Reintroducing Online Gambling in the United States: An Ethical Perspective

Eric Pfanner, in his April 26, 2009 New York Times article titled "A New Chance for Online Gambling in the U.S.", alludes to the possibility of Internet-based casino-type gambling, made illegal by a federal legislation in 2006, being reintroduced in the U.S. due to the efforts of the Democratic Congressman Barney Frank and the more favorable political atmosphere associated with the arrival of a Democratic administration and a stronger hold by the Democrats - who are generally more favorable to online gambling - on the U.S. Congress. The article does not provide much detail in terms of benefits or drawbacks of such a move, mentioning only that, according to a study conducted by the accounting firm PriceWaterhouseCoopers, the legalization of online gambling would bring approximately $5 billion a year in tax revenue to the federal government. The article barely hints at the support of such a move from any party in the U.S. while citing a number of voices in opposition, from the Christian Coalition that is worried about online gambling ruining families to Las Vegas brick-and-mortar casino entrepreneurs like Steve Wynn who predicts that online gambling industry will be practically impossible to regulate. Analyzed from an ethical perspective, specifically using Mill's utilitarian approach, it is fair to argue that such a move would cause significantly more harm than good and as such ought to be rejected by the federal lawmakers.

Gambling of any type is highly controversial in terms from an ethical perspective. Even on individual level, it provides no benefits aside from entertainment, and even that is severely limited by the negative emotions that losing money produces. While a possibility of winning does exist, and thus provides an added ethical benefit of increasing personal wealth and subsequently increasing the quality of personal well being, the chance of winning an amount significant enough to produce such benefits is so miniscule as to be considered of no significance in determining the ethical value of gambling. On the other hand, the chance of losing money is extremely high, and considering the fact that loss aversion is a common trait of the human psyche, attempts to recoup the losses by continuing to gamble creates a strong possibility of losses significant enough to impact negatively the well being of not only the player, but also the people who rely on the funds he or she possesses for their well being as well.

Using Mill's utilitarian theory of ethics appears most fitting in this case. Neither of the parties involved in a transaction typical of online gambling can be claimed to act in a virtuous way or to adhere to the Kantian Categorical Imperative. The rights-based perspective might be applied to this discussion - after all, as long as the player does not try to cheat and the online casino operator creates a situation in which a player has at least some chance of winning, both negative and positive rights of both involved parties are preserved. However, such an approach does not appear to provide the complete picture of benefits and drawbacks associated with online gambling that the application of the utilitarian principle could. Mills posited that an ethical act is the one that does the most to increase human happiness and reduce human suffering. By this Mills means the sum of all human happiness and the sum of all human suffering, which in turn implies that simple mathematics can be applied to Mill's theory: the more people are made happy, or less unhappy, by the act, the more ethical the act is.

Some forms of gambling, such as state-sponsored lottery, might be considered of a higher ethical value, particularly on the basis of the utilitarian theory, since the benefits provided by the chances of winning, however miniscule, are augmented by the proceeds from such initiatives going to fund public works such as public schools, after-school programs, and the like. In case of online gambling, however, such additional ethical benefit is absent. An individual player certainly has a chance to win, but in most cases it is the "house" - the casino operator - that takes in revenue due to losses incurred by individual players. The said operator rarely, if ever, provides any funds and services, aside from taxes that it is obligated to pay by law, that offer any ethical significance. Like any other private entity, be it an individual or a business, a casino operator can become involved in charitable actions or charitable contributions. However, from the purely capitalistic operational formula, a casino operator is not required to do so. Another act of positive ethical significance is providing access to gambling addiction treatment to those players willing to utilize them. While this is indeed a mitigating ethical factor, it is practically unrealistic as it goes against the operational formula of the operator. After all, a casino relies on its patrons gambling - and losing - in order to generate revenue. This is especially applicable to an online casino, since it lacks additional revenue streams, such as hotel room, dining, concerts, shopping, and other of the sort, available to their brick-and-mortar counterparts. A casino offering gambling addiction counseling services is about as genuine as a tobacco manufacturer offering smoking cessation services or funding anti-smoking campaigns for teenagers - and about as effective if such services are offered.

As previously mentioned, paying taxes on the part of a Web-based casino operator is in itself not a sufficient enough act to justify its existence from an ethical perspective, since this is an activity that it must do rather than ought to do. Even if we consider a hypothetical situation where the government would use the collected tax revenue to the utmost public benefit does not produce a situation that, based on the utilitarian principle, would make the operation of an online casino or an act of online gambling ethical. This can be shown through simple mathematics. Lets presume that the government uses all of the tax revenue collected from an online gambling operation into improving public schools. Taxes, however, represent only a certain percentage of a Web-based casino's revenue - which is, at the same time, the online gamblers' losses. In pure monetary terms then, the positive impact on public happiness, or decrease in public misery, from these tax revenues represents only a certain percentage of the funds that could have been used for public schools if the online gamblers donated them directly to schools rather than going the circuitous route of loss, reporting, taxation, allocation, and finally distribution. Furthermore, whatever positive emotions might have been produced in gamblers by the realization of the public good their money is doing - thus increasing the ethical value of this action through an increase in the overall human happiness - is absent in this particular case.

An argument in favor of an online gambling operation as an ethical undertaking can be made in cases where such an operator is a publicly traded company - as many of them are, according to Pfanner's article. Specifically, it can be argued that by entering a new market and acquiring new sources of revenue, the online casino increases happiness of its shareholders through higher stock price, higher dividends, or both. It can even be implied that such a development benefits the same people who keep the casino operator in business by gambling using its platform, in case they own shares in a retirement plan or mutual fund that in turn owns shares of the online casino operator. The application of a utilitarian formula, however, shows that this argument is faulty. On the one hand, not every online casino is a publicly traded company, and of those that are, considerably fewer people own shares in such companies than those that gamble using its services. On the other hand, even if a person gambling with the company owns shares of this company directly, let alone through a retirement fund or mutual fund, the ratio of financial benefit a rising stock or dividend to the money lost gambling usually would be very small, and as such could not be considered ethical from a utilitarian perspective.

Based on the above analysis, it is fair to claim that reintroducing online gambling in the U.S. is not ethically desirable, as online gambling does not receive the consideration of an ethical undertaking under the utilitarian perspective. It is not going to increase human happiness while reducing human suffering - in fact, it is more likely to do the opposite, and do it on a larger scale than gambling enterprises operating from a physical location, because access to those is generally limited. With online gambling, however, no geographical limits exist, and easy access can potentially attract even those people who would not usually think of gambling. Even the financial benefits of reintroducing online gambling could be debated, but that is the issue for a different project.