Jonathan Adler today quotes from an opinion in the NYT by Northwestern professor on whether prediction markets should be granted a safe harbor by the CFTC.  I tried to comment on this post, but the spam filter wouldn't let me post my comment because it contained "blacklisted words" that gave the suspicion that I was a gambling spammer.  Because I could not think of how to write my comment without the blacklisted words, here is my comment:

I agree that there should be a safe harbor for prediction markets (and other types of online speculation), but I take issue with the statement (of Professor John McGinnis) that federal and state law generally does not prohibit gambling.  I think that's false.  Federal law does prohibit online gambling generally, with few exceptions for securities trading and fantasy sports.  Federal law also prohibits gambling over "the wires."  Given its jurisdiction, that's about all federal law can do.  I would also say that most states generally prohibit gambling, but have many exceptions.  In other words, in most states, gambling is prohibited unless it is specifically allowed.  A better way to frame the argument is to say that most states allow many types of gambling, from casino gambling to horse racing, and prediction markets, which have positive externalities, should also be allowed.  Of course, the real comparison is that prediction markets are online, and online gambling is illegal throughout the U.S.  To carve out an exemption, one would have to face that blanket prohibition head on.

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Sometimes I think while teaching Securities Regulation that I could make an argument that anything is a security, and the same goes with researching gambling.  Here's another gambling candidate that caught my ear on the radio today:  Something Store.

Here's the idea -- you pay $10, and Something Store will send you "something."  You have no idea what until you receive your package.  The store doesn't try to match you with anything, so "[y]ou can be a 25 year-old man and your something maybe a white tank top embroidered with a pink heart."  In fact, the website says shipments are chosen randomly (albeit from their storeroom, which I assume was not stocked randomly).  The concept as sold as a way to suprise yourself.  The website says that your something will probably be brand new (although possibly refurbished) and they "hope you will be pleasantly surprised."  No returns, all sales final; the site suggests regifting, giving away, or selling any "something" you don't need.

Is this gambling?  It seems a little like games at the fair where you could win a big stuffed animal, but odds are you will win a plastic dinosaur the size of a fig newton.  I seem to remember in my past "grab bags" being for sale at stores -- the bags were closed, so you didn't know what you had until you bought the bag.  At Something Store, the experience seems to be what is being sold, not the potential upside of a great something.  (They do not have testimonials from customers who received iPods or flat screen TVs, for example.)  You are buying a surprise, and that's really about all you'll get.

Who would do this?  Well, not many people.  According to the site, less than 6000 somethings have been ordered in the past six months.  Perhaps bringing this idea online during a time of less economic uncertainty when $10 seemed like a good price to throw away on being surprised.

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This semester has been fairly busy, so I have not been following gambling issues in the news as well as I would like.  For example, viewers of Deal or No Deal have filed lawsuits in multiple states claiming that the "Lucky Case" game is an illegal gambling game.  In some states, losers may file civil suits to recover gambling losses in illegal games.  The Lucky Case game allows at home viewers to choose which of five or so cases a prize is in (like a shell game) for money.  Viewers text in their guesses.  Texting charges apply, as well as a $.99 fee, which seems to go to NBC.  At least here in Illinois, that sounds like gambling.  However, the Georgia Supreme Court, in answering a question certified to it by the federal district court in Georgia, said that the game did not fall under its definition of "gambling contract," and so the viewers could not sue for losses.  The court left open the question whether the Lucky Case game is a lottery, however.  Fortunately or unfortunately, viewers do not have the ability to sue for losses in illegal lotteries, so unless the State of Georgia wants to prosecute NBC, the game could go on.  (In Illinois, gambling losses must be at least $50 for losers to have the right to sue for recovery.)  Because these laws vary from state to state, cases are still pending in other states, including California.

NBC seems to understand what is going on.  On the website, the Lucky Case game is listed as taking a "short break."  Another game, where viewers text in votes for the next Deal or No Deal model for a chance at a $10k price, NBC seems to be covering all bases.  First, in consideration of the $1 texting fee, voters receive Deal or No Deal computer wallpaper and a chance to win the $10k.  Second, if the viewer doesn't want to vote, they can merely enter for a chance to win the $10k for free.  By tying the $1 to the right to vote and the wallpaper, the game does not seem to require gambling consideration. 

What I thought was interesting about this Law.com story on the Georgia case was its disdain for the "colonial era Georgia statute."  I guess all old statutes are obsolete, like those for murder, burglary, etc.

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I was going to blog on this story last week, but I wanted to wait until we had a virtual world expert, Leandra, in-house to help with the analysis.

Leandra blogged below on the economy of Second Life and whether exchanges there for Lindens should be taxable.  This duplication of an economy in cyberspace has another ramification besides than this very interesting tax question.  Apparently, there are "hundreds" of casinos on Second Life where players can wager and win Lindens.  The creators of Second Life, Linden Labs, worried about possible criminal liability for hosting the world that contains these casinos, invited FBI agents into Second Life to take a look around and give them guidance.  (CNN story here.)  Apparently, since the U.S. crackdown on online gambling (which readers of the Glom should probably be sick of hearing about by now!), gambling on Second Life has increased.  Unfortunately, the FBI have not given Linden Labs any clear conclusions at this time.

So, how could gambling on Second Life be any different from gambling on an onine site, which the U.S. government says is illegal nine different ways?  I could go to an online site, use money from my bank account or credit card to create an account at the online casino.  When I have winnings, I can cash out.  Now, it sounds like on Second Life, I would use money from my bank account or credit card to buy Lindens to use at the online casino.  When I have winnings, I can then cash out.  How is this different? 

According to the DOJ, I would be violating the Wire Act by gambling on Second Life.  (I would like the chance to fight that one in court, but I don't have time to be a test case right now.)  Also, after the SAFE Ports Act passed last Fall, Second Life would be liable for processing the exchange of U.S. dollars to Lindens and from Lindens that facilitated the illegal online gambling.  So why is the FBI so confused?  If PartyPoker would just make me purchase "PartyBucks" at some ratio, would that make it legal?  My colleague Larry Ribstein has coined the phrase "the Apple Rule" to describe the seeming willingness to prosecute corporate officers for options backdating, which may or may not be illegal, but not popular officers such as Steve Jobs, who have done the same exact thing.  Perhaps we could call this "the Posner Rule"; Second Life is so hip and cool and brainy that even lovable jurists like Richard Posner drop by every now and then.  So how could Second Life be criminal like those sleazy online gambling sites based in foreign countries and run by foreigners?  Either it's all legit or it's all not.

The CNN article reported that there are "hundreds" of casinos on Second Life, and that the larger ones might earn $1500 (U.S., not Lindens) per month.  So, let's multiply $1000 per month by 500 casinos.  That's $500,000 per month, or $6M a year.  And it's only beginning.  If the FBI tells Linden Labs that these casinos are legitimate, how many casinos do you think there will be this time next year, as U.S. players shift away from online gambling, which has become increasingly difficult to navigate after U.S. payment systems have opted out?  Look for the Bellagio -- Second Life, Trump Second Life, and even PartyPoker Second Life.

Just one more thing, In the many comments to Leandra's posts, it seems that some readers equate "virtual" for "imaginary."  I think that gambling helps put this in some perspective.  Lindens seems to have a real-world value, an exchange rate to the U.S. dollar, so Lindens are more like foreign currency than imaginary currency.  Or, you can think of Lindens as casino chips.  Just because your winnings come in chips doesn't make them untaxable winnings, nor do you get to pay your taxes in chips.  Just as I would have to report the sale of my house to the IRS if I were paid in casino chips, Beanie Babies, Lira or free lawn mowing for the rest of my life, I see no difference in being paid in Lindens for my goods, services or poker playing. 

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In Austin today, a public hearing is being held on this bill, which would allow poker games to be organized by licensed persons in the state of Texas.  Apparently, California and Montana have already legalized poker outside of casinos.  Should the bill pass, Texas would be an interesting gambling state.  Although Texas has had a lottery since the early 90s, Texas has no commercial casinos and only one tribal casino (in Eagle Pass, which is fairly "out of the way" for most folks).  For Texas then to allow legalized poker would be a bold move and might open the door to other efforts to expand gambling in the state.  However, the bill distinguishes poker from other games because it is a game of skill, not chance.

There are multiple bills pending to allow casino gambling, electronic gaming devices, etc.

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I'm sure many of our corporate law readers get kind of sick of my posts on gambling.  What does gambling have to do with corporate law?  Aside from the obvious speculation comparison with investing, I am also interested in the "can a whole industry be criminal" aspect.  In recent years, we have seem criminal prosecutions for corporate misconduct that was not only widespread in certain industries but also not perceived by many to be criminal in nature.  (Think "earnings management" or backdating.)  Well, this week begins our nation's traditional revelry in illegal gambling:  the NCAA Tournament Pool.  Can a whole country be criminal?

Note that the Glom pool contains no wagering; it is clearly above-board and good, clean fun.  However, the other office pools that charge $2, $5, or more are seen by almost all as also good, clean fun.  I have received several emails today from licensed attorneys or future attorneys inviting me to participate in these fun pools.  According to some counts, almost one-third of U.S. workers this week will participate in a pool, with some of them spending work time to contemplate their entries.  And yes, in most states, these pools are clearly illegal.  (Vermont actually passed a law a few years ago making such pools not illegal as long as all entrance fees are paid out, interestingly.)  In Illinois, it is a Class A misdemeanor to "[m]ake a wager upon the result of any game, contest, or any political nomination, appointment or election," yet I'm sure it's happening right now, as I type! 

So why do we care, if we now that state regulators have historically turned a blind eye to something they have zero resources and zero incentive to investigate?  Because who knows when the tide will turn?  As Monty Python fans know, "Nobody expects the Spanish Inquisition!"  Perhaps U.S. prosecutors will take organizers of office pools away in handcuffs for "theft of honest services" for using employer time and materials to print out brackets.  Or perhaps those of us who received the brackets via email will be arrested for violating the Wire Wager Act and face federal prosecution.

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Today's NYT has an article reporting that former NY Senator Al D'Amato is joining forces with poker player associations to attempt to overturn the federal ban on online gambling.  (His interest seems limited to poker playing online, which he considers a skill and not a game of chance, and not other forms of online gambling.)  While that aspect of the article is interesting to me, out of my hatred for the last-minute attaching of online gambling prohibitions to a bill on terrorism and the nation's ports, what really stood out was the very casual and frequent mentions of D'Amato's casual, frequent illegal gambling.  Apparently now D'Amato has a weekly poker game in Long Island, "where a bad night might mean that a player drops $5000 or more."  When D'Amato was at least a part-time resident in Washington, D.C., he "was the host at a Thursday evening poker game at his Capitol Hill office, playing with other lawmakers, staff members and lobbyists."  This seems like an odd subplot of this article given that, in New York and D.C., this type of gambling is illegal.

New  York General Obligation Law 5-410 states that "[a]ll wagers, bets or stakes, made to depend upon any race, or upon any gaming by lot or chance, or upon any lot, chance, casualty, or unknown or contingent event whatever, shall be unlawful."  (There are exceptions for state-run lotteries and parimutuel horse racing.)  New York Penal Law 225.00 defines "contest of chance" as "any contest, game, gaming scheme or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein."  Now, although D'Amato's poker game is "unlawful," it may be that no player will be guilty of a crime.  Just looking at the NY statutes, it appears that players have not committed a gambling offense unless they are "promoters."  So, as long as D'Amato doesn't take a rake for hosting the game, then the whole enterprise will be overlooked, and this is how most social gambling in nice houses on Long Island is ignored.  If the game were in a public place, then even the players could be cited for "loitering" for the purposes of engaging in gambling. 

Should D'Amato' s Long Island poker game be aboveboard, we have to wonder why the same game played online is illegal or in a poker room where some sort of "rent" is paid to a host.  Does the existence of a host create more negative externalities?  Increase participation?  Isn't it funny how if our so-called immoral activities take place by happenstance ("Hey, let's get everyone over and play poker," "Hey, I know we just met, but would you like to come back to my place?") then it's fine, whereas the introduction of a paid intermediary to faciliate the activity makes it illegal? 

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As my colleague Larry Ribstein has already pointed out, the state of Illinois is considering selling its state lottery for a one-time lump sum.  The folks at one of the other law schools here in Illinois also are talking about it.  As Larry points out, there are some obvious problems with putting up to $10 billion in the hands of a single Illinois governor, but there are some other problems, too, that go beyond the short-term profits to be gained from selling off public revenue-generating assets.  As a point of reference, lotteries have over U.S. history been both completely prohibited and freely permitted; the current state of affairs is that state may vote to legalize lotteries, and all such states use the state-owned monopoly model.  Private lotteries would represent a change in the legal landscape; currently private parties may not start their own lotteries.

As readers know, I write and think a lot about different types of gambling.  Although occasional readers probably think that I have a purely libertarian view of gambling regulation, I think my position is more nuanced.  I argue for reasoned and consistent regulation (or nonregulation)of similar speculation activities based on the net utility of such activity.  So, I would could be for either complete prohibition or permission, or a hybrid approach that treats like activities similarly.  If I were to begin prohibiting activities along a utility spectrum, the first thing I would prohibit would be the lottery.  As a negative-sum game, it creates no net positive utility but also may create negative utility through externalities.  Melissa Kearney, who is quoted in the NYT article, has studied the externalities of lotteries, including crime, bankruptcies, and domestic problems.  However, states may argue that if the profits of the lottery are 100X, and the costs of treating the additional problems as 50X, then the state still comes out ahead.  However, does this calculus still work in a world in which the 100X goes to the private owners of the lottery and not the state, which must pay for the additional social services costs?

The fix would be to tax the privately-owned lottery at a 50% rate.  The NYT article didn't say anything about the tax rate of the lottery, although many states tax commercial and tribal casinos at a higher rate.  Is this tax pre-paid somehow in the lump sum payment for the lottery?  I am not cheered by that thought; I would prefer that my state government get paid as it goes.

I also think it will be interesting to see a private-run lottery.  As it is, many states aggressively advertise their lottery.  Here in Illinois, lottery card vending machines are in the grocery stores, which makes one wonder about the effectiveness of age requirements for lottery participation.  The machines are next to the Coinstar and candy vending machines, so my son always wants to "play that game."  Nice.  The NYT article suggests that advertising will be more aggressive.  Also note that one exception to the anti-gambling provisions in the SAFE Port Act is online wagering in "intrastate transactions" authorized by the law of such state.  I would bet serious money that a private Illinois lottery would have an online game up and running fairly quickly.

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One week after arresting two non-U.S. shareholders in a non-U.S. financial services company that was used by U.S. online gamblers, the Justice Department has issued subpoenas to four firms -- HSBC, Credit Suisse, Deutsche Bank and Dresdner Kleinwort.  Each of these banks has major operations in the U.S.  What these banks have in common is that they participated in the IPOs of popular online gambling sites, such as PartyGaming.  The reporters do not know if the subpoenas are merely information-seeking or are a signal of a future prosecution of the firms.  The subpoenas may be designed to identify U.S. shareholders of online gambling companies for future arrests.

For everyone keeping score, here is the current list of DOJ anti-gambling targets:

• Neteller's Canadian founders Stephen Lawrence and John Lefebvre, who indirectly own less than 6% of Neteller and hold no officer or director positions -- arrested Monday, January 15, 2007 while vacationing in Malibu and the U.S. Virgin Islands
• David Carruthers, CEO of BetonSports, arrested while changing planes at DFW in July 2006.  Ten other arrest warrants were issued for non-U.S. BetonSports employees, and four have been arrested in the U.S. so far.
• Sportingbet's CEO Peter Dicks was detained in New York on Louisiana warrant, but NY refused to extradict him and allowed him to return to his home in the UK.

At times like these, I wish I knew more about civil procedure and conflicts of laws than corporate law. The NYT article attributes to attorney Lawrence Ge. Walters the belief that these subpoenas are a radical departure "because the prevailing wisdom had been that investment in a company that is legal and licensed in its jurisdiction was not grounds for prosecution." So, if the U.S. can arrest non-U.S. shareholders of non-U.S. companies that are legal in their jurisdiction, then can these scenarios happen?

• If a resident of Texas, where commercial casinos are not legal, buys stock in Harrah's, can the resident be prosecuted in Texas for illegal gambling?
• If a resident of Nevada, where commercial casinos are legal, buys stock in Harrah's, but goes skiing in Utah, can Utah police arrest the NE resident for illegal gambling?
• Can the state of Texas prosecute the editors of Texas Monthly for selling advertising space to Harrah's?
• Can the state of Texas prosecute a private charter bus company for taking Texas residents from Houston to Louisiana casinos?

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Readers may remember that in October, Congress passed the SAFE Port Act, which contained an anti-online gambling section that was appended right before passage.  President Bush then signed the Act into law.  The provisions create civil and criminal liability for "financial transaction providers" who knowingly control bets and wagers and "operates, manages, supervises, or directs an Internet website at which unlawful bets or wagers may be placed, received, or otherwise made, or at which unlawful bets or wagers are offered to be placed, received, or otherwise made."

On Monday, the U.S. Department of Justice arrested two Canadian founders and current shareholders of Neteller Plc, the PayPal of Canada and the UK (incorporated in the Isle of Man).  Neteller is part of the Neteller Group, which is regulated by the UK Financial Services Authority and listed on the UK AIM stock exchange.  After PayPal exited the online gambling market a few years ago at the insistence of New York regulators, Neteller became the online payment system of choice for online gamblers.  Stephen Lawrence was arrested in the U.S. Virgin Islands, and John Lefebvre was arrested in Malibu, California.  Neither men are currently officers, directors or employees of Neteller, although prior to October, Lawrence was a nonexecutive director and prior to December 2005, Lefebvre was a nonexecutive director.  Following these arrests, Neteller announced today that it would no longer accept U.S. customers.

Interestingly, the two men were not charged with violating the SAFE Port Act.  The two were charged with money laundering.  Perhaps this charge is more compelling after the passage of the SAFE Port Act specifically criminalizes online gambling.  Note that money laundering carries a maximum 20-year sentence whereas the SAFE Port Act provides for a mere 5-year maximum.

What I'm most interested in knowing is under what theory are these shareholders liable?  Neither man owns more than 6% of the company, and each man owns that indirectly.  Neither man was acting as an agent of Neteller.  The release from the Southern District of New York says this:

“Michael J. Garcia, the United States Attorney for the Southern District of New York, and Mark J. Mershon, the Assistant Director in charge of the New York office of the Federal Bureau of Investigation, announced today that Stephen Eric Lawrence and John David Lefebvre were arrested yesterday in connection with the creation and operation of an Internet payment services company that facilitated the transfer of billions of dollars of illegal gambling proceeds from United States citizens to the owners of various Internet gambling companies located overseas.”

I cannot find a charging instrument on Pacer as of this morning.  If someone understands more about money laundering and how charges can extend to nonparticipant shareholders, please enlighten!

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An op-ed in today's NYT laments the end-of-September end-run that Congress did that attached provisions from H.R. 4411 to the SAFE Ports Act.  Once the Act is signed by the President, the provisions will prohibit U.S. financial institutions from facilitating transactions between U.S. consumers and online gambling sites.  The authors of the op-ed, Robert Hahn and Paul Tetlock, criticize prohibiting online gambling because of its effect on information markets.

For example, Tradesports, which is hosted offshore, would arguably come under the auspices of these new provisions, making the host bank of your credit card a criminal for processing your participation in the site.  (Note that the Iowa Electronic Markets operates under a no-action letter.)  The authors argue that some types of wagers have significant positive utility while others do not.  In the authors' view, information sent into the marketplace by these types of sites have a greater utility than the consumption value of online gambling sites. 

I don't disagree, and have even presented a taxonomy of wagering activity based in part on the utility of the wager in this article.  However, the U.S. government seems to measure the utility of a wagering activity based on how much pressure an appropriate lobby will exert to exempt its activities.  And, of course, how much pressure will be exerted will depend on the amount of profits available to whom as a result of the wagering activity.  So, if you are the NFL, you will expend great amounts to ensure that fantasy football is exempted from any prohibition.  State lotteries will do likewise.  These activities will be exempted even though the social utility of these activities may be less than the utility of information markets.  These markets need better lobbyists!

However, I would also posit that the U.S. government is not going to turn its scarce resources to information markets just yet. If these sites grow large enough to cannibalize profits from state lotteries, then we'll have a problem.

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This summer I was watching H.R. 4411, a bill passed by the House that prohibited U.S. financial institutions from aiding and abetting online gambling.  When asked if the Senate would pass the bill, I usually said that I was prepared to be surprised.  Although these types of anti-gambling bills had not been passed in the last four Congresses, I was prepared to be surprised.  Well, I'm surprised.

Last week, H.R. 4954 was passed by both the House and the Senate.  The title of the bill is the SAFE Ports Act, and it contains detailed provisions on increasing the security of the nation's ports.  Who would be against safe ports?  However, last week, provisions of H.R. 4411 were tacked on to the end (Sections 801 et seq.) and also passed by both houses, almost unanimously.  The text of these new sections is not included in the text of the bill on Thomas (just the subheadings), so I'm not sure if H.R. 4411 was incorporated full-text.  News accounts like this one in the WSJ seem to assume that the basic thrust of 4411 is intact -- U.S. financial institutions may not accept transactions that facilitate online gambling.

Of course, gamblers can wager through offshore financial institutions like Neteller, etc.  Where there is a will, there's a way.  But our state lotteries and tribal casinos (which were excepted in the conference report) can sleep tight knowing that their family friendly gaming operations will not be cannibalized by evil offshore gambling.

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As readers know, I am often frustrated by the hypocrisies and inconsistencies inherent in U.S. gambling laws.  While six non-residents await proceedings in the U.S. after being arrested while passing through this country for violating U.S. laws by owning online gambling sites operated in foreign countries (here and here), our own country continues to broadcast gambling entertainment on television monitors to numerous jurisdictions.  Although the U.S. holds that it is illegal to allow U.S. citizens here to gamble on legal foreign-owned and operated websites, the U.S. seems to think it is perfectly fine to televise gambling that is legal at its physical location (say, a Las Vegas casino) and then broadcast that game to all 50 states (say, Utah), regardless of whether that gambling is illegal in that jurisdiction.  First, we had the broadcasting of various poker tournaments, and now blackjack.

According to this WSJ story, CBS has a new program called the Ultimate Blackjack Tour, which will air on Saturdays before college football.  The program showcases a blackjack tournament, duplicating successful broadcasts of World Series of Poker and similar shows.  The first few rounds were filmed in a Las Vegas casino, where blackjack is legal.  However, the final rounds were televised in front of a live audience in Los Angeles, where blackjack is illegal.  (California has tribal-owned casinos, and I don't believe the CBS soundstage qualifies.)  Where's the DOJ? 

Now, technically, the tournament on the show may not be gambling if the players are not wagering anything.  The article states that each player in the final rounds start with $100,000 in chips, and the player with the least chips at designated times is eliminated.  The winner may receive a pre-determined prize, making UBT look more like Jeopardy! than a back room card game.  However, the shows obviously encourage interest in real gambling, so the distinction that makes Saturday afternoon watching of UBT legal and Tuesday night playing blackjack online illegal seems fairly fuzzy.  The line between illegal prostitution and legal erotic filmmaking seems to be the camera in the room, so perhaps the camera in the room can turn illegal gambling into legal entertainment also.

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I'm posted on H.R. 4411 before, a bill that purports to stop online gambling by targeting financial institutions who allow monies to be routed through their system on their way to an online casino.  So, if you make an electronic payment from your bank account to a casino, or to Neteller and then a casino, the bank is on the hook under this bill.  We can guess the parties in favor of the bill:  states who believe that online gambling cannibalizes their lottery monopolies; tribal casinos who think the same thing; congressional leaders who want to distance themselves from Jack Abramoff; and those who believe that gambling is morally wrong and socially destructive and should be illegal in all forms, and who have chosen to succeed in at least one area.

At least for now, some groups are lining up to oppose this bill, which now is in the Senate.  WSJ article here.  Apparently requiring all banks to be policeman will cost banks a lot of money, especially smaller banks.  The Independent Community Bankers of America, the American Bankers Association, and the U.S. Chamber of Commerce have spoken out against the bill.  A lobbyist for the ICBA says quite pointedly, "It's very tempting to think the banking industry can stop this kind of stuff because people pay for it through banks, but the fact is the system just wasn't really designed to do it."  The author of the bill, Rep. Leach, responds:  "It's the only approach I know of that has a hope of making a significant dent in Internet gambling."

Well, just because it's the only plan that could work doesn't mean that it's a feasible plan.  It may be as infeasible as placing liability on Dell Computer Corp. (or AOL or Google or the manufacturer of your couch) anytime a user of the computer (or AOL or Google or the couch) accesses an online gambling site.

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Growing up in Lubbock, the joke was that to get to heaven, you had to change planes in Dallas.  Apparently, Dallas is also the gateway to H-E-double toothpicks if you are the CEO of a successful online sports betting site that is headquartered in the UK and traded on the LSE.  On Sunday, the DOJ indicted three online betting sites and eleven individuals on charges of "racketeering, conspiracy and fraud."  Enforcing the Wire Act against online gambling sites has many problems (although most substantive problems are not present with sports betting sites, as with online casinos), the jurisdictional hurdle was jumped by arresting David Carruthers, CEO of BetOnSports, while he was changing planes in DFW on his way to Costa Rica. 

Now the puzzle is to figure out why now?  Does this new energy on the part of the DOJ spring from the House passing H.R. 4411 last week?

So, my question is this:  If millions of Americans are gambling online at offshore sites, why is this the problem of the offshore sites?  Casinos in Monte Carlo or the Bahamas attract Americans to take vacations there and visit the casinos, but we don't arrest the owners of foreign casinos should they take a vacation here in the U.S. or change planes in our airports.  Why is creating an online casino any different?  Why is the burden on the online gambling site to keep Americans out?  (Other than that burden being almost impossible to meet.)

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In preparing for my stint this morning on Wisconsin Public Radio, I read through the debates held on H.R. 4411, a bill passed this week by the House of Representatives that prohibits the use of credit cards and other payment systems by online gambling establishments, with the exception of U.S. horseracing establishments and state lotteries.  The money quote (from Rep. Osborne):  "There is nothing that we can do right now at this particular time that I think is more germane to the welfare of families and people in the United States than this legislation."  Rep. Osborne suffers from a lack of imagination if he thinks that the American people will benefit from no other conceivable piece of legislation more than an ineffective prohibition against internet gambling.

However, proponents of the bill had a powerful weapon in their arsenal:  Greg Hogan.  Mr. Hogan, the son of a Baptist preacher (always mentioned) and president of his class at Lehigh University robbed a Wachovia bank last year by saying he had a gun.  Although the action only netted him about $2,800, his stated reason for robbing the bank was that he had an online poker habit that cost him $7,500.  Predictably, supporters of H.R. 4411 have adopted Mr. Hogan as their poster boy for outlawing (financial services that provide infrastructure for the financing of) internet gambling.  See how internet gambling can take our good boys and make them bank robbers? 

I have many thoughts on the use of this anecdote:

1.  Let's prohibit anything that might cause an otherwise good person to steal.  Debts are odious.  Let's prohibit lending.  Acohol.  Drugs (did that).  Poverty.  The average college student carries a credit card debt of $2,748 according to a 2000 Sallie Mae study.  If anything is adding to the financial woes of college students, it's credit card debt, yet colleges hand out applications all over campus.  If Mr. Hogan had run up a $7,500 credit card bill at Abercrombie and robbed a bank, whose fault would that be?  Abercrombie's?

2.  Perhaps we have a parenting crisis.  If it weren't for MySpace, then my 14 year-old girl would be playing with her American Girl doll and not meeting up with 19 year-old men who pose for 18 year-old boys.  This is MySpace's fault.  According to information included in the Congressional Record, Mr. Hogan's parents knew all about his gambling problems because they read his bank statements.  Mr. Hogan always promised to stop, even though he played 10 hours a day in his parents' basement over Thanksgiving.  What did they think he was doing?  The senior Mr. Hogan even drove to his son's college to install anti-gambling software on his son's laptop.  Unfortunately, there are other computers on a college campus. 

3.  This bill would not have stopped Greg Hogan.  Mr. Hogan's father was quoted as saying that this bill would have helped his son.  How?  Mr. Hogan built a bank account with his debit card and loans from friends.  Surely if he can circumvent his father's software program he can figure out how to use an offshore e-commerce payment system.

4.  Ironically, the son of a family friend did the same thing -- in 1986.  While in college on a basketball scholarship, our friend ran up sports gambling debts.  He decided to rob a bank in our hometown over the holiday break.  Unfortunately, he walked there from his house in the snow.  He robbed the bank in a ski mask and then walked back to his house in the snow.  Looking for a suspect who was 6'4" and who made size 13 footprints and who lived in our neighborhood was not as difficult as he might have thought.  Amazingly, this good son was turned into a bank robber without the Internet. 

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What's the difference between H.R. 4411 and every other anti-internet gambling bill introduced in the last ten years?  This one has passed the House, by a vote of 317 to 93.  Acknowledging that most online gambling sites are now run by operators in foreign countries, with no bodies within our shores for jurisdictional purposes, this bill follows the path taken in the past few years of proposed legislation and governmental enforcement of targeting the payment systems that make online gambling feasible, such as credit cards and other fund transfer systems.  However, there are certain important exceptions to this prohibition, including the use of such payment systems for intrastate online wagers (online lotteries), horse race betting, and fantasy sports leagues, an exception I've talked about before.  H.R. 4411 would provide a perfect example of interest lobbying in the political process.

Apparently this issue is part of a 10-part family values agenda designed to increase political support for the Republican party before election time.  Nice.  Let's see what the Senate does with it.  What is absent in the findings of the legislation, found here, is an acknowledgment that the carve-outs to the bill fly in the face of the WTO opinion, issued in 2005, which stated that the U.S. was in violation of GATS if it prohibited online gambling from offshore while allowing internet gambling in connection with horse racing.  I suppose that is no concern of the House of Representatives.

I will be on Wisconsin Public Radio Thursday morning at 6:00 a.m. in case anyone wants to chat about this during the hour-long call-in period.  I know it's early, but we were up all night gambling anyway.  Knowing that I was against gambling regulation, the producer asked me if I were a gambler, in particular an internet gambler.  Honestly, I personally think wagering on chance is stupid and faintly immoral.  I love games, especially games of skill, but I see no need to bet money on them to make them more interesting.  I think individuals who put their finances, and their family's finances, at risk gambling are the worst kind of suckers.  Nevertheless, like many things, I do not support its prohibition.

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I have been in a fog lately of publication deadlines and moving minutiae, but I did notice that a new anti-gambling bill was introduced in the House a few weeks ago.  On February 16, H.R. 4777 was introduced by Rep. Goodlatte of Virginia with 118 co-sponsors.  That last part makes me a little nervous.  Most Congresses in the past ten years have seen an anti-gambling bill be introduced, but none so far have passed.  We'll see about this one.

H.R. 4777 is aptly named the Internet Gambling Prohibition Act, and does not differ wildly from other similar bills introduced in the 108th or 107th Congresses.  This bill does, however, contain a more detailed exception than earlier bills for Fantasy Sports and other quasi-gambling online activities. I blogged this post last year about a less-detailed exception in a proposed bill from the 108th Congress.

`(vi) participation in any game or contest in which participants do not stake or risk anything of value other than-- `

(I) personal efforts of the participants in playing the game or contest or obtaining access to the Internet; or

(II) point or credits that the sponsor of the game or contest provides to participants free of charge and that can be used or redeemed only for participation in games or contests offered by the sponsor; or

(vii) participation in any simulation sports game or educational game or contest in which (if the game or contest involves a team or teams) all teams are fictional and no team is a member of an amateur or professional sports organization (as those terms are defined in section 3701 of title 28) and that meets the following conditions:

(I) All prizes and awards offered to winning participants are established and made known to the participants in advance of the game or contest and their value is not determined by the number of participants or the amount of any fees paid by those participants.

(II) All winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events.

(III) No winning outcome is based--

(aa) on the score, point-spread or any performance or performances of any single real-world team or any combination of such teams; or

(bb) solely on any single performance of an individual athlete in any single real-world sporting or other event.

This exception would also take out of the equation promotional contests and contests such as the Winbutton, where you are merely wagering your attention. I would like to see the bill's cosponsors (really just one of them) articulate the difference between an NCAA March Madness pool and a Fantasy Football league that would require the criminalization of the former but not the latter. I see how fantasy sports have less ability to corrupt a sport because "fixing" a certain number of performances in different games per week over a season would be fairly impossible. However, I'm not sure if the potential for the corruption of sports was the only reason why sports gambling is illegal in almost every state and under the Wire Act. I thought there was this whole morality problem. I also thought that the reason why the federal government has told us that Internet gambling should be illegal is because Internet hosts might use our credit cards for bad things and might commit fraud on us. I guess this potential is less if the host is Sports Illustrated or ESPN. Surely the reason for this exception isn't that SI and ESPN lobbied for it. Surely the reason for the exception isn't that cable companies like to sell the NFL Ticket and other zillion-game packages that only fantasy sportspeople buy. Surely not.

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Sportingbet PLC is an online gambling company that owns, among other things, Paradise Poker and Sportingbet.au.  Sportingbet shares are traded on the London Stock Exchange.  At about 9:30 this morning, I read in an online WSJ article that "Merrill Lynch Friday placed 8.4 million Sportingbet PLC (SBT.LN) shares, according to traders familiar with the transaction."  The shares were placed on behalf of an institution.  Although the link to the article is still currently working, the headline for the article no longer appears on the site, and the article cannot be found by searching the site.

I would like to know what the DOJ thinks of this.  The DOJ has formerly characterized such activities as the provision of credit card services to online gamblers, the provision of electronic payment services to online gambling sites, and the selling of ad space to online gambling sites as "aiding and abetting" illegal online gambling.  Wouldn't the provision of investment banking or brokerage services to online gambling firms be similarly criminal?  (Note:  in case you're reading for the first time, I don't think any of these should be illegal.)

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While the prosecution has taken to having the witness read whole articles from Business Week and Fortune to the Enron jury, I'll turn my attention back to one of my other obsessions interests, the intersection of securities trading and gambling.  Exhibit A this morning is an LAT article (tip:  WSJ Law Blog) describing how the SEC has attempted to serve a subpoena on the administrator of the online poker site, Doyle's Room.  However, the SEC is not alleging that the site, which is operated out of the Netherland Antilles, allows citizens of the United States to gambling illegally online.  The SEC is interested in what it is usually interested in:  securities fraud.

The online poker site is owned by Doyle Brunson, a high-stakes poker champion.  Last July, Mr. Brunson announced a $700 million tender offer for WPT Enterprises, Inc., which owns the World Poker Tour and other things.  This offer was twice the market value of WPT and caused the stock to go up 66% to almost $30 per share.  However, when asked about the specifics of his offer, Mr. Brunson rescinded the offer, causing the stock to plummet.  The stock currently trades at a little over $7, less than its $8 original 2002 IPO price.  Was Mr. Brunson bluffing?  Did WPT call his bluff and then he folded?  (Vic, if I get these terms wrong, let me know.)  Or, was Brunson's move a pump-and-dump?  ProfB posted on that possibility in December.  WPT and Mr. Brunson are not strangers to one another, after all.  The SEC seems to thing something was fishy.  Now that Mr. Brunson, who presumably lives offshore, has refused to cooperate or be served, the SEC is trying to subpoena the site administrator through the administrator's brother, who lives in LA.  Civ Pro profs will have to tell me how that works.

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Depending on the TV show du jour, I'm sure many of us have been in a room in college where TV watchers play a drinking game based on betting what's going to happen next.  I once read about a Law & Order drinking game with such bets as (1) the next time Ben Stone says "sir"; (2) whether Det. Mike Logan wears his plaid tie; and (3) whether Lt. Anita foreshadows the next clue.  Well, this apparently is not lost on Vegas, where casinos are realizing that merely betting on the end result of a sporting match in our society of constant stimulation is just boring.

So, casinos are working on technology that will allow gamblers in a casino to bet on plays in a specific game:  Which team wins the toss?  Will Tiger birdie this hole?  Will the next batter get a hit?  Of course, the same fears surrounding this type of gambling are the fears cited for prohibiting Internet gambling:  quick, iterative play means that large sums may be lost quickly, quick play exacerbates problem gamblers' inclination to dissociate into a trance-like state, etc.  I have to think that as more casinos create "intranet" games that legal internet gambling cannot be that far away.

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This post is more up Christine's alley, but the New York State Lottery has a new game called "King Kong Millions."  Along with being one huge advertisement for the you-can't-escape-it movie, apparently King Kong Millions is "guaranteed to create the most millionaires ever on one drawing."  At a press briefing held at the Empire State Building, the ESB director of public relations said, ""I am very excited to purchase the first ticket sold at the Empire State Building for the King Kong Millions game, which I am doing in Fay Wray's memory."

So who's paying for all those ads on buses, telephone booths, and billboards with the big guy's ugly mug?  The press release notes that the state has "partnered" with Universal Studios on this new game.  But I can't find much about the partnership; the press reports I could find were all puff pieces.  And apparently New York is not alone -- there's this from the Georgia lottery (where they unveiled the world's largest lottery ticket!), and in Virginia, they've introduced the "Apprentice" scratch-off game, which this article describes as having increased scratch-off sales by 15 percent.  ("Want to get hired for your dream job? That won’t happen here, but you could win one of more than $10 million in prizes in this exciting $5 Scratcher.")

Is it just me, or are states wandering into some troubling territory here?  State-sponsored and monopolized gambling makes me uncomfortable enough, although I know it's all for the children.  But now the state is advertising for an upcoming Hollywood thriller?  I wish the details of this partnership were a little more public.  Where's the outrage?  If people can go crazy over a movie promo on first base, shouldn't they be troubled when the government's pushing the promos?

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Reading Christine Hurt and Thomas Schelling while watching the WSOP on my TiVo can only lead to one result:  blogging about poker.  I'm puzzled by the following behavior:  at the end of a tournament, when a short stack is all in and two others call, the two others routinely check it down on the turn and the river unless they improve.  Why?  More details below the fold, for those who share my poker habit.

I've followed this strategy before, and it seems to work, but I'm not sure why.  It should be obvious to someone who really knows game theory, but I don't.  The commentators on ESPN called it an implicit agreement.  A poker table would be a strange place to find implicit agreements, as there is no honor among thieves. 

So here's the puzzle.  Suppose Ivey is the small blind with $100, Hellmuth is in the big blind with $500, and you are on the button with $600.  The blinds are $10-20, and the tournament pays out $50,000, $30,000, $15,000. 

You are dealt A-6 offsuit and raise on the button to $60.  Ivey calls all-in for $100, and Hellmuth calls, and you call.  (You put Hellmuth on a real hand, so you don't want to re-raise.) 

Suppose now the flop comes 8-5-2.  No flush draws.  The convention is for both you and Hellmuth to check it all the way down, assuming you don't improve on the turn or the river.  On one level, the reason is obvious: if either of you bet the flop, one of you might fold, which increases the chances that Ivey wins the pot.  On the other hand, if you think you have the best hand, why not bet?  The implicit agreement seems to be that it's more important to knock Ivey out even if it means some foregone profits in the side pot.  But not only do you give up possible profits in the side pot, you decrease your odds on the main pot. 

To illustrate, suppose Ivey has J-10, and Hellmuth has K-Q.  You'd rather see the turn and the river heads up than three-way. 

(A variation.  Suppose Hellmuth has 7-7.  Is he allowed to bet it?  After all, he doesn't need to improve to make his hand.  But of course by that logic, you should be able to bet your A-6, which you might think is good after the flop.) 

So there's two possible explanations for the check-it-down convention, as I see it.  The first is that this is a prisoner's dilemma, and poker players follow a tit-for-tat strategy, cooperating until they know the other person defects, at which point they may retaliate.  But that seems unlikely. 

The second possibility is that it all turns on the tournament structure, and the marginal increase in the likelihood of winning the $300 main pot and/or getting a call on the side pot is worth less the the marginal increase in the probability of knocking Ivey out.  Unless my math instincts are wrong, though, you're giving up a lot by not betting on the flop, esp. because it increases your odds of winning the main pot, and winning the main pot increases your likelihood of winning the whole thing vis-a-vis Hellmuth. 

I'm interested in this puzzle, in part, because there are a surprising number of norms that seem to develop at a poker table, despite the fact that the game seems downright designed to make people into selfish, rational, wealth-maximizing machines.  If it's true in poker, it might be true for things like hedge fund compensation.

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Today's NYT once again asks the question whether the DOJ actually thinks that Internet gambling is illegal.  Several U.S. celebrities like Jesse Ventura, Tom Arnold and Jim Kelly have signed lucrative contracts to endorse different offshore gaming sites.  In researching the story, the NYT asked at least two different USAAs whether this type of "aiding and abetting" would violate federal law, as the DOJ has stated that other actions of advertisers, media companies, online payment providers and credit card companies does.  No comment.  Doesn't the federal government have some obligation to articulate what actions it believes violates law?

These celebrities do not some legal advice.  I'm not sure who is more naive here, the celebrities or the "legal experts" cited in the NYT article.  Jim Kelly, for instance, assures us that "when he signed the contract he was told he would be held harmless for any legal problems."  In U.S. v. Cohen, Mr. Cohen received jail time.  Is SportsInteraction.com going to be able to do Mr. Kelly's jail time?  The article also states:

Legal experts said celebrities pursued by prosecutors could defend themselves by arguing that they were not aware that the enterprise they were promoting was illegal.

Is that really a defense now? I, for instance, can never go to jail for antitrust violations because I know almost nothing about criminal antitrust law. Good to know.  Moreover, this statement cannot even be made with respect to sports gambling on the Internet because several people have been sent to jail for this unknown crime.

The most interesting part of the article is the sentiment that a $12 billion industry can't be wrong.  Although this may shock our readers, I'm not particularly interested in the de-criminalization of Internet gambling, but I am generally interested in why some actions that seem to involve morality are legal, illegal, in-between, or of a changed status.  What makes the change happen?  Why does the de-criminalization of some acts (sodomy) take a long time or (prostitution) forever, but others happen quickly.  I would be cynical and say money, but what about drugs?  There has to be more than $12 billion involved in the illegal drug industry.

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Michael McCann at SportsLaw Blog reports that Theo Epstein, who recently stepped down as GM of the Red Sox at the young age of 31, has an offer he may or may not be able to refuse.  An online gambling site located in Costa Rica has offered him $2M/year plus mansion (with staff) to set the line for MLB games.

Hopefully, his mother will call him and tell him to decline.  Unless and until the U.S. government changes its stance on online betting, he would be resigning himself to 60-70 years of exile from MLB and possibly the U.S.  He'd be like Gregory Hines in White Nights who left the U.S. and moved to the Soviet Union only to find out that the U.S. wasn't so bad after all.  Mike thinks he's going to turn down the lucrative offer and be the next GM of the Washington Nationals.  I think that would be best.

Besides, I'm not even sure that being a GM is good practice for being an odds-maker.  Sort of like being a CEO then becoming a mutual fund manager.

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The U.S. government, which has officially claimed that all Internet gambling violates the Wire Act and that prohibition is necessary because of the ease of at-home gambling to exploit problem gambling, is itself in the close-to-home gambling business.  According to today's NYT, the U.S. military owns and maintains slot machines on overseas military bases.  This overseas gambling rakes in more than $120 million annually that the U.S. government says is necessary to fund other military recreation.  Domestic bases do not have slot machines, but they have bingo games, which bring in $7 million annually.  If I were to imagine a setting that could exploit the problem gambler, then an on-base casino aimed at young people under stress, apart from family, during wartime might do it.

Read the whole article.  Most telling is that four years ago, Congress asked the Pentagon to study the situation.  After hiring PWC to do the study, the Pentagon fired the outside consulting firm and finished the study itself, which concluded that slot machine revenue was necessary for "golf courses and family activity centers."

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Apropos of Gordon's post below on Harriet Miers, I think we may be heading for a national conversation on the the legalization of gambling.  First, Mississippi is heading for a decision on whether to try to rebuild as a gambling-free society or whether to use gambling as a beacon for tourism dollars.  Although Mississippi allowed gambling only on floating riverboat casinos, the destruction of those casinos will force the question:  onshore or outta here?  I would suggest an experiment in a state-owned online casino, but that's another ball of wax.

Gordon alluded as to what issues political watchers could scrounge up on Miers, who has no judicial opinions to scour.  But, she was head of the Texas Lottery Commission, and that could open up questions about individual rights and morality.  I suspect that she would characterize her position as one of guardian and watchdog, a position designed to maintain integrity and fairness in the lottery.  Read the "core mission statement" of the Texas Lottery here.  As 39 states have a lottery, few senators would be able to take the moral high ground in questioning over the lottery, but it could spark some questions about Miers' views on the federal and state regulation of gambling generally.  Or, I could just be dreaming!

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Tyler Cowen reports that a new information market, ProTrade, is appearing that allows participants to buy shares in individual sports players, not just teams.  Initially, participants will be given play money, but the site plans to eventually charge a fee, keep fees in escrow, and distribute 97-98% in prizes.  I would suggest charging an "administration fee" and offering stated, non-fluctuating prize amounts, similar to other fantasy sports sites.  Or, get a no-action letter from the SEC like the Iowa Electronic Markets.  In time, the distinction between illegal sports gambling and recreational fantasy sports and information markets is going to get blurrier and blurrier.  I hope so -- then the federal government may have to make a decision as to what is legal and what is not, and back that up with a consistent policy statement.

Another interesting, but related question, is whether professional athletes will be able to participate.  Although professional athletes in most sports are not allowed to bet on their sport, leagues have turned a blind eye to fantasy sports.

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    Steve Rosenbloom at Espn.com reports that the World Series of Poker is taking on the World Poker Tour for dominance of the year round poker tour by leveraging its connection with ESPN to lure the best players to WSOP circuit events.   This combines two of my favorite things: poker and the competition for distribution.  The WSOP has settled into 12 circuit events scheduled right on top of WPT events throughout 05-06 (compare schedules here and here).  Players will not be able to play in both in most circumstances.  So what will competition between the two tours look like?

    Rosenbloom suggests a few likely dimensions for competition: lowering room rates, loosening player endorsement rules, perhaps slowing down blind structures to increase the amount of play (favoring "better" players), locating tournaments near the homes of top professionals, and increasing player exposure (where WSOP/ESPN clearly dominates WPT/Travel Channel at the moment).  I imagine that we might even see tours paying for long-term exclusive commitments with top players (I will leave my thoughts on poker payola for another day....).

    The player faces a number of important trade-offs in making this decision.  Will big name pros prefer to play in a tournament with 1000 players and 200 big name professionals or 5000 players who are mostly unknown?  Which would be more difficult to win?  Will the WSOP's ESPN advantage be insurmountable because it creates other financial opportunities for top players (books, DVDs, TV shows, etc.)?  Who knows.  It is pretty clear that the player's decision is a complex one.  It will be very interesting to see how both the WSOP and WPT approach this branding decision in the coming years.

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Vic semi-seriously introduced a syllabus for a poker and the law course.  No less than John Bates Clark medal winner Steven Levitt has started a project analyzing online poker play in order to identify optimal poker strategy.  In the comments to Vic's post, Ted suggests that Levitt is likely to be disappointed because optimal poker play, holding the hole cards of the player constant, depends on things like tells (yes, even online), position, tournament or cash game, and signaling (not to mention the varying importance of these factors in different in say, limit vs. no-limit games).  For example, sometimes a player might want to make a call when he is behind, for the right price, simply to send the signal that he is not going to be bullied out of pots later in the game.  I agree with many of Ted's concerns about how useful the results will be to my own poker play, but am looking forward to the first large scale empirical analysis of poker play.

I would, though, like to add a chapter to the "Poker and the Law'" syllabus.  One critical question hovering over the behavioral law and economics literature is the extent to which markets might mitigate (or eliminate) the types of biases individuals exhibit in decision-making.  The poker table seems to be a great laboratory to get some data and insight on these issues.  Does repeat experience in the market operate to reduce these biases?  Do players respond to losses incurred because they overvalue certain hands (e.g. a pair of 3's in a ten-handed game)?   How robust are these biases to market interaction that threatens actual loss to the player's income?  Proof that consumer biases appearing to deviate from the rational choice model persist in actual markets over time would be the empirical foundation for any regulation based on the insights presented in this literature.  Poker seems to me to be a great place to find a few answers.

P.S. Ted really wants to know what stakes I play and what makes me a poker shark?  Well, shark was Vic's label (although I admit that I like the sound of it).  I would be more than happy to talk limits, credentials, or arrange a heads up match to satisfy your curiousity via email. 

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Earlier this week, all eyes were on Tradesports.com and the information market for the Supreme Court nomination.  Since then, a blogospheric debate has emerged as to whether real-money information markets are efficient.  The elephant in the room here is a different question:  Are real-money information markets legal in the United States?

No one will tell you whether Tradesports.com is legal, and there's no FAQ on the site that even touches the subject.  However, the federal government is stating the (semi-untenable) position that all Internet gambling is illegal in the U.S. and the (tenable) sub-position that all Internet sports gambling is illegal in the U.S.  If that is the case, and Tradesports.com is legal, then the most arbitrary of lines has been drawn.  I cannot place a bet via the Internet on a sporting event, but I can buy a "future" in the winner of the sporting event on this Internet site.  Does Tradesports.com believe that it is breaking U.S. law?  Possibly, which is why it is headquartered in Ireland.  Do others?  Possibly.  PayPal, which entered into a settlement agreement with Spitzer promising never to associate with Internet gambling sites, will not touch Tradesports.  You'll notice that it does not have outside advertising, unlike most for-profit websites.  The U.S. advertising industry has been warned not to consort with Internet gambling sites, as well.

But, everyone goes on the site.  Well-known law professors link to the site.  Tradesports may be the Irish Sweepstakes of the 21st century, similar to the contest, run by the government of Ireland, that was illegal in the U.S. but extremely popular throughout much of the 20th century, until the U.S. began liberalizing gambling in the early 1980s.  So, if Internet gambling is legalized, we may see an end to Tradesports.com.

N.B. -- the Iowa Electronic Markets are legal, operating under the auspices of the CFTC and a no-action letter from the SEC.

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