eBay stands behind online gambling ban as its PayPal arm gets back into industry

eBay, for whatever the reason, has made itself a staunch ally of those looking to ban online gambling, this while its subsidiary, PayPal, embraced online gambling in the European nations as recently as February - though there is no sign of PayPal deposit methods featured on the BetFair site currently.

In other words, just a few months ago it was okay to bet over the internet, just as long as United States citizens were not exposed to its evils.

In a press release issued back in February, PayPal's Chief Executive, Geoff Iddison, announced that “PayPal may be best known as the preferred payment method for eBay customers. This is another example of the PayPal system being used by merchants to develop their online business.”

The online casino's European members will also have the added options of using credit and debit cards, or using the existing money in their PayPal accounts. They will also be able to withdraw their winnings directly into their PayPal accounts.

"It is a significant step for Betfair to be the first online gambling company approved by PayPal Europe. This will undoubtedly also give us access to a large and growing base of experienced online users," said Mark Davies, Betfair's Chief Executive.

The online auction giant eBay, meanwhile, has thrown its support behind Goodlatte's efforts.

Why would an Internet company open its arms to congressional regulation of the Internet?

Fox News reported that some speculate that eBay is attempting to win favor with Goodlatte, who also happens to sit on the Congressional Internet Caucus.

"There's probably some truth to that. But there's another, more likely explanation for eBay selling out the e-commerce world: Good, old-fashioned protectionism.

"First, a brief history lesson is in order.

"eBay owns PayPal, the popular, online payment system favored by millions of auction sites, membership-based, sites, and bloggers. This wasn't always the case. PayPal was actually founded in the late 1990s by Peter Thiel and Max Levchin, two libertarian-minded Silicon Valley entrepreneurs with a revolutionary vision. Thiel and Levchin saw the potential for PayPal to grow into a kind of private currency.

"In his book The PayPal Wars (my review of the book here), early PayPal marketing guru Eric M. Jackson recounts a stirring speech Thiel gave to the company's early staff."

Thiel is quoted.

"PayPal will give citizens worldwide more direct control over their currencies than they ever had before," Thiel said. "It will be nearly impossible for corrupt governments to steal wealth from their people through their old means because if they try the people will switch to dollars or pounds or yen, in effect dumping the worthless local currency for something more secure."

It's hard to believe but at one time PayPal was a major competitive in the third party money transaction field for online gambling now dominated by NETeller.

eBay's purchase of PayPal and New York Attorney General Elliott Spitzer's investigation into the company, which invoked the Patriot Act, ended PayPal's dominance in the world of online gambling transaction processing. 

Spitzer subpoenaed documents related to PayPal's use in online gaming sites, arguing that the company's refusal to snoop in on what its customers were doing with their own money on their own time was in violation of New York's anti-gambling laws.  PayPal reportedly turned over customer records to the New York Attorney General's office. 

eBay's backing of the proposed bill to make online gambling illegal in the United States would make it close to impossible for its subsidiary to continue its business relationships with online gambling entities based out of Europe.  eBay's position makes no sense unless it simply wishes to abolish gambling on the web all together, which isn't the case when considering the PayPal/BetFair marriage.

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Christopher Costigan, www.gambling911.com

Originally published July 17, 2006 12:08 am EDT