Federalism, Morality, and Online Gambling

It doesn't get any more interesting than an issue that combines morality, federalism, the budget crisis, and a thorny set of questions about statutory interpretation, administrative law, and prosecutorial discretion. All that is in play in this story about several states looking into permitting (and taxing) Internet gambling on lotteries (which some already permit) or more serious games such as online poker. I don't think one needs to be an abolitionist about gambling to wonder whether using widespread online gambling as a revenue tool is a great idea. But one argument is that people are gambling online anyway, so the states might as well try to capture some of the revenue stream from that harmless hobby--or does lifting the legal sanction from online gambling amount to a regressive tax increase on gambling addicts? As the NY Times story notes, there's also the difficult question of the interplay between the 2006 Unlawful Internet Gambling Enforcement Act (which goes after the payment systems for online gambling and was the subject of elaborate regulations on credit card banks at the very end of the Bush Administration) and the Wire Act, with DOJ taking the position that the Wire Act permits prosecution of all online gambling ventures. (As I recall the runup to passage of UIGEA, the savings clause in the statute was intended to steer clear of intrastate gambling and wagering on horse racing, but some states are now pushing a much harder non-preemptive argument.) And the political interests are all over the map--roughly speaking, opposition to online gambling comes from religious conservatives, the professional sports leagues, and the Nevada gaming industry (as the story notes, Senators Reid and Kyl have written to DOJ asking it to crackdown on the states), while banking interests (one of the lead sponsors of legislation to curtail UIGEA is Barney Frank), libertarians, and budget hawks are inclined to permit more online gambling and tax it.