Don’t Ban Internet Cafés. Regulate Them.
Pierre Tristam | January 23, 2012
They’re sordid little places, those misnomers known as Internet cafés. They specialize neither in Internet connections nor in coffee, but in low-stakes gambling, what their proponents like to call “game promotion” or “sweepstakes.” They’ve been filling empty storefronts in strip malls across Florida, like an invasive species taking advantage of retail’s wilts. There’s anywhere from 450 to 1,000 of them in the state.
They can be sordid inside, too: quiet, neon-lit places catering mostly to older people with dollars or time to spare, or loneliness to foil. The only sound is the gurgling of slot machines rigged as games of chance. There’s not even the sound of metal kissing metal when slots line up, because coins aren’t the currency of choice. Winnings are “cashed in” at the front desk so as to maintain the elaborate lie that patrons aren’t really gambling but using “phone cards” or other bogus credit devices. In Palm Coast, where there’s a dozen of these things—about six times more of them than actual coffee shops—they’re rarely busy, and often empty. But those gambling halls have been getting an awful lot of attention from local and state politicians. A bill advancing in the Legislature would ban them outright. Gov. Rick Scott supports the ban, saying he doesn’t want “our budget to be dependent on gaming.”
Scott is right: the budget shouldn’t depend on gambling. But it does. The state raked in almost $4 billion in lottery ticket sales in 2010, an industry it monopolizes by law. Florida transferred less than a third of the money to the education budget, the ostensible justification for the lottery. Gambling’s justifications as a revenue source for worthier causes can be overstated. The American Gaming Association itself concedes that “the legalization of online poker would generate $2 billion in tax revenue, primarily at the state level, every year.” That’s a projection of combined tax revenue across 50 states, a pittance when compared to lottery sales in Florida alone. Still, the state shouldn’t be swinging from a lottery’s levers with one hand while wagging its finger at gambling with the other.
Internet cafés may be a pest, and their proponents make laughable arguments when they claim they’re not about gambling. Winnings depend entirely on chance. There’s zero skill involved aside from the relatively primitive motor kind required to press a button. But Internet cafés shouldn’t be banned. It’s never a good idea when the state imposes prohibitions on moralistic grounds. It needlessly interferes with business. It paternalistically interferes with people’s right to enjoy themselves as they choose. The low-stakes gambling that takes place in internet cafés isn’t attracting crime. It’s attracting the Medicare generation, and the occasional sheriff with a Comstock complex. Maybe there’s a better way to waste money. But it’s not government’s job to define it, especially when those businesses are creating jobs.
The worst gambling crime of the century took place a few years ago in the stock market, the nation’s biggest virtual and physical collection of gambling halls, when fund managers and stock brokers used other people’s money to bet on the housing bubble. A few cashed in colossal sums. Most lost, and took the economy down with them. There hasn’t been a single conviction out of that catastrophe. And the gambling goes on, glorified by its practitioners and sanctified by the government through capital gains and dividend tax rates set absurdly lower than those for earned income. “It is unjust and in my opinion morally wrong,” President Eisenhower said in 1954, “to make a person with earned income pay considerably more in taxes than persons with unearned income from dividends.” That was back when the stock market hadn’t become America’s most ecumenical house of worship. When it comes to threatening the fabric of society, Internet cafés have nothing on Wall Street.
Government can and should regulate gambling. A bill in the Florida Legislature would do just that with Internet cafés, letting them go on but also letting local governments write rules for them and impose fees that could generate a little extra tax revenue, including potentially steep permitting fees and $100 per electronic device per year. No moral overlord. No nanny state. Just a reasonable compromise, with a touch of sin-tax surcharges that could help rein in the gambling joints’ proliferation.
Now if we could apply the same thinking to drugs and prostitution, we might get somewhere as a rational society.