We seem to agree that some level of regulation is called for in most activities. Deciding on the appropriate level and keeping it there is where there is a problem.
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Take drug traffic control...billions each year, net result ... sometimes the prices go up in the streets, but you can still get the stuff. And no tax revenue coming in...just expenses going up. I say legalize and control just like you do alcohol and spend the billions on treating the abusers in stead of incarcerating the users.
I agree with this statement, but I don't think the current efforts in the area of gambling is comparable to the drug war and if anything your statement supports what I am saying. They are not going after gambling to try and eliminate it like they are with drugs and they are not trying to criminalize the gamblers (unless they fail to pay their taxes) like they do with drug dealers and users. I don't know of anyone having been arrested for playing nickle-ante poker in their basement. They are going after internet gambling because it makes it easier for gamblers to avoid paying taxes and to try and help people from getting ripped off AND because it is drawing revenue away from the regulated sources. Lotteries, casinos and racetracks are all examples of how gambling is legal and controlled just like you argue should be done with drugs. Gambling in the US is regulated so that criminal elements are kept out of it, the gambling is done fairly and honestly (everything is on the up and up, no marked decks, no loaded dice, no players shaving points, etc.) and the winners pay their fair share of taxes. That is what this is really all about.
And because internet gambling is like the home shopping club for gamblers. Many, probably most, use it with reasonable moderation. But for others, with far less self control, it's as easy to run up huge debts as it is to type in your credit card number on to the net. The other part of your drug argument (about treating the abusers) would be that tax on gambling should be earmarked at least in part to support GA programs.
Your discussion of regulation of the sex trade also has parallels. You want to free up activities conducted by consenting adults (amen to that) but you want limited and reasonable regulation to keep out the undesirable elements such as pimps and syndicates (I would add health regulation as another reasonable goal for prostitution). The same would apply to the gambling industry. The government has been very effective at getting the mob out of Las Vegas. How effective can they be at keepig them out of gambling if the activity moves out over the unregulated internet?