ONLINE GAMBLING SET TO FLOURISH IN THE US: GREATER FEDERAL REGULATION NECESSARY

By Missi Davis Nov. 20, 2013
After years of being kept on the backburner, online gambling is gaining momentum in the US, with New Jersey commencing online wagering on November 26, and various states poised to follow suit. Pundits predict that within 10 years, a large percentage of states will offer Internet gambling experiences. Morgan Stanley estimates that US online gambling revenues will amount to around $670 million in 2014, and $9.3 billion in 2020. Since 2001, there has been much confusion regarding the legal status of online gambling in the United States. In 2006, the passing of the Unlawful Internet Gambling Enforcement Act (UIGEA) forbade the use of credit cards and other financial tools with a view to Internet gambling. This law, coupled with the Wire Act (1961), effectively put a stop to illegal online gambling.
In 2011, the status quo was shaken by a groundbreaking ruling by the Department of Justice, which limited the applicability of the Wire Act to sports betting. Since the Internet generally functions at an interstate level, borders are rendered irrelevant, the doors are opened to offshore operators and the enforcement of limits becomes impossible, as various states begin to offer intrastate Internet gambling experiences. Thus far, states have been using geo-location technology to keep gamblers within states, but bilateral agreements could soon see gamblers exchanging bets with players in other states.
It is, perhaps, no wonder that casino tycoon, Sheldon Adelson, is working hard to persuade Congress to ban online gambling; in his view, the latter could hamper the gambling industry’s traditional business model and endanger some of the weakest members of society. According to the Washington Post, Adelson and his team are currently working on a campaign which will highlight the dangers of online gambling to children and those living in poverty. Adelson is not the first to warn against the effects of gambling addiction. As psychguides.com states, “If you become addicted to gambling, your entire life can be impacted. You can face financial ruin, the loss of your home or business because of gambling debts, the ending of a marriage or loss of child custody, or your downward spiral can lead you to additional addictions and psychological ailments”. Adelson’s assertions lead one to wonder whether online wagering will actually increase percentages of those addicted to gambling, or have an appreciable effect on the more vulnerable members of society.
Thus far, Adelson has hired top public relations experts and lobbyists to convince the powers that be in Washington and in various state capitals of his way of thinking. He warns of the serious consequences of opening the floodgates, including the loss of some 400.000 lost jobs in casino-hosting cities across America. Additionally, he says that the widespread use of online gaming sites will make it difficult to ensure “that each wager has been placed in a rational and consensual manner”.
Adelson will be be joined by a coalition of groups including those defending the rights of women, African Americans and Hispanics, who are set to commence a massive campaign in January, 2014. On the other side of the fence are the equally vocal members of the online gambling industry and other casinos like Caesar’s Entertainment and MGM Resorts, who have indicated their support for online gambling.
The new legality of gambling presents a series of legal issues which need to be tackled on a federal level. For one, greater consumer protection needs to be adopted, and equal importance should be given to curtailing abuse by illicit operators. The American Gaming Association has already made a request for federal rules, which will help bring in welcome revenue at a federal level. Congress likewise needs to look at the logic of prohibiting some types of online gambling, such as poker and bingo, while allowing betting on horse races. Without some form of logical determination of permitted activities, the result could be a somewhat arbitrary and haphazard system of rules. Protection is another key area: according to John Kindt, Business Professor at the University of Illinois, “This is not just fun and games. It is a question of national economic security”. Practices which could get out of hand if not tightly regulated include money laundering, the bypassing of age restrictions and profiteering by organized crime or offshore organisations.

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