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More on the politics of internet gambling in America (from Online Gambling Insider):

The Internet Gambling prohibition Act lead by Rep. Bob Goodlatte has found renewed backing from an unlikely source. In what smacks of total hypocrisy, Paypal and eBay have commended Goodlatte’s efforts…

One immediately wonders why Paypal, in writing to our friend Rep. Goodlatte, would commend him for his actions and call the attempts to ban online gambling as “commonsense legislation”. The letter written to Goodlatte apparently also states that “the power to prosecute citizens who partake in online gambling activates will be the most effective solution to the problems posed by illegal online gambling”. is

Let’s backtrack a couple of months. Paypal Europe started processing transaction for Betfair and Ladbrokes in February and March respectively. This comes after Paypal had suspended the processing of gambling transactions in November 2002, after it was acquired by eBay. Paypal has however made it very clear that it will not process transactions for companies illegally transacting with US citizens.

So why would Paypal back the banning of online gambling transactions?

It’s very simple to see why. Goodlatte is the chair person of the Congressional Internet Caucus, which by default implies that Paypal want to make sure that they are in his good books. Furthermore, shortly after being acquired by eBay, Paypal took a beating from the then New York Attorney General, Eliot Spitzer, for having processed gambling transactions. Paypal ultimately ended the investigation when it agreed to pay a $200,000 fine.

A source is quoted to say that ” They are being contrite”. That puts it mildly.

Clearly, Paypal wants to have its cake and eat it too.

Navigating the laws of the world that were written before it was flattened is not easy for the companies of the new digital age. Sort of like playing croquet with the Queen of Hearts.

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The American Gaming Association has called for a one-year Congressional study commission to look at whether legalising and regulating internet gambling might be a more viable alternative to attempting prohibition.

A number of high profile online gaming sights saw their share prices appreciate on the back of this news as it was seen as mitigating some of the more shrill prohibitionist voices in Congress and lowering the possibility of passage of even more restrictive legislation.

While most of the public and legislative debate on this subject is focused on casino games and traditional gambling, the impact of the reactionary and protectionist state of American laws prohibiting online betting has been equally damaging to the development of free and fair markets in all information and prediction markets. Let’s hope that this is a first small step on the road to bringing the US into the 21st century with respect to harnessing the advantages inherent in creating online networked markets in tomorrow’s outcomes.

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