Barney Frank and online gambling

It turns out that my congressman Barney Frank, whom I'm generally a fan of, is working hard to legalize online gambling. More precisely, working hard to overturn a law which makes online gambling effectively impossible by forbidding the use of credit cards to pay for it. (There is an exception: online credit card gambling on horse races is currently quite legal.)

This law was passed in the later days of the Bush administration, probably as a gift to his fundamentalist (and anti-gambling) base. Frank is a self-proclaimed non-gambler, but seems to be enjoying his status as an icon of the professional gambling interests. My guess is that they have no other use for him, but they do like his stand on paying gambling debts with plastic. He has also collected more than $50,000 in campaign contributions from these people.

Mr. Frank claims that people should have a right to spend their money on legal activities as they see fit.

Frank's position is OK as a sort of general principle, but of course it can't be taken too literally. After all, it is legal to finance political campaigns, but not legal to give unlimited amounts of money to them -- especially anonymously. (I believe that Frank supports this kind of "campaign finance reform". ) It is also legal to buy alcohol, but not if you are underage or try to drink more in a bar when you have reached the limits of sobriety; in fact, bartenders have been held liable for drunken accidents when they failed to cut off the customers who subsequently caused them. It is also legal to buy legal drugs, but some of them require a doctor's prescription in order to protect people from their potential dangers.

So it is for online credit-card gambling. Unlike cash gambling, where (with some exceptions) you can't spend what you don't have, debts rung up through, say, online plastic poker can quickly max out one or more credit cards. Since credit-card companies regularly give people credit lines well above their ability to pay in a reasonable time, this can have disastrous effects. The main potential victims are compulsive gamblers and younger people with access to their parents' credit cards. I have read of dozens of accounts illustrating this; there must be thousands more that don't get reported. These date from before the enactment of the law that Frank is challenging.

I am not against gambling and I am not against online gambling, even with credit cards. But, something extremely careful must be done to prevent financial disasters from happening to vulnerable people. If credit cards are used, the least that should be required is that they be used only before the gambling is to take place, not to finance that "one last big hand" to make back money just lost -- the Gambler's Ruin. I can see people setting up limited accounts at gambling sites, using credit cards, for a fixed amount of money, and well in advance of play. The sites would have to check the cards' limits and perhaps only allow a certain percentage. The sites would also have to obtain written verification from the owner of the card, via the address associated with the card. This would require, then, that parents acknowledge that their card is being used for gambling purposes. It would also give the card issuers time to check the bona fides of the gambling site. You would think that banks would want to do this, but apparently they may not be currently liable for fraudulent commercial sites.

This is just the beginning. We need a lot of thoughtful preparation before we open up an activity that can lead to much personal harm.

(Just out of curiosity, does anyone know of any other federal law that restricts the use of credit cards in purchasing legal goods or services?)