Prohibition Ii: Good Grief

Perhaps Prohibition II is being launched because Prohibition I worked so well at getting rid of gin. Or maybe the point is to reassure social conservatives that Republicans remain resolved to purify Americans' behavior. Incorrigible cynics will say Prohibition II is being undertaken because someone stands to make money from interfering with other people making money.

For whatever reason, last Friday the president signed into law Prohibition II. You almost have to admire the government's plucky refusal to heed history's warnings about the probable futility of this adventure. This time the government is prohibiting Internet gambling by making it illegal for banks or credit-card companies to process payments to online gambling operations on a list the government will prepare.

Last year about 12 million Americans wagered $6 billion online. But after Congress, 32 minutes before adjourning, passed its ban, the stock of the largest online-gambling business, Gibraltar-based PartyGaming, which gets 85 percent of its $1 billion annual revenue from Americans, declined 58 percent in one day, wiping out about $5 billion in market value. The stock of a British company, World Gaming PLC, which gets about 95 percent of its revenue from Americans, plunged 88 percent. The industry, which has some 2,300 Web sites and did half of its business last year with Americans, has lost $8 billion in market value because of the new law. And you thought the 109th Congress did not accomplish anything.

Supporters of the new law say it merely strengthens enforcement; they claim that Internet gambling is illegal under the Wire Act enacted in 1961, before Al Gore, who was then 13, had invented the Internet. But not all courts agree. Supporters of the new law say online gambling sends billions of dollars overseas. But the way to keep the money here is to decriminalize the activity.

The number of online American gamblers, although just one sixth the number of Americans who visit real casinos annually, doubled in the last year. This competition alarms the nation's biggest gambling interests--state governments.

It is an iron law: When government uses laws, tariffs and regulations to restrict the choices of Americans, ostensibly for their own good, someone is going to make money from the paternalism. One of the big winners from the government's action against online gambling will be the state governments that are America's most relentless promoters of gambling. Forty-eight states (all but Hawaii and Utah) have some form of legalized gambling. Forty-two states have lottery monopolies. Thirty-four states rake in part of the take from casino gambling, slot machines or video poker.