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US Sheds Few Tears For Carruthers

August 07, 2006

By Walter Olson

Like Prohibition-era Oklahomans who were said to stagger to the polls to vote dry, America these days is a gambling-mad country happy to elect officials who outdo each other in anti-gambling fervor. Perhaps that explains the absence of an outpouring of support here thus far for David Carruthers, the former chief executive who was nabbed at the Dallas airport, shackled and menaced with years in prison for running an online gaming company (droll New York Post headline: "Texas Hold 'Em").

If war is the continuation of politics by other means, then prosecution can serve as a continuation of policy by other means. The editors of the reputedly liberal St. Louis Post-Dispatch applauded the crackdown on online betting, sparing no sympathy for the British executive. "Whatever you think about legalized gambling, and we think it's a mistake," they wrote, "it makes no sense to send American gambling revenue overseas via internet gambling sites where it circumvents American taxes."

It rather calls to mind humorist Dave Barry's comment on the legal action by American state governments against cigarette makers. "The underlying moral principle of these lawsuits was: 'You are knowingly selling a product that kills tens of thousands of our citizens each year. We want a piece of that action!'" In fact, federal law already imposes a special surtax on illegal wagering, whose practitioners are apparently expected to poke their heads above ground long enough to mail a check to tax authorities.

The various land-based casinos, state lotteries, Indian tribes, riverboats and racetracks that constitute America's vast (and politically savvy) legalized gambling sector are likewise not exactly draining their tear ducts for Mr. Carruthers. The press release from federal prosecutors pointedly noted that' activities could "harm legitimate businesses"—that is to say, might offer consumers a preferred alternative to them. So both anti-gambling activists and their gambling-industry opponents have reason to be pleased. Quite a broad political coalition.

To be fair to the US Department of Justice, it's not as if its action came out of the blue. For years it has made no secret of its (debatable) position that US law applies to offshore operators who handle bets from the US, and many lawyers say Mr. Carruthers should have known better than to set foot on these shores. The more paraded its claims to legitimacy—public listing and so on—the more furious authorities got. Rather than slink into a hole as an outlaw should, Mr. Carruthers had gone so far as to place comment pieces in American papers emphasizing his enterprise's eagerness to be taxed and regulated as part of legalization. During an online debate at The Wall Street Journal he even taunted a leading anti-gambling lawmaker by saying: "Why is the congressman trying to tell Americans what they can and cannot do in the privacy of their own homes?"

While the prosecution raises questions of extraterritoriality, that is nothing new as regards American law, which has for years slighted the arguable claims of sovereign comity in grabbing jurisdiction over controversies in such areas as antitrust, banking, human rights, World War II reparations and so forth. In practice, the Department of Justice probably made a calculation that the British government would not strongly protest its actions. It also mattered that had flagrantly targeted the American market in its advertising efforts.

Whether they realize it or not, many outside the gambling field have a stake in the issues raised by the prosecution. If American criminal law applies to servers in Costa Rica, might authorities in other countries not try to impose their law on servers based in Texas? You might almost bet that will happen, were it legal to bet.

Original Source:



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