A Stitch in Haste

The federal government's war on lottery competitors is on the verge of inflicting some collateral damage:

The Justice Department has issued subpoenas to at least four Wall Street investment banks as part of a widening investigation into the multibillion-dollar online gambling industry, according to people briefed on the investigation.

The subpoenas were issued to firms that had underwritten the initial public offerings of some of the most popular online gambling sites that operate abroad.
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Another lawyer, Lawrence G. Walters of Altamonte Springs, Fla., said the development was disconcerting because the prevailing wisdom had been that investment in a company that is legal and licensed in its jurisdiction was not grounds for prosecution.

Assuming that the Justice Department investigation is prosecutorial and not just "fact-finding," the implications are astonishing: a financial institution that does business with a company in another country, all entirely legally, can still potentially face prosecution, or at least harassment, by the United States government.

Conglomerate tries to formulate some interstate (rather than international) analogies to help demonstrate the reasoning at work:

• 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?

My contribution:

What if a U.S. citizen travels to Amsterdam, patronizes a "coffee shop" and returns to the U.S.?

The government has no business investigating business outside the U.S. when that business is perfectly legal where conducted, U.S. laws to the contrary notwithstanding.

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And this is all, remember, defended on the grounds of nanny-statism — which would be bad enough if it were actually true. But the online gaming ban serves only one purpose and only one constituency: the protection of state lotteries from better-paying private competition. That's not just a safe bet; it's a sure thing.