Incentives Matter

The New York Times today reports on the beginning of a crack-down on Internet gambling. Yesterday, federal authorites arrested David Carruthers, the CEO of BetOnSports, a Costa Rican-based company that is publically traded in Britain, on charges of "racketeering conspiracy for participating in an illegal gambling enterprise." Carruthers was arrested while in Dallas-Fort Worth International Airport while on his way from London to Costa Rica.

I don't know much about the legality of internet gambling in the US. (I know that gambling is illegal in the US, that these companies set up shop in countries where gambling is not illegal, and that the legal issue is whether or not they violate US law by accepting bets online that originate in the US.) But what I do know is that incentives matter; this is the final paragraph of the Times article:

Sue Schneider, publisher of Interactive Gaming News, an online magazine focusing on the Internet casino industry, said the charges would have at least one major chilling effect on the industry’s officers. “I imagine the number of executives coming through the U.S. on connecting flights will come to a screeching halt,” she said.

So do I.