The Walled-Garden Fallacy

The Nevada Gaming Control Board is crafting regulations to allow online poker in the state. In theory, sites could be running as soon as early next year. The catch is that online poker sites are being shut down and prosecuted by the U.S. Justice Department.

The board’s temporary solution is to require that operators of poker sites “not allow interactive gaming to individuals outside Nevada.” The theory is that if Nevada operators build and test sites now with only in-state players, once Congress finally legalizes online poker (which the gaming industry is certain will happen), those operators can then simply open their sites to players everywhere and gain a head start on other states.

It’s a great plan—except that it may be technically impossible.

Just look at the two local pseudo-Internet sports gambling options, which show what it takes to prevent out-of-state play. Both are so heavily locked down that neither qualifies as a true Internet site. The Leroy’s Blackberry application uses GPS verification, and the Station Casinos Sports Connection requires players to use a Virtual Private Network connection through Cox Communications, which disconnects them from the Internet while they are placing bets.

For any website available over a regular Internet connection, hackers could easily connect from out of state in ways indistinguishable from in-state users.

However, if the board were to stop thinking of technology as magic and take responsibility for enforcement themselves instead of passing the buck to operators, there might be another solution. Strong penalties (and stiff enforcement) for players caught betting from out of state could discourage them from playing, even if it were technically possible.

Of course, persecuting customers is a less-than-ideal way to run an industry—remember the Recording Industry Association of America’s jihad on file-sharing? But if Nevadans are serious about building an online gaming infrastructure, we need to build it for real while demonstrating to the Justice Department that we’re doing everything in our power to follow all the federal laws. Even the stupid ones.