Online Gambling: A Lost Cause? (7 of 8)

An area to consider in relation to gambling is the economic impact it produces. Gambling of some sort is legal in all states, whether it’s the state lottery, bingo, or betting in tribal lands. Since the emergence of online gambling, hundreds of websites have been created world wide, including some which have been the center of attention after the Department of Justice seized their domain names. Proponents of online gambling have discussed the possibility of regulating and taxing it instead of making it illegal.

Opponents to online gambling argue legalization would be disastrous.[1]Such opponents consist of conservative groups like the Christian group Focus on the Family.[2] By 2010, Americans were gambling $16 billion a year on online poker alone and an estimated 1.8 million Americans were playing it.[3] According to the Congressional Committee on Taxation, legal online gambling could generate $42 billion in tax revenue over the course of 10 years.[4]With all the budget problems Congress seems to be having and the wars it has to pay, it’s surprising they would ignore such a huge revenue producer. Ironic enough, online gambling is legal in our nation’s capital where officials hope it will bring in about $13 million a year in tax revenue.

A big point of contention with the UIGEA and poker players is whether poker is a game of skill or chance. Proponents argue no matter how skilled a poker player is, at the end of the day they cannot tell you which card will flip next. I think this really undermines the calculations many skilled players undertake. There’s a reason why you see the same familiar faces in the final tables in the World Series of Poker. Professional poker players can predict what cards players have, which cards will be turned next, and the probability of players having stronger hands fairly accurately.

If online poker were to be legalized, it could produce a lot more in revenue than live poker and provide people another source of income. The UIGEA refers to gambling as the reason for collection problems on debts in it’s legislative findings and others argue gambling can become addicting. Would the amount of revenue a government could make in taxes justify its legalization? I had the chance to speak with someone who played poker online prior to Black Friday. He had software that recorded all the hands he’s played and allowed him to analyze many aspects of the game afterwards. He was playing 1,200 hands per hour which in person he’d only be able to play about 30 hands per hour. It would take 40 hours in person to see what he saw online in 1 hour. In 10 months he saw over 300,000 hands online. When I asked him what he thought about legalization with heavy taxes, he said he would rather pay a premium to play online than play in person.

Who and how taxes may be applied may be a bit complicated. Gambling is a matter of state law, each state determining whether individuals can gamble within their border. Internet gambling crosses state and international lines. Should the state and federal government tax individuals? Some factors to consider with the legalization of gambling is the impact on existing legal gambling. Players may not go to casinos as often which means they wouldn’t spend money on their travels(airplane fares, gas, hotel, etc) and casinos would see a decrease in revenue. In a study of economic impacts of commercial casinos and online gambling, traditional casinos were found to help local communities and be very important. It provides tourism revenue, more job opportunities, and tax revenue for states to then pour into schools and other projects that online gambling did not provide.[5] This study grouped justifications for prohibiting online gambling into sovereignty protection (each state creates its own policies), consumer protection (consumers will be subject to issues such as dispute resolution that may not be as favorable online), and economic protection (jurisdictions with traditional casinos offer economic benefits to the community in the form of jobs and taxes that online gambling don’t provide).

Another study found online gambling to be hurtful to the U.S. economy in it’s current state. This study concluded online gambling deprives states  of revenue needed to function and hurts consumers in the form of higher fees and interest rates as a result of uncollectable gambling debts.[6]It also argued it’s harmful beyond the economical aspect by creating addictive behavior and causing family disintegration. [7] Although online gambling right now may be hurtful because it is not regulated, I would say these findings may be irrelevant if online gambling were to be legalized. The harmful effects would be controlled in the form of government regulation and taxes. Local communities would still receive benefits from extra money their governments would have at their disposal to invest. Online gambling is a reality lawmakers should accept and regulate instead of ignoring and missing out on a revenue gold mine.

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~ by davidghassan on November 29, 2011.

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