A Brief Examination of Child Pornography and the Modern Legal System

•October 4, 2015 • 8 Comments

Let me preface this posting by saying that I in no way endorse or support child pornography or the people who view and distribute it; however, this is a volatile area of the law and it needs to be explored. I personally believe that people who are struggling with pedophilia need to find the professional help that they badly need, and the law needs to be refined in such a way that allows them to get help while still being just in its enforcement. This post will examine the problem of child pornography in this country, and how the legal system interacts with the rapidly changing environment child pornography flourishes in: the Internet.

Child pornography (CP) is on the rise in the United States. Statistics show that there has been a huge increase in CP-related arrests; in 2009, there were 4,901 arrests made for CP, almost triple the amount of arrests made in 2000. While this may be because law enforcement is getting better at finding people involved in CP, the opposite may be true. The evolving technologies surrounding the Internet are actually making CP easier to access, while simultaneously making it harder for law enforcement to find and successfully arrest perpetrators.

The rapid growth of the Internet, while a positive factor in many ways, has made it easier for people to access, view, download, and distribute CP somewhat undetectably. Peer-to-Peer file sharing is one arena which has allowed CP to flourish; P2P, as its called, allows a “seeder” to share pieces of a file with downloaders, who then becoming seeders as well. It is a decentralized network; because no one is sharing a complete file, it is harder to track. Coupled with the use of proxies (fake servers that help disguise a users IP address) tracking down CP distributors is several orders of magnitude harder than it was thirty years ago.

One of the ways in which CP distributors are caught, however, lies in their communities. Like many fetishes, CP consumers often band together to share their collections, fantasies, and tastes. Unlike many fetishes, however, there aren’t many safe spaces in the real world for people who like CP to get together and talk about child abuse. The anonymity of the Internet provides the perfect place for CP consumers to “meet up” and find a community that shares in their predilections.

The Cache was one such community. The Cache was a collection of forums in which users posted and shared explicit photos of underage girls. In 2008, the DOJ brought down the Cache in an operation called Operation Nest Egg. At its completion, charges were filed against the individuals involved in the Cache, but namely against the Cache’s creator/admin, Roger Loughry. At his trial, the prosecution, seeking a guilty verdict, showed several incredibly graphic videos of CP to the jury. The jury then returned a guilty verdict. But then something went wrong: Roger Loughry appealed, and won.

On appeal, the Seventh Circuit Court of Appeals found that there was a problem with the videos shown to the jury at trial: they were not videos that were posted on the forum, but were actually from Loughry’s private stash. Rather, the prosecution’s usage of the CP videos was only to inflame the jury against him, as the videos were not related to the charges being brought against Loughry. The court held that the unfair prejudice outweighed the “minimal probative value” of the videos, and reversed, remanding for a new trial. Loughry was still convicted at his new trial, but his case raises an interesting question: whether the showing of any CP to a jury has probative value, and whether that probative value is ever higher than the monumental prejudice that showing CP in court has on a defendant’s case.

To review: it is getting harder and harder to catch CP consumers and distributers. But conversely, it is easy to convict them. In 2007, 2,197 individuals were defendants in CP-related cases; 9 out of 10 of them were convicted, an increase in the rate of conviction since 2006, where it was only 8 out of 10. Because of the lack of clear charging guidelines, prosecutors have almost unfettered discretion in what charges they can bring. Some prosecutors (52% of those surveyed) have expressed a desire for clearer guidelines. Most courts have to adopt either a case-by-case basis for CP sentencing, or have to strictly follow the guidelines. The federal sentencing guidelines call for a minimum mandatory of 5 years without parole for downloading CP, but require 15 to 20 years for “large amounts” of CP. However, they never set a numbered guideline for what constitutes a large amount, which results in huge discrepancies in sentences for similar cases.

Child pornography is a difficult area of the law as it is; just as law enforcement struggles to keep up with the rapidly evolving landscape in which CP thrives, the law struggles to keep pace with changing times. CP is deplorable, and prosecuting those who exploit children is a laudable goal. But the laws as written allow for gross discrepancies in sentences, abuse of prosecutorial discretion, and conviction regardless of actual evidence or proper procedure at trial. I do not endorse people who consume or distribute child pornography, but there needs to be a change in the laws to ensure that everyone has their fair day in court.

Revenge Porn: State Law Issues and Effects

•October 4, 2015 • 7 Comments

I first learned about revenge porn in 2013 when the news websites I visit started reporting on it.  The term has become more commonplace since then, but I realize not everyone may be familiar with what revenge porn is.  Revenge porn is the posting of nude images of a person online without that person’s consent, typically with the intent to harass and humiliate the person in the photos.  Often the person posting the images is a former partner of the victim, though that’s not always the case.  Many victims have had their images stolen from their online accounts.  The photos are often accompanied by the victim’s personal information, like full name, address, and phone number.  My interest in this subject began when reading the victims’ stories of how this harassment was affecting their lives and how difficult it was for victims to get their photos taken down evoked both feelings of anger and disbelief.  How was it that such an egregious act was going largely unpunished?

Since I first read about revenge porn, states have been scrambling to catch up to this new form of harassment and provide relief for victims.  At this time, 27 states have passed laws prohibiting revenge porn.  However, these laws are not without their problems.  Some state laws have been criticized for not covering enough types of behavior to be effective.  In 2013, California passed a bill that made revenge porn a misdemeanor.  However, critics of the bill questioned its effectiveness because it did not cover “selfies” (or photos the subject had taken of his or herself), redistributors, or hackers, was unclear on how to handle differing opinions on confidentiality of the photos, and required intent to cause emotional harm to the subject of the photos.  California then amended the bill in 2014 to include selfies.  While this was a step in the right direction, considering how common selfies are today, I have doubts as to whether the California bill will cast a wide enough net to prosecute the wrongdoers and deter people from posting revenge porn.

On the other side, Arizona’s revenge porn law was challenged by businesses and the American Civil Liberties Union for being overly broad and encroaching on the First Amendment.  The complaint alleged that Arizona’s law as it stood covered a number of different situations that should not be criminalized and was a burden on bookstores that could not know whether the subjects of photos in books they carry consented to their photo being published.  One example of a situation that would be criminalized was a professor showing during a lecture the “Napalm Girl,” a photograph of a naked young girl running from an attack during the Vietnam War that won a Pulitzer Prize.  The judge later issued a final decree stating that the revenge porn law could not be enforced.

Maybe finding the right language for revenge porn laws can eliminate these issues.  On one hand, a law that is too narrow won’t effect change, and on the other hand, an overly broad law could infringe on First Amendment rights.  The Arizona law is not the only one that may bring about First Amendment issues.  Unfortunately, in order to pass a law prohibiting revenge porn, there will have to be some restriction on free speech.  It is just a matter of whether it is too broad of a restriction.  Perhaps the answer is a federal law written well enough to largely avoid these issues.  That may be on its way.

While there have been some issues with the revenge porn laws that states have passed, that’s not to say that there has been no justice for victims.  Hunter Moore was indicted and plead guilty to federal charges stemming from his revenge porn website, isanyoneup.com.  Moore was paying a man to hack into victims’ email accounts and steal their private photos for his website.

Another man, Kevin Bollaert, was sentenced to 18 years in prison (later reduced to 8 years followed by 10 years mandatory supervision) for identity theft and extortion.  Bollaert was running a revenge porn website where people could upload photos of their former partners and include the victim’s personal information.  He was then demanding money from victims looking to have their photos removed.

While this paragraph may not necessarily deal with revenge porn laws, I think it is a very important topic to touch on when discussing this issue.  When I read about revenge porn online or watch news about it, there is often a comment about the “solution” to the problem: don’t take or share nude photos of yourself.  However, not only is it not that simple, it’s also a victim-blaming mentality and extremely problematic.  It’s similar to telling rape victims that they shouldn’t have dressed in a particular manner, acted a certain way, drank that much, etc.  It places the blame on a person who has done nothing wrong and shifts the blame away from the person who deserves it.  The law review article cited at the end of this post explains how that kind of thinking contributes to gender inequality by shaming women (who are the majority of the victims) for their sexual behavior and maintains outdated ideas of how women should express their sexuality.  I think it’s important to keep in mind that these are people who have done nothing to deserve their private photos being posted on the internet.

While it’s clear that the laws as they stand may need to be amended to have their intended effect, it is good to see some of the worst offenders prosecuted for their harassment of others.  What are your thoughts on the current laws and how this area should be handled from a criminal perspective?

Article cited: Rachel Button, Taking The Sting Out of Revenge Porn: Using Criminal Sanction to Safeguard Sexual Autonomy, 16 Geo. J. Gender & L. 407 (2015).

Social Media as Evidence in Criminal Proceedings

•September 27, 2015 • 11 Comments

I have been an active social network user since I was in high school. I use Facebook, Instagram, Twitter and LinkedIn to share posts with family, friends and colleagues. I’m always cautious of my privacy settings and the importance of sharing information with only people in my network. But some people aren’t so wary. Social media is everywhere and 91% of online adults use social media regularly. Social networking has grown more rapidly than the laws that govern it. I would like to be a prosecutor and was curious as to how social media can be used in criminal proceedings. This blog post will focus on the  authenticity and admissibility of social media in criminal proceedings. I’ll also share some recent news articles discussing how social media is being used in criminal proceedings. When reading this blog post, ask yourself, is this how you think law should develop regarding social media in criminal law?

Right now, the laws on admissibility and authenticity of social media content in criminal proceedings are all over the place. In my readings for this week, I read a law review article that discussed several cases showing the distinctions in admissibility and authenticity in various jurisdictions. The article came to the conclusion that there are two “camps” that jurisdictions can fall into with regards to admissibility and authenticity of social media posts: The first camp would exclude social media content because there is a possibility that someone other than the profile user created the social media content. Because of this possibility, these jurisdictions believe that social media content should be excluded. The second group would include social media content as long as the party introducing the evidence could abide by Rule 901 of the Federal Rules of Evidence. This rule lists ten ways, although the rule says there could be more, that a party could authenticate or identify evidence. As long as a party introduces enough facts, this camp believes the evidence should be authenticated.

The law review article discussed also how Federal Rules 104(a) and 104(b) and Rule 401 interact with the authentication and admissibility of social media content. According to the article, if a trial judge thinks social media content is authentic and if the opposing party objects to the authenticity, a judge may conditionally admit the evidence and allow the jury to decide whether the content is authentic or not.

This seems worrisome to me for several reasons. First, some jurors may not understand social media fully and may have a hard time deciding the authenticity of a post. Secondly, if the social media post was acquired unconstitutionally by the government, then there is a risk of infringing upon a person’s Fourth Amendment right to be free from unreasonable searches and seizures, a topic I will explore in my seminar paper. If the content is gathered from a social media networking website and not from a third party mutual friend of the content creator, the authenticity and admissibility would probably be harder to challenge.

However, if the content is gathered constitutionally, I think the way the second camp thinks about authenticity is the way of the future. Using the Federal Rules of Evidence to form arguments and using supporting facts on a case-by-case basis is how content should be analyzed for authenticity purposes. I think as members of the judiciary retire and younger judges take the bench, we will see more fact finders with more of an understanding of social media making these evidentiary findings. I believe until people with knowledge of how social media works take the bench, we will continue to see inconsistencies in how social media is used in criminal proceedings mostly because some people just don’t understand how social media sharing works. What do you think? How else do you see the law in this area becoming more consistent?

I’d like to now turn to some recent examples of how social media is being used in criminal proceedings. In 2013, there was a case in South Florida where a husband allegedly murdered his wife and then posted a picture of her dead body on his Facebook profile along with a Facebook status where he admits he is going to jail. Derek Medina is now charged with first degree murder. Mr. Medina’s photograph went viral. He ended up confessing to the Miami Dade Police Department. If you were a prosecutor, what arguments would you make for the authenticity and admissibility for this type of admission on social media?

Another recent case I read in preparation for this blog post was Elonis v. United States. It is perhaps one of the biggest cases dealing with social media content in criminal proceedings. It dealt with a First Amendment issue arising out of using content shared over social media.

In Elonis v. United States, a man posted several Facebook statuses using the nickname “Tone Dougie.” He made threatening remarks about several people in his life including his ex-wife, a co-worker, and a FBI agent. The wife had a court order for protection and Elonis was eventually convicted for some of his threats. He appealed arguing he had a First Amendment protection to his content on his social media profile. He compared his posts to Eminem’s dark lyrics about killing his own ex-wife. In a 7-2 decision, the Supreme Court didn’t even address the First Amendment argument. Instead, the Court argued that the interpretations of the threatening messages didn’t matter when it came to Elonis’s posts. The Court said, what mattered was Elonis’s intent behind his posts. The Court reversed and remanded the case for the lower court to determine Elonis’s intent and whether or not he actually meant what he said or whether he was just exercising his First Amendment right to free speech.

Just this week in Florida, Jason McQuillen in Lakeland was arrested and charged with four felonies for several Facebook posts he made in a public group of about 7,500 members. The linked article quotes the Facebook posts from the police affidavit. He allegedly posted in a Facebook group a request to attack a person he knew and he offered to pay the attacker. It will be interesting to see if McQuillen will be able to make an argument similar to Elonis. Will it be successful?

Overall, I think it is clear that this area of the law needs to develop more. I would like to see the Supreme Court give more checklists for prosecutors with regards to how to introduce social media evidence during criminal proceedings. For now, prosecutors may use the Federal Rules of Evidence to prepare and make arguments for using content from social media websites with regards to authenticity and admissibility. I look forward to hearing what you all have to say regarding how you think this area of the law should develop.

Copyright Laws Require Revision to Keep Up

•September 18, 2015 • 13 Comments

For reference, here is the Copyright Office’s summary of the Digital Millennium Copyright Act and the full law.

Two years ago, I began law school as a person who spent far too much time watching television and sports for someone in law school. Now, not much has changed other than the fact I also watch too many movies, and also spend a lot of time reading about the business behind both sports and entertainment and just what goes into getting such programming on the air.

Showtime paid $200 million to broadcast six Floyd Mayweather Jr. fights. The average “Game of Thrones” episode costs $6 million to produce. The resources that media companies put into such efforts are vast, and that is why their valuable intellectual property should be protected.

Unfortunately, that task is far easier said than done thanks to the Internet and the rapidly changing technology that exists on it, and in order to keep up with the technology, changes need to be made to the Digital Millennium Copyright Act.

Copyright owners are constantly victimized by websites which stream their content without permission, and the U.S. government has attempted to curb this behavior through strengthening the criminal aspects of copyright law and shutting down such websites. While some of these efforts have been successful, there is still a long way to go.

Actions taken against criminal copyright infringers are done so under 17 U.S.C. §506, which states that one’s actions reach the level of criminal infringement in three ways. The infringer can violate the exclusive rights granted to a copyright owner under §106 of the Copyright Act to benefit financially, by reproducing copyrighted works which have a total retail value of more than $1,000 or by distributing such works on a computer network accessible to the public which one knows were intended for commercial distribution.

The Digital Millennium Copyright Act of 1998 strengthened some of the criminal sanctions on criminal copyright infringers who infringe both willfully and for financial gain. This included increasing fines to $500,000 for first-time offenders and $1,000,000 for repeat offenders and prison sentences of five years for first offenders and 10 years for repeat offenders. The Copyright Act also provides for full restitution, but your average infringer of a lot of these expensive works likely cannot pay such exorbitant sums anyway.

In March 2011, Brian McCarthy was arrested and six months later he was charged with criminal copyright infringement. McCarthy allegedly intercepted and streamed live sporting events on channelsurfing.net. It turned out he was linking the material rather than hosting it, but he was still charged under the criminal statute and as a first-time offender, he faced up to five years in jail, but he reached a deferred prosecution agreement that allowed him to avoid jail time in exchange for paying back the $351,033.54 he made off of the site. The lengths to government went to track McCarthy down included pulling information from a domain register, PayPal, public records, the DMV, ad networks, Gmail, Comcast and basic surveillance just to ensure he lived at the address they ultimately found.

The U.S. Immigration and Customs Enforcement seized 16 websites in February 2012 that had been illegally streaming sports as part of a larger sweep of web sites welling both illegally streaming sports and selling fake NFL memorabilia. In the sweep, federal agents arrested for criminal copyright infringement one man who had allegedly been operating nine of the 16 sites.

During this time, the government unsuccessfully attempted to provide more protection for copyright owners. In the same month McCarthy was arrested, the Obama administration proposed legislation that would “ensure felony penalties for infringement by streaming and by means of other new technology” and “increase the statutory maximum for economic espionage from 15 to 20 years in prison.” The bill containing the proposed changes died in the senate a few months later.

The other side of the aisle followed the failed Obama legislation with its own proposal when Texas Republican Congressman Lamar Smith proposed the Stop Online Piracy Act (SOPA). SOPA provided for the requesting of court orders to bar search engines from linking to infringing websites, to require Internet service providers to block access to infringing websites and to bar advertising networks and payment facilitators from working with infringing websites. The legislation is yet to gain enough traction to get through Congress, but it has not completely died either as different parties look to improve upon it. The Department of Commerce’s Internet Policy Task Force proposed in 2012 that SOPA be revised to make it a felony to stream copyrighted works.

Large busts such as the ones described above might work on a micro-level, but the fact that sites similar to what the government went to such great lengths to shut down are still around prove that the current laws are not effective deterrents and something else needs to change if the rights of copyright holders are to be adequately protected. Both infringing host web sites and web sites that provide links to host sites like McCarthy’s still exist while simultaneously claiming to be DMCA-friendly.

Despite the aims of the current provisions to curb individual infringement, service providers are still given a good amount of protection by the safe-harbor provision of 17 U.S.C. §512, which states that ISPs cannot be held liable for copyright infringement by way of storage of information by a user if the ISP has no actual knowledge of the infringing actions and acts expeditiously to remove such material once receiving actual knowledge.

The safe-harbor provision has prolonged litigation in the case of Square Ring, Inc., v. Ustream.TV. In advance of a boxing fight between Roy Jones, Jr. and Omar Sheika, Square Ring, a company owned by Jones Jr., sent notices to Ustream in the week leading up to the fight asking it to have its staff actively monitor steams of the fight. Square Ring filed a complaint in 2009 that alleged that Ustream allowed approximately 2,377 users to view the fight. It took Usteam two days to remove the steams, and this January, a Delaware district court denied Ustream’s motion to dismiss as it held that consideration needed to be given as to whether 48 hours constituted acting “expeditiously.” Ruling that 48 hours is a reasonable response time would make it nearly impossible to hold newer live-streaming apps such as Periscope and Meerkat liable for infringement that automatically delete all of their streams. Thus, the infringing stream could easily be taken down even before a notice of infringement is filed. This catch-22 is an area I plan to delve into further in my seminar paper.

Mobile streaming apps allow not just for people to infringe on live sporting events from their home while hooking up their television to a computer, but allow those attending the event to stream from their phone, thus hurting the rights holders to such athletic events. Every viewer that switches from watching a game or show on television to watching a stream of it on Ustream or Periscope hurts both ratings and subscription and pay-per-view purchases. Broadcasters rely on both ratings driving advertising and subscriptions to increase their revenue, which can be put into developing or acquiring more programming. Thus, in the case of television shows, streaming ultimately puts us, the viewers, at a disadvantage if we want to see broadcasters develop new, high-quality programming.

Clearly, this will not go away on its own. The current copyright laws were already not stringent enough to control normal posting of copyrighted works, but they are even less suited to keep up with the changing technology that allows for live streaming.

There is no definite solution to stop online copyright infringement completely as it is impossible to know with certainty how technology will react to new regulations. However, there are avenues that are yet to be tested, and in order to protect the programming of broadcasters, it is imperative that Congress act by exploring these options. Whether it be getting some form of SOPA passed that makes criminal infringement a felony and makes it more difficult to find such websites through search engines, doing away with the §512 safe-harbor provision and putting more of an onus on service providers to stop infringement or facing the constitutional challenges that come with regulating advertising on infringing sites, action needs to be taken. If the status quo remains, consequences could include higher cable prices as broadcasters that feel the hurt of online infringement on their ratings pass the costs on to consumers or a lack of incentive to create new entertainment programming if the money is not there.

As I mentioned at the beginning of this post, I am an avid television consumer and can vouch for the high-quality of television programming available today and the variety of options we have as views to find sports.  But I fear that this ease with which we consume television programming and the quality and quantity of options we have could be damaged if Congress does not continue to examine the challenges copyright holders face on the Internet and take appropriate action.


•September 15, 2015 • Leave a Comment

Last year one of the students blogged about crowdfunding, His discussion included identifying some of the risks when a project that is successfully funded for thousands of dollar, fails to make it to market.  As of last year Kickstarter changed its Terms of Use to require more substantiation from  project sponsors. Last week the state of Washington became the first state to require that the sponsors of a failed Kickstarter campaign pay fines and restitution. Washington initiated a civil action against Asylum Playing Cards for failure to deliver donor rewards in a timely manner and the court ultimately agreed that the donors were entitled to relief. The restitution was only for residents of Washington who donated to the Kickstarter, nonetheless, the decision has the potential to shake up project sponsors, who up until this point, faced no liability for failure to deliver the goods.

The US Government Needs to Step in On Gambling

•September 11, 2015 • 12 Comments

As the first writer on the blog for this semester, I am excited to write about a topic that I’m passionate about and will explore even further as I write my paper this year. There are a few serial blog posts below mine that also talk about gambling from the previous semester that are well written and well researched. If you’re interested in gambling, you should definitely try to read them as I might link to them in this post in order to not repeat myself. I am writing this little intro because, although the previous posts cover a lot about gaming law,  I am hoping to give my perspective on not only what is written below, but to give my comment on the current, yet ever-changing gaming law universe.

What is the first association when you hear the word gambling? Mine is sports betting. For a lot of you it might be poker. Or blackjack. It probably includes some form of the idea of “risk”. The point is that there are so many different things that encompass “gambling” and the 50 U.S. states agree. Within our country, there is no agreement among the states as to what pertains to gambling and what should be legal, illegal, or otherwise regulated.

In one of the readings I was assigned this week, it shortly discusses the laws each state has relating to online poker. What stood out to me immediately was the word “definition” as it relates to gambling and the descriptor preceding it. To list them: vague, narrow, expansive, broad, broadest, statutory, and no. That’s 7 different kinds of adjectives describing the definition of gambling and this is just a site describing poker laws!!  It’s maddening to me that this country has gone so long and continues to avoid federally addressing gambling law. An argument against my comment could be that UIGEA (Unlawful Internet Gambling Enforcement Act) and the Federal Wire Act are examples of the government attempting to address issues, but both are not reasonably long-term solutions. As the Federal Wire Act was mostly overruled in 2011 (reversing it’s decision to ban all internet gaming, re-instating just a ban of online sports betting), the shelf life of UIGEA (which attempts to attack the money gamblers make) is also nearing its end. With workarounds being produced in the market, I predict that the government will ultimately have to accommodate the banks and the people who want to process their gambling winnings. Until we have concrete federal law and stop allowing states to make their own laws regarding the topic, this will remain a grey, inconsistent, and frustrating area of law

Economically speaking, if there is a demand for something, a market will emerge. This is the framework behind the idea of “internet cafe sweepstakes”. For those that don’t know what internet cafe sweepstakes are, I’ll try to explain. The models of these cafes are similar to that of the McDonald’s monopoly sweepstakes that occur every year. McDonald’s has been running their monopoly sweepstakes since 1987 and has seen its profits rise during those months because of it. The idea is that the hope of getting that “boardwalk” piece keeps customers coming in to try and win that $1,000,000 grand prize. By giving away little items like free breakfast sandwiches, fries, or drinks, McDonald’s incentivizes the consumer to come back in and spend money on the food to play the “free” monopoly game. The benefit to McDonald’s is obvious. Someone cannot win the grand prize without coming to their store and actually purchasing something. You are paying for food, but hoping that you win an even bigger prize. It is the same idea for internet sweepstakes cafes. A main form of this includes letting customers into your cafe filled with computers and charging them for the time they spend on the computer/internet and allowing them to play games, quite similar to casino games, in hopes of winning other prizes during their allotted time. Is this any different than a McDonald’s sweepstakes? It may seem so, and much more obvious, but these kinds of places have operated within a grey area of the law for over 10 years. Some places have been shut down, but as I said before, if there is a market, new producers will find ways to emerge.

Colorado passed a bill earlier this year prohibiting internet sweepstakes cafes (and they’re not the only state that is anti-gambling). The bill address these cafes specifically and also attempts to account for future iterations of cafes by including a ban to “simulated gambling devices” like the computer programs installed on the computers inside the cafes. Colorado’s main concern with cafes is the regulation of them, or lack thereof, relative to legal gambling areas in the state. I would agree with Colorado in its concern regarding the regulation of such places and the protection of its citizens. The bill notes in section 1(f) that the voters of Colorado have voted to approve which forms of gambling they want to allow, but have never been given the opportunity to vote for the approval of internet sweepstakes cafes. Why is this the case? It is evident to me that there is a demand for these cafes if their growth was so widespread that the legislature felt the need to pass a bill to ban them. Why not attempt to legalize, license, and regulate them as an alternative form of consumer protection while also granting the state a share in the revenues?

A reason might be the subpar results in the three states (DE, NJ, NV) that have legalized online gambling. It’s interesting to note the somewhat drastic drop in actual and expected revenues from online gambling in these states given the anticipated market for it. The article linked above discusses some reasons for this difference including low consumer education and high start up costs. I have an alternative theory on this. History in the US has shown us that the government cannot always operate as efficiently as a private company can. The fixed costs associated with this project along with the government’s lack of experience operating in such a field could definitely be a cause for the slow start. If the federal government finds a way to pass laws that allow and properly regulate online gambling, I think things could drastically change. It would allow for experienced market producers to get involved, whether foreign or domestic, and operate more efficiently than market producers in each individual state could. There have been problems related to technology with the current launch of online gambling in the three states that a federal law could more easily solve. Where it has been discussed that geo-location technology has been a problem in some areas determining whether a consumer is within the borders of a state, a legal online gaming country would help solve that issue. Again, the market would expect to be filled with specialists in each part of the market, helping not only the cost but also the quality of the service.

Further, I believe that marketing has been an issue as well. Through my initial research, I haven’t found much written on this topic, but it is a big deal. There is a reason big corporations have dedicated marketing teams and unique marketing strategies. Let’s take a look back at McDonald’s again. Their monopoly campaign is always plastered everywhere – TV ads, radio ads, billboards, etc. They might still get a decent size of extra consumers simply by word of mouth if they didn’t advertise, but that is a testament to their market share. These new online casinos do not have that benefit. For all the talk about how big the gambling industry is as a whole, if consumers do not know your product is out there, how will they know to buy it? The fact that I haven’t found much information from the three states regarding their marketing strategies concerns me. Google, Microsoft, and Yahoo! paid over $30M in fines for advertising gambling in 2007 when gambling was a smaller market and a smaller segment of their ad revenue. Those three powerful companies could help advertise and inform consumers to help boost the previously stated “consumer education” and boost the user base. Did we really need the government to spend time, money, and other resources to sue these companies for federal crimes on advertisements?

As the previous gambling poster noted, prohibition is not something realistic or something that works. It is time for the government to take a clear stance on both the allowance of internet gambling for casino games and sports betting on a national level. I’ll admit that the legal sports betting angle might cause more trouble than legal online casino gambling, but they are both highly successful in vegas and sports betting revenue might even exceed that of casino games, if legalized. New York has already commissioned studies on the effect and extent of legal and illegal gambling in the state. This should be done nationally as well. These laws should not be implemented without proper research and strong considerations for consumer protection. There are still issues with the likes of fantasy sports and internet sweepstakes cafes, but ideas like that have spawned in response to shifting gaming laws in the last decade. It is clear that this country has a huge demand for this market that will generate revenue, and it’s up to the government to step in and work for the people.

Some Conclusions on Online Gambling Law

•December 11, 2014 • Leave a Comment

1205_bigOn December 5, 1933, at 6:55 p.m. President Franklin Roosevelt signed an official proclamation declaring the end of alcohol prohibition in the United States.[1] In doing so he, he had declared to the entire world that the United States experience with prohibition had been a monumental failure. Society did not benefit from a new moral order whereby alcohol was criminalized. Rather, the eighteenth amendment led to an unprecedented increase in crime, which has still yet to be matched to this day. For instance, in the first year of prohibition, all number of crimes in the United States increased by twenty four percent. Worst of all, alcohol related crimes saw the greatest increase, with arrests for drunken and disorderly conduct increasing by forty percent. Prisons were quickly filled to capacity with everyday citizens just looking to get a little buzz after a hard days work.

What the failure of the eighteenth amendment teaches us is that outright prohibition rarely has the effect of decreasing demand for the prohibited product. In fact, it often leads to increase demand. Demand in turns leads to a black market to fill that demand which in turn leads to an increase in violent crime. This pattern has been demonstrated time and time again with vices like drugs, pornography, and more recently, online gambling.

The federal government should have known better. They had decades of experience with which to draw upon, yet as we saw in the first blog post, they decided to prohibit or at least attempt to prohibit online gambling across the U.S. Here we are in 2014 and as expected, prohibition has failed. In the second blog post, we saw how the federal government was forced to embarrassingly accept this when the DOJ issued their letter declaring that they would not longer attempt to regulate online gambling through the Wire Act. I predict that it is only a matter of time before UGEA is overturned.

China’s online gambling industry is another example as mentioned in blog post four. In China, online gambling continues to thrive with the support of some of china’s biggest retailers, much to the embarrassment of many Chinese officials.

Today, in the U.S. online gambling is in a quasi/legal/illegal conundrum. In some states, online gambling operates legally, undisturbed by the federal government, while in others, prohibition persists. For some people, this state-by-state system is the preferred option. These anti-federalists believe that each state should have the right to decide whether or not to legalize gambling. However, this system often works better in theory than in practice. For example, no one would believe that every person gambling on New Jersey’s website is playing from New Jersey. Of course, new technologies like geolocation have kept this to a minimum but these technologies are almost more trouble than they are worth. As we saw in blog post four, the geolocation technology was partly to blame tax revenue reaching only 9.3 million as opposed to over 100 million as predicted.

Yet, as we saw in the Malta and E.U. example, uniform regulation can have its own problems. If the E.U. attempted to regulate the online gambling industry uniformly, Malta’s economy would be ruined.

The lesson to be learned from these examples is there may not be one perfect answer. Even outright prohibition has been successful in many countries and certain U.S. states. Rather, I think that each country must evaluate its own unique circumstances and create a regime that works best for them. For example, maybe the E.U. should implement uniform online gambling legislation but exempt Malta. Malta would be permitted to continue their current framework, maintaining their large market share of the industry while Europe would have the uniformity they desire.

Whatever the future may hold, online gambling is not a passing phenomenon. Countries can no longer afford to ignore it. Whether they choose to regulate or prohibit, they must do something.

[1] http://www.nytimes.com/learning/general/onthisday/big/1205.html


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