will be replaced by a law closer to the UK model and online betting activity will return to the USA.
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