Regulate, don’t ban, online gambling

Online gaming is a pressing issue that affects millions of American consumers, major businesses and the U.S. economy. With so much at stake, I recently testified before the House Committee on Energy and Commerce (Subcommittee on Commerce, Manufacturing, and Trade) to deliver a clear message: the attempted prohibition of online gaming simply does not—and will not—work.

Under the Unlawful Internet Gambling Enforcement Act of 2006 and the Wire Act, the federal government has tried to crack down on operators running illegal offshore gambling sites. This attempted prohibition has failed by every measure.  

{mosads}Last year, before a single state legalized online gaming, Americans spent nearly $3 billion—or nearly 10 percent of the entire worldwide online gaming market—on illegal, unregulated offshore gaming sites.

In other words, prohibition has succeeded only in creating a thriving black market that places consumers at risk. Moreover, the failed attempts to squeeze the Internet back into the bottle from which it came prevent law-abiding U.S. companies from innovating and prevent states and localities from creating jobs and reaping much-needed tax revenue.

In New Jersey—one of three states that have legalized online gaming in the absence of federal action—50,000 people signed up for online gaming sites in the first week it was available. Furthermore, estimates show that 100 million individuals will gamble on their mobile devices by 2018.

The writing is on the wall: the encroachment of the Internet cannot be stopped and neither can consumer demand. Anyone who doesn’t believe that online gaming is here to stay should ask Blockbuster if streaming movies online was merely a fad.

The simple question that policymakers must answer is: Are we going to regulate online gaming or pretend that we can wish the Internet away?

Fortunately, there is a solution. Where prohibition has failed, legalization, oversight and a strong regulatory regime can accomplish the following:

• Protect consumers from unscrupulous operators and fraudulent games;
• Shrink the unregulated black market and provide for the safe, controlled, pragmatic development of the regulated transparent market; and
• Provide law enforcement agencies with a willing partner for cracking down on underage gambling, criminal activity and illegal operators.

Congress has the chance to enact strong regulatory standards that provide a uniform set of protections for consumers while respecting states’ rights to choose what is in their best interests. The technology exists now to allow regulated online gaming that can preserve the integrity of the games to protect consumers, prevent underage play, promote responsible gaming, and provide law enforcement officials the tools they need to identify fraudulent and criminal activity.

Countries and jurisdictions such as the United Kingdom, France, Germany, Italy, Denmark, Spain, Belgium, Australia, Switzerland, Sweden, Hong Kong, Japan and Canada—as well as Delaware, New Jersey and Nevada—are already using these technologies to effectively protect online gamers. If and when we choose to join them, we have the potential to generate more than $26 billion in tax revenue while bringing more than 22,000 jobs to the United States.

Responsibly extending gaming into the online world is a natural progression. Millions of Americans are already gambling online illegally and will continue to do so—no matter how many times governments try to prohibit it.

Instead of benefitting shady offshore operators through pretend prohibition, American consumers deserve an online gaming market that is safe and well-regulated.

Freeman is president and CEO of the American Gaming Association.