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Consumer Corner: Prof says you can't gamble your way to prosperity

By MARCELLA S. KREITER, United Press International   |   May 1, 2011 at 4:30 AM
For those who don't have the time or inclination to travel to Las Vegas or Atlantic City, N.J., or even the nearest Indian or riverboat casinos, the Internet has provided an easy-to-get-to venue for trying their luck. But the federal government is trying to shut down the online gambling industry and at least one expert says that's a good thing that needs to go further.

"When we talk about online gambling, we're not talking about fun and games. We're talking about real trouble for our economy," said John Kindt, professor of business and legal policy at the University of Illinois at Champaign-Urbana.

"Gambling in its many forms is a force that destabilizes our financial institutions. To take it one step further, the philosophy behind gambling destabilizes capitalism by promulgating artificial risk-taking and financial instability."

Earlier this month, a federal grand jury indicted 11 people, including the founders of the three largest Internet poker companies doing business in the United states, charging them with bank fraud, money laundering and illegal gambling offenses.

"As charged, these defendants concocted an elaborate criminal fraud scheme, alternately tricking some U.S. banks and effectively bribing others to assure the continued flow of billions in illegal gambling profits," New York U.S. Attorney Preet Bharara said in announcing the indictments.

Kindt said even more insidious and economically threatening forms of gambling have been embedded in some financial markets -- and that's what took the economy down, plunging the nation into recession.

"The classic example of this is the Commodities Futures Modernization Act of 2000. It basically decriminalized gambling on Wall Street by legalizing credit-default swaps, which were illegal for almost 100 years because they had previously destabilized the economy," Lindt said in an interview published by the university's news bureau. "Special-interest lobbyists slipped provisions into this act, eliminating the anti-gambling enforcement mechanisms in other statutes, which then allowed Wall Street financiers to gamble on these credit-default swaps. Congress has called this 'casino capitalism,' and rightly so. It's a major reason why we're in our current economic mess."

Lindt credits the Unlawful Internet Gambling Enforcement Act of 2006 with curbing online speculation.

"The people behind these Web sites want to make it as easy as possible for you to click your mouse and lose your house," he said.

Lindt said the online poker sites managed to dodge the law by exploiting loopholes and exceptions and called on Congress to pass even stricter anti-gambling laws.

"If you took an even more radical approach and outlawed all gambling, like we did 100 years ago, tens of billions of dollars would be funneled back into the economy as spending on consumer goods. We would have an overnight economic stimulus," he said.

But even with stricter enforcement, gambling remains a threat to the economy.

"It's going to destabilize the world economy and financial markets and we're going to have more speculative bubbles," Lindt said.

"You simply cannot gamble your way to prosperity."

Lindt said people need to realize gambling on foreign sites could lead to personal financial disaster.

"Gamblers are now complaining that their accounts have been frozen -- but if they win big, what guarantees do they have that they'll get paid? And then the question is, 'Who is getting all this money when people lose?' Well, if you're playing against a computer, you simply can't win. Eventually, they're going to take your entire account.

"People who like to gamble are typically business-minded people with Type-A personalities. We need to encourage utilizing those entrepreneurial skills in legal, profitable business pursuits instead of wasting those skills playing Internet poker against computers."

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