Jurisdiction, privacy, and the future of gaming
“When it comes to privacy and accountability, people always demand the former for themselves and the latter for everyone else.”
David Brin
Once upon a time, a “rat jacket” meant that you had been identified as a “rat”—an informer, a stool pigeon. This qualified you for much unfriendly attention in certain circles. That was then.
Today, automated and digitized, you can get a jacket that will rat on you.
The Tommy Hilfiger brand has brought out a line of “smart” clothing which features a geolocation chip in every sweatshirt and pair of jeans. It tells a central database when you’re wearing Tommy Hilfiger gear, and where you are when you’re doing it.. This is now—you’re put under surveillance and will pay for the privilege.
This odd straw in the wind shows how greatly the future of privacy is in doubt. And privacy is an issue that gaming operators and customers are going to have to confront very soon.
In or out of bounds?
For the future of gambling, including newly authorized sports betting, is clearly going to involve use of the Internet and Internet-based applications such as social media. And that comes with a built-in problem for the U.S. gambling industry, online or off. Because state law is the primary reference point of American gaming law, a given state government can only license or permit gambling in relation to its own residents and citizens. If you live in New Jersey, for instance, which permits online gaming, you can only participate when you are physically within the borders of the Garden State. Programs and filters are in place to prevent anyone located outside from betting in. Probably the most useful tool for that is a GPS feature on the cell phones of registered customers.
Even New Jersey, when it first authorized online bets, had trouble distinguishing whether a given player was close to the state line, or actually over it. As a result, some New Jersey residents who were otherwise perfectly eligible to register and play online, couldn’t do so because their home address was too close to the border. That particular glitch has been rectified. ”In or out?” is not too much of a problem for states with large land areas and large populations, such as California and New York. But smaller states such as Rhode Island or West Virginia would have to be very diligent about customer location, because it takes no time at all to travel right through.
And this brings up another question—location versus jurisdiction. Let’s suppose John Doe, a New Jersey resident and online poker enthusiast, gets into an online game via hos smartphone, waiting for a flight to California. Obviously he has to get out of the game once the plane takes off.
Or does he? A number of U.S. air carriers offer WiFi during the flight. So John can, in theory anyway, keep on playing, or plug back into another game once the aircraft reaches cruising altitude and WiFi access is allowed, depending on the airline policy. But when the plane crosses the state line into a state that doesn’t permit online gaming, what happens then?
Clearly, Mr. Doe began his online poker session while he was within state boundaries. If he had not been, he wouldn’t have been admitted. But will the server of the licensed New Jersey operation check the GPS periodically to see that Doe is still within bounds, and break the connection when he crosses the state border? And if not, could he be breaking any state laws?
Well in that case, basically, yes. When an airplane flying ordinary commercial routes passes into the airspace over a given state, then state law applies to what happens inside that airplane, for as long as it’s within state boundaries.1 So Mr. Doe could be brought up on charges. But he probably won’t be. State authorities probably don’t know that he’s there (unless, of course, his rat jacket rats him out). And in most U.S. states, unauthorized gambling is a misdemeanor at worst, so he’s not worth the aggravation to prosecute.
For law enforcement, the gaming operator has always been the more worthwhile target. Oops, complications here, too: for one thing, the operator is not some fly-by-night outfit from the Pirate Islands. It is a legitimate business, licensed in another American state, very definitely a horse of another color, as far as prosecution is concerned. And was it “operating” in the other state at all, when its essential functions are all on a server located in New Jersey? And neither John Doe nor the Jersey operator of acted against the purpose of the other states law—to keep illicit gambling out of the hands of its residents. Well, the operator is not offering it to anybody else, and John Doe is not one of the other states residents anyway. In short, what’s the point of cutting somebody off from his otherwise legal activities, when it doesn’t actually touch anybody in the supposedly aggrieved other state?
But let’s take the opposite tack. The New Jersey operator is on the ball, and cuts John Doe’s access as soon as the plane crosses into the airspace of another state. Suppose Doe was about win big with a full house, but never got the chance to actually play it. Does he have a claim against the operator?
But that’s the tip of the iceberg. There are even more interesting possibilities in store. States can and do make agreements between themselves to pool their respective gambling markets, so that somebody from Delaware can still bet if he’s located in New Jersey, or Nevada. Right now these are the only ones in the U.S. to take that step, but as more and more states authorize sports betting, they will find it advantageous to pool their customer bases in the same way. But some states won’t. So what will that lead to? Mr. Doe can play poker online while flying, but only over cooperating states. So all through the flight, his access will vary—on/off, on/off,off/off/on. Lightning round, anyone?
The deeper threat
But the threat from the authorities was and is a limited one. There was a bigger, deeper, longer term threat growing. Mr. Bettor didn’t see this coming. In fact, no one did.
The Internet is, among many other things, the world’s biggest marketplace.
And that generates a demand for advertising and marketing services. But how to effectively advertise in a venue with literally billions of customers, millions upon millions of webpages and websites, a venue that is growing every day?
The only solution is in effective use of data. Advertising and marketing are all about putting the most effective ads in front of the most receptive audience, fine-tuning the message until it hits just the right note, reaches just the right kind of people. Which means their appetite for data—any data—is bottomless. But the other side of the coin is: knowledge is power.
Usually governments and creditors are only harmful to the bottom line. Unless you’ve done serious work in offering illegal gambling or money laundering, they’re only after a fixed sum of money. But there are other parties to beware of on the Internet—hackers and cyber crooks. They can do far more harm, using the power of your own identity against you.
Victims of identity theft may find themselves suddenly liable for credit card debt and loans they never even knew about, but charged to their name. It can be very hard to settle all the bogus debts and rebuild your credit after a hit like that.
The particular problem of Internet and interactive gaming is that to function adequately, they must collect and store what is called vital client information—credit card numbers, date of birth and so on. Additionally, other information is collected and stored for marketing purposes—what kinds of games someone likes to play how much they are prepared to lose before they quit, what season of the year they are most likely to take a vacation—until a pretty complete profile has been put together. One that can be used against Mr. Bettor as effectively as it is used for him.
Needed: A system
The demands Mr. Bettor makes on Internet and interactive gambling are contradictory as far as privacy and anonymity. On the one hand, he wants his pastime to be safe from the prying eyes of tax men, alimony lawyers, or jealous spouses. On the other hand, he wants clear records and accurate accounting—especially when that neat little sports book in the Caribbean stops answering its emails and drops out of sight, or when he sues his credit card company for letting him bet on the wrong teams.
Government makes its own demands. Accounting and money transfer must be above board, transparent, and audit—ready at practically any time. At the same time, it expects the operators to safeguard clients’ sensitive information and balances against prying eyes (except their own, of course).
And what do the operators want in the area of privacy? In this context, what they really want is the right to collect and use data and metadata about their customers, the better to please them and attract more. But they also want adequate protection against intrusion.
Perhaps it’s not possible to satisfy all these demands, but most of them can probably be accommodated. There needs to be an agreed-upon standard for collecting, protecting, handling and storage of financial and personal data, of both operators and bettors.
But wouldn’t that be a standing invitation to national government level supervision, something which American gaming executives and state legislators don’t want? Not necessarily. While the growth of sports betting is in its early stages here in the U.S., lawmakers and operators can come to agreement on a national standard for privacy protection and security. It is already been done in the case of pari-mutuel interstate and international wagering, and there is no reason the decision-makers in this industry can’t do the same. They should meet, negotiate, work out a modus vivendi. But just in case, they should all leave their jackets outside.
1 Grace v. MacArthur, 170 F. Supp. 442, 446 (E.D. Ark. 1959)
Mr. Owens is a California attorney specializing in the law of Internet and interactive gaming since 1998. Co-author of INTERNET GAMING LAW with Professor Nelson Rose, (Mary Ann Liebert Publishers, 2nd ed 2009); Associate Editor, Gaming Law Review & Economics; Contributing Editor, TSN. Comments/inquiries welcome at [email protected].
