Online gambling opened with a thud in the first big state to permit it, in part because some major banks won’t let their customers use their credit cards to play. (Wall Street Journal)

At the moment, only three states allow online gambling: Nevada, Delaware, and New Jersey. New Jersey is the latest entrant to the online gambling game, and as the quote from the Wall Street Journal above says, it didn’t go well.

Meanwhile, gambling sites like BitBet.com, which allows people to bet online with bitcoins, have been proliferating at a good pace. The contrast could not be starker. The US has always had a difficult relationship with gambling. On the one hand seeing it as part of the individualist spirit that helped build the country, and on the other seeing it as idle, wasteful, and sinful. The state lotteries that were very common in the early days of the nation were gradually made illegal and most other types of gambling were regulated or prohibited by a myriad of local and national laws.

Regulation is always a difficult balance to get right. As Douglas MacArthur, one of the great generals of World War 2, said “Never give an order you can’t enforce.” The story goes that when MacArthur was in Japan, he and an aid were walking down the street and saw a serviceman with a Japanese lady. When the aid asked if MacArthur was going to stop the man, MacArthur, recognizing that human nature was stronger than the order of a general, made his famous statement.

What MacArthur knew, and what so frequently gets forgotten, is that driving things underground causes more problems than allowing them. History is littered with stories of laws with unintended consequences: The Prohibition took Italian street gangs and gave them the revenue streams to become a syndicate. The war on drugs has ruined millions of lives, exploded our prison system, crippled our criminal justice system, and empowered criminal gangs and cartels across the world. People will have what they want – to deny that is to invite trouble.

Sometimes though, the desires of people can help innovation. Take the Internet. In the early days, it required special equipment and knowledge. The tech was so new that glitches were common. Though it seemed to have a lot of promise, it was so troublesome that most people didn’t believe that it would be adopted by anyone but the geeks. One of the driving forces of Internet adoption was porn. The ability of people to privately view at any hour of the day or night whatever they were into helped the Internet find its way into many households. Once there, people discovered how useful, how valuable, the Internet really is and that is when it exploded.

Gambling is serving some of that same function with Bitcoin. People want to gamble. People like to compete, and adding stakes makes it more exciting. Bitcoin allows people to bet without worrying about whether their credit card company or bank allows them to. If the jurisdiction they’re in doesn’t allow gambling, it has the advantage of being anonymous. As more of the gamblers in states like New Jersey get frustrated and look for another way bet, they will begin to find their way to Bitcoin. Once they begin to use Bitcoin, they will see its other advantages and tell their wives, relatives and friends about it. Pretty soon states like New Jersey will have lost the ability to enforce this order, and we will be living in a whole new world.