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11 Serious Problems With Newsweek’s Weird Tirade Against Regulated Online Gambling

Newsweek lazy writing

Did Sheldon Adelson buy Newsweek and no one said anything?

I’m scratching my head for alternative explanations for how a mainstream news source could get so much wrong on the subject of regulated online gambling.

In the order that they appear, here are 11 misrepresentations, inaccuracies and things that border on outright falsehoods from Newsweek’s “How Washington Opened the Floodgates for Online Poker, Dealing Parents a Bad Hand,” by Leah McGrath Goodman.

1. The Wire Act did not originally ban online gambling

Goodman opens by railing against the DoJ’s decision to clarify the Wire Act in 2011.

That, says Goodman lifted “a long-standing federal ban” on online gambling and had the effect of “reversing 50 years of legal precedent.”

Except the DoJ’s decision reversed something much newer the agency’s own opinion on the Wire Act as it applied to online gambling, developed during the Clinton administration and articulated in a 2002 letter to Nevada lawmakers.

That opinion was far from universally shared (even within the DoJ), especially as it applied to online poker.

And, as the Wire Act predated the commercial Internet by several decades, the idea that the Wire Act originally contained comprehensive, germane policy regarding online gambling is ludicrous on face.

2. The DoJ interpretation did not destroy the UIGEA

Goodman claims that the DoJ opinion shift had the effect of “razing the foundation of the UIGEA, passed by Congress in 2006.”

Three things:

  • First, the UIGEA was a rushed piece of legislation jammed through on the coattails of a terrorism bill in the dead of the night. Its foundation was shaky to begin with.
  • Second, Goodman never actually articulates how this happened. She just asserts that it did and moves on. That’s not enough.
  • Finally, the UIGEA was written in a way that placed the law at legal and logistical loggerheads with the Wire Act prior to the DoJ’s 2011 opinion. More on that here.

3. You could legally bet on horses online before and after the DOJ opinion

Goodman asserts that the “only federal restriction” the DoJ opinion “preserved was the ban against online betting on such events as horse racing or March Madness.”

Actually: Americans in several states could bet on horse racing remotely before (and after) the DoJ’s opinion change.

Small thing? Sure. But facts matter. And it raises the legitimate question of where else Goodman and her editors cut corners.

4. The DoJ and FBI have not stopped cracking down on online gambling

File this one under gross misrepresentation – or, at best, more slipshod writing and editing:

Reached by Newsweek, the DOJ, as well as the FBI, both confirmed that, as a result of Seitz’s opinion, they have ceased cracking down on online gambling and will leave it up to the preferences of the states.

Not quite.

The distinction Goodman fails to draw – and she does it so often that it feels intentional – is the critical distinction between regulated, legal online gambling and unregulated, illegal online gambling.

The FBI and DoJ haven’t “ceased cracking down” on legal online gambling in the US. Why?

Because you can’t cease doing something you were never doing. There was never any “crackdown” by the FBI and DoJ on legal sites authorized and regulated by states like New Jersey.

More irresponsible still: Goodman implies that the feds are no longer going after illegal, offshore sites as a direct result of the DoJ letter.

(She articulates this canard more directly later in the article, stating “Until Seitz handed down her opinion in late 2011, agencies such as the FBI had forcefully cracked down on online gambling in the U.S.”)

The FBI might beg to differCalvin Ayre might beg to differ. And so on.

5. If only we could find someone who knows about geolocation technology

Goodman takes the debate over geolocation technology – a valid debate that should be undertaken seriously – and reduces it to a single declaration by a man with a clear agenda and no relevant technological bonafides: Rep. Jason Chaffetz, who is sponsoring Sheldon Adelson’s online gambling ban in the House:

Chaffetz is wary of claims that geolocational technology, which works better in cities than in rural areas and vast expanses of desert (due to their reliance on hot spots and cellular towers to triangulate players), can keep poker out of his state.

That’s it.

No balance. No thoughts from experts in the field, people who actually work with the technology or regulators in New Jersey, who have watched hundreds of thousands of online wagers pass through their system without a single report of an unauthorized bet.

Just more laziness.

6. The “floodgates” were already open

Goodman leans on the biblically-tinged hyperbole in her headline and again later in the piece – the DoJ “opened the floodgates to online gambling.”

Two things:

First: They were already open. Unregulated online gambling in the U.S. was a multi-billion dollar business as early as 2003.

And accessing an illegal online gambling site – which requires none of the know-your-customer requirements or identity verification steps that are present with regulated options – is worlds easier than accessing a legal one.

That matters. Because unregulated operators have displayed a clear pattern of exiting states where regulated online gambling launches.

In this way, regulated online gambling nudges the “floodgates” – which were swung fully open since the late 90’s – tighter, not wider.

7. The DOJ opinion had nothing to do with social casinos

This is where Goodman jumps the shark, with plenty of air to spare.

She spends the next several paragraphs making the case against social casino games. They attract kids. They feed problem gambling. And so on.

That may well be so. I’m not familiar with the research on the matter.

But it has absolutely nothing to do with the article Goodman has claimed to be writing up until this point.

Social casino games – games like Zynga Poker and Slotomania – are not considered gambling under the law. Their rise in popularity has no connection whatsoever with the Wire Act reinterpretation.

To say it a third time: The two things – the Wire Act and social casino – do not intersect at any point on any meaningful level.

So why does Goodman spend nearly a quarter of her article talking about the harms of social casino games?

8. That’s not how identity verification works in regulated online gambling

Goodman turns her focus back to real-money online gambling with a whopper:

Without strong rules in place, Chaffetz fears young people will be able to log on and start placing bets without much trouble. Many sites assume players are old enough to play if they simply enter a credit card.

In the parlance of poker: I call.

“Many sites?”

What sites, specifically? What regulated online gambling sites in the United States “assume players are old enough to play if they simply enter a credit card.”

What ones did you try to sign up for where this was the case? Did you report them to regulators, as it flies in the face of the basic rules for operating in a regulated market like Nevada or New Jersey?

Or did you just make that up?

9. Do you just think everything Jason Chaffetz says is true?

Next up, another hyperbolic generalization from Chaffetz is presented, unchallenged, as fact:

“In the physical world of bricks-and-mortar casinos, it’s easy to see a 13-year-old on a casino floor. On the Internet, there are no physical barriers, nothing stopping a child from becoming an addict,” he says.

Again, the dialogue surrounding problem gambling and underage gambling online is an important one that should be had. But that’s not what Goodman’s interested in.

We get no balance. No competing quotes from operators or regulators or folks from the multi-billion-dollar online identity verification industry.

We also get no context. For example, underage gambling happens quite a bit in land-based casinos. Turns out there are some ages between 13 and 21. Who knew?

10. The US iGaming market is far from opened

The DoJ’s opinion “has essentially opened the U.S. market,” Goodman claims as the article transitions into a discussion on the lobbying surrounding regulated online gambling.

This is a common thread among opponents of regulation. Chaffetz, et al, argue for RAWA by asserting that online gambling is happening too fast. That’s a mythology Goodman advances by using terms like “pandora’s box” and phrases like “opened the floodgates.”

Unfortunately, it’s simply not borne out by the facts. States still have to affirmatively legalize and regulate online gambling for the market to open.

Consider:

  • The DoJ opinion was issued in September of 2011.
  • In the three years since, only three states – Delaware, Nevada and New Jersey – have launched regulated online poker or casino games. All three were among what experts would consider low-hanging fruit in terms of willingness to regulate the activity.
  • No new states regulated the activity in 2014.
  • None are expected to go live with games in 2015.

Goodman supports her case with a lone quote from Dr. Jeffrey Derevensky:

“Since the economy tanked around the world, you’re seeing the greatest move to gambling ever,” Derevensky tells Newsweek. “Three states have online gambling, and you will see it proliferated throughout the United States. We’re never going back. The governments are just too dependent on it for tax revenue.”

Nice story.

But note that Derevensky, who is a director at McGill’s International Centre for Youth Gambling Problems and High-Risk Behaviors, is described “a professor of applied child psychology and psychiatry.”

Dr. Derevensky’s expertise in one area, well-established as it is, does not make him the logical choice for Goodman’s sole quote supporting her controversial hypothesis that regulated online gambling is exploding unchecked across the United States.

I would not expect Dr. Derevensky to be able to speak to the finer points of state-based legislative momentum in the US any more than I would expect an analyst covering the gaming industry to be able to speak to the finer points of the intersection of online gambling and problem gambling.

11. Seriously, stop conflating regulated and unregulated online gambling

Goodman wraps up by employing one of the most hackneyed tricks in the anti-regulation arsenal: Taking a statement made about illegal, unregulated online gambling and suggesting that the statement describes regulated online gambling.

Generally this trick relies on the mischaracterization of specific FBI testimony on the issue.

But Goodman’s got a new variation on the theme: pulling out-of-context quotes from the White House’s response to a petition concerning online poker:

It observed that online gambling posed “distinct challenges” when compared with gambling in physical locations such as casinos, since players might sidestep “restrictions on online gambling that can allow individuals from countries where gambling is illegal, or even minors, to play using real currency.” It also noted the use of online gambling portals as a conduit “for money-laundering schemes, because of the volume, speed, anonymity and international reach made possible by Internet transactions.”

When you read the whole response, it’s crystal clear that those concerns are related to illegal, offshore online casinos, and not the regulated sites strictly overseen by officials in New Jersey or Nevada.

Goodman either doesn’t know enough, or doesn’t care enough, to make the difference clear to the reader.

Frankly, by this point in the article, that’s pretty much what I’d come to expect.

11 Serious Problems With Newsweek's Weird Tirade Against Regulated Online Gambling
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Chris Grove
- Chris is the publisher of OnlinePokerReport.com. Grove also serves as a consultant to various stakeholders in the regulated market for online gambling in the United States.