GUEST BLOG: This is a guest blog from Washington, DC by Freddy Gray of The American Conservative magazine.
The legalization of Internet gambling in the United States looks an increasingly sure bet. U.S. Congress is currently considering several bills designed to remove Internet betting restrictions. Earlier this year, Barney Frank, the influential chairman of the House Financial Services Committee, introduced the Internet Gambling and Regulation Act to repeal—or at least relax—the controversial 2005 Unlawful Internet Gambling Act (UIGA), which prohibited web betting companies from operating inside the country. If Frank’s bid fails, online gamblers can turn to a bill introduced by Senator Robert Menendez on August 6, which focuses more narrowly on legalizing Internet poker and other “games of skill.”
One way or the other, a change in the law seems imminent. In July, Goldman Sachs advised investors to expect trade limitations on Internet Gambling to be overturned, prompting a surge in the share price of certain web-companies. And in January, the British online betting exchange paid $50 million for the Television Games Network, America’s leading interactive racing channel, an indication that the company is gearing up for full entry into the U.S. market.
It is widely accepted that U.S. gambling laws as they stand are confusing. The UIGA never strictly banned online betting, but prohibited financial organizations or individuals from knowingly accepting payments made in connection with Internet gambling. More reputable websites complied by abandoning U.S. operations, but plenty of other companies—based in places like Antigua—had fewer scruples.
Online wagering on real sports, rather than games like poker, is more clearly unlawful. In 2002, the Fifth Circuit Court of Appeals ruled that such activity fell foul of the 1961 Federal Wire Act. Again, however, the pervasive nature of the Internet renders the law all but futile. Like drinkers in the prohibition America of the 1930s, online gamblers tend to find ways of indulging their habit.
Still, legitimate Internet betting operators deeply resent the passing of the UIGA three years ago. The law was attached to the bigger and apparently unrelated Security and Accountability for Every Port (SAFE) Act. Former Majority leader Bill Frist inserted the gambling clauses at the last minute before Congress adjourned for the 2006 elections. The SAFE Act itself was a late “must pass” bill, designed to protect America’s ports from terrorist infiltration. Any politician who objected risked being branded soft on national security—not a label that any politician wants.
More controversially, some the politicians responsible for the Internet betting ban—campaigning under the moral banner of the Republican Party’s “American Values Agenda”—were reported to have been paid off by traditional, Las Vegas-based casino groups and sports agencies that felt threatened by the rise of the Internet.
But if online gambling companies felt hard done by in 2005, today they are wiser—and much richer. Internet betting remains a booming trade. A recent PricewaterhouseCoopers survey estimated that, in 2011 alone, the industry’s worldwide revenue would reach $144 billion.
With such riches floating around the virtual ether, it is hardly surprising that the U.S. government is taking notice. Frank’s bill seeks to impose a 2 percent “licensing fee” for all gambling operators in America, a tax that experts reckon will bring in $51 billion in ten years. With federal and state politicians desperate to plug the ever-expanding gulf of recessionary public debt, the impetus to regulate--- and thus levy ---online betting is greater than ever.
by Freddy Gray of The American Conservative
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There is a more in depth exploration of this story by Freddy in the latest issue of The American Conservative, and you can also read his posts at the magazine's blog here.
