Hypocrisy, thy name is PayPal. Last week Fox News ran a story about PayPal and their views toward internet gambling. It seems, they are against it, or at least they are against it in the US.

Back in the day when I managed a group of internet casinos PayPal was my favorite method of deposit and withdrawal (up there with Neteller). They had a large number of clients, where easy to use, and had a low charge-back rate. How does a company which started out as a leader in alternative deposit methods for the internet gambling industry end up against the industry which started them?

PayPal was founded in 1998 by two libertarian-minded Silicon Valley entrepreneurs, Peter Thiel and Max Levchin. They wanted to take their Libertarian opinions and turn them into a financial revolution, a private currency which would give people more control over their own money. 

In the book "The PayPal Wars" by Eric M. Jackson, the former Marketing manager of PayPal, Jackson recalls a speech by Thiel. "PayPal will give citizens worldwide more direct control over their currencies than they ever had before," Theil 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."

Like everything that is aiming to be good and true in the world the forces of evil set out to destroy it (only a slight sarcastic tone there). PayPal was bombarded with class-action suits and patent-infringement claims. On top of that, state governments put in their two-cents and insisted that the company should be subject to expensive banking regulations. Finally New York Attorney General Elliott Spitzer hit PayPal in their Libertarian heart. Spitzer subpoenaed documents connected to PayPal's use in internet gambling casino, stating that PayPal's refusal to spy on what their customers were doing with their own money on their own time was in violation of New York's anti-gambling laws. The final blow was issued by a US attorney following Spitzer's lead by using the Patriot Act to investigate PayPal and it's relation to gambling online. 

Theil and Levchin had enough. In 2002 they sold PayPal to eBay with the knowledge that they had not only lost the battle, but the war as well. PayPal did everything the US government could ask for. They paid a $10 million dollar fine and in November 2002 they stopped allowing their clients to place deposits into internet casinos. They even went one step further and banned the use of their product to pay for any adult sites, even if they were legal.

Now eBay, the owner of PayPal is backing Rep. Bob Goodlatte's Anti-Internet Gambling Bill through the House of Representatives. This in itself shouldn't be too shocking, as eBay has bent over backwards for everything this administration could possibly want. However, there's something more behind all of this. Goodlatte sits on the Congressional Internet Caucus and it is in eBay's best interest to keep him on their good side. The other incentive is economic protectionism. If Goodlatte's bill is passed then banks and other financial institutions will have to ban transactions with offshore payment services. This means PayPal could stay a monopoly, as foreign competitors (who need the revenue from internet gambling, as PayPal did in the beginning to get started) would be banned from expanding to the US.

By now you're probably saying, all of this is fine and good, but they're owned by eBay now, so why are they hypocrites?

PayPal Europe allows for internet gambling industry deposits. In fact, they are not just entering the industry again after several years of hibernation, but they are going after new clients. This past February PayPal's European division started allowing its non-US based customers to deposit and withdraw funds with Betfair, an online sportsbook. In March they began allowing the same services for Ladbrokes online customers.

Just to make the company stance towards internet gambling thoroughly confusing eBay government relations director Brian Bieron sent Goodlatte a letter asking for "the actual prosecution of Internet gamblers themselves, a policy which could only be enforced by allowing law enforcement officials to essentially begin monitoring everyone's online activity, including tracing visited websites back to IP addresses," according to Fox News.

I can kind of understand why the government went after people doing file sharing. It directly infringed on the artists financial standing. Theory has it that if you download bands music then you won't need to buy the c.d.  I do not understand the benefit of going after internet gamblers. Internet gamblers are not being exploited. They are enjoying their favorite games online as they would enjoy them in a land-based casino. This is a victim-less crime, which could mean that it shouldn’t be considered a crime at all. If people are allowed to play in their local Indian casino then what is the crime being committed by playing online? Is it because the money is leaving the US? If that was it then why isn't the US government interested in regulating the industry instead? I don't have the answers to these questions.

I do know that when I go on eBay my only logical choice for paying is PayPal. Otherwise I have to schlep to the bank and pay hefty fees for a wire transfer.

On the other hand I have other choices when it comes to depositing in internet casinos. Neteller is my favorite alternative deposit method, with FirePay and moneybookers coming in close second.

Currently depositing into, winning, and withdrawing from online casinos is not a crime. Internet gambling industry experts estimate approximately 4 percent of theUS population participates in online gambling. One would think that 12 million people would have an impact on policy, but most likely they will remain silent. The media has painted such an ugly picture of the internet gambler that raising one's voice against the bill labels you as an addict almost immediately, as opposed to the fact that it's perfectly acceptable to enjoy gambling in a land-based casino. It isn't fair or just, but neither is life. I just wish that PayPal would remember where they came from and where their European branch is going to.