Law Making: Regulating online gambling
In an age where just about everything is available on the World Wide Web, those companies - and in some cases, entire vertical industries - that are lagging behind on the virtual front, are now faced with the prospect of either going virtual or continuing to lose out on an increasing amount of revenue being tapped by internet businesses. Nowhere is this more evident than in the online gambling industry, where many an websites are now giving land-based casino giants like Caesers a run for their money. It isn’t that land-based casinos don’t know how to compete. In many cases, they are not online and simply can’t compete.
The element of time certainly hasn’t been a factor in keeping land-based casinos from launching their wares on the internet. Rather, it’s been the undeniable force of bureaucracy and politics that has hampered the liberalization of online gambling. Ironically, it’s the world’s largest global online gambling revenue generator - the United States - that happens to be lagging behind the most on the regulatory front - specifically, legislation to effectively govern internet wagering activities.
The government’s of certain countries, like that of Great Britain and elsewhere in Europe, however, have made tremendous progress in liberalizing many types of internet wagering, including sports and exchange betting, poker, bingo, lottery, skill games (Backgammon, Gin Rummy, etc.) and, of course, online casino games. Even the original “form” of internet wagering itself, has evolved beyond desktop gaming to now include mobile phone wagering, television broadcast and live dealer online casinos, thanks to a successful marriage between forward thinking lawmakers and technological innovations.
One reason why the US-facing online gambling industry has a long way to go in being liberalized is because it is currently moving in the complete opposite direction thanks to the Unlawful Internet Gambling Enforcement Act (UIGEA). A quasi-ban against online gambling, the UIGEA orohibits the transfer of funds from financial entities to illegal internet gambling sites, such as online casinos, poker rooms and sportsbooks. The lone exceptions are horseracing, fantasy sports and online lotteries, which needless to say, have been carved out of the UIGEA in order for certain US land-based gambling monopolies to profit in these particular sectors.
But what about land-based casino giants like Harrah’s? Shouldn’t they have a stake at the internet as well? Obviously, the UIGEA isn’t a matter of keeping organized crime, addiction and underage gamblers off the internet. As proven in the United Kingdom, where the “British Gambling Prevalence Survey 2007″ revealed only 0.6% of the adult population had a “problem gambling” issue - the same percentage in 1999, which needless to say, was well before online gambling was legalized in Great Britain, it goes to show that proper legislation is effective at regulating internet betting.
While Harrah’s has not always been an adamant supporter of legalizing online gambling in the United States, they certainly are now. In 2009, $3.65 million was spent lobbying the U.S. government specifically over online gambling (supporters and opponents), which was a 50% increase from 2008. Harrah’s Entertainment, along with UC Group Limited and the Interactive Gaming Council, were the primary forces behind lobbying in support of online gambling - accounting for $2.04 million, or 56% of the total lobbying costs.
It would seem these lobbying efforts have paid off, as there are currently two major bills doing the rounds in Congress that seek to overturn the UIGEA and impart regulatory legislation on both the federal and State level. One of these bills - the Internet Gambling Regulation Consumer Protection and Enforcement Act (HR 2667), aka IGREA - was introduced by House Financial Services Committee Chairman, Representative Barney Frank, and currently has 66 co-sponsors.
Giving each State the power to decide over regulation, the IGREA also contains a companion bill that would give Native American tribes and casino-friendly State’s a stake at taking part in the regulatory process. A good example of the latter is the Kahnawake Gaming Commission, which was one of of the first regulatory bodies to license online casino operators in the late 90’s. Washington State Democrat Jim McDermott’s companion bill, the Internet Gambling Regulation and Tax Enforcement Act, proposes a taxation policy that is estimated to generate $30 billion for State coffers and $41 billion for the federal government in ten years time (analysis based on the provisions of a federal license). It would provide revenue incentive for State’s and tribes (6% tax on all gambling deposits that flow through them), two revenue set-asides giving 25% of generated funds to foster care for children and 0.5% for the historic preservation of the arts, and overall tax measures that would encourage otherwise “illegal” online casino operators to obtain licensing credentials.
It’s this element of taxation revenue that has many to believe, including premiere investment bank, Goldman Sachs, that the legalization of online gambling is on the horizon (See the report on CNN Money’s Fortune Magazine: Online Gambling for the Facebook Generation). With Congress now facing a historic budget deficit and many U.S. States on the verge of bankruptcy, the future of the UIGEA is looking increasingly glum. Even with the UIGEA in effect, which does not define “unlawful internet gambling” to begin with, U.S. citizens continue to spend billions of dollars in online wagers every year. Whether the successful integration of intrastate online poker networks in California or Florida or the legalization of online sports betting in New Jersey and Missouri, there is no denying that a strong wave to liberalize online gambling is on the move.
