Online gambling ban won’t stop online gambling – but will stop economic growth

The Sheldon Adelson-backed legislation to ban regulated online gambling — The Restoration of America’s Wire Act (RAWA) — is back in the spotlight thanks to the decision by House Subcommittee on Crime, Terrorism, Homeland Security, and Investigations to hold a hearing for the bill on March 25th. 

While most of the media coverage surrounding RAWA has focused on Adelson and his relationships with politicians like Gov. Chris Christie (R-N.J.) and Sen. Lindsey Graham (R-S.C.), the actual impact RAWA would have if passed into law has been largely overlooked.

That impact: RAWA would risk thousands of jobs and millions in tax revenue, while doing nothing to decrease the demand for or availability of online gambling.

How? To start, RAWA would immediately abolish the legal, state-regulated online gambling markets in New Jersey, Nevada and Delaware, where regulated online casinos directly employ hundreds of people.  For example, New Jersey regulations require customer support, accounting and fraud prevention employees to be located in-state. These are good, local jobs that offer real opportunities to a wide range of potential employees.

Atlantic City has shed some 7,000 jobs in the last year. Why are Adelson and his supporters so intent on pumping that number even higher?

Regulated online gambling also supports thousands of additional jobs via the broader economic ecosystem surrounding the industry. Geolocation providers like Geocomply, payment facilitators like Sightline and identity verification services like CAMS are just three of the hundreds of companies supported by regulated online gambling. Local media outlets profit handsomely from online casino marketing spend, as do marketing affiliates, to say nothing of partners like the New Jersey Devils and Philadelphia 76ers that have struck multi-million dollar deals with regulated online casinos.

Additionally, RAWA would cost states with regulated online gambling industries millions in tax revenue and deny other states that future opportunity. Regulated online gambling generated over $20 million in direct tax revenue for New Jersey, Delaware and Nevada in 2014. States like Illinois, Michigan and Georgia generated millions more in state revenue via online lottery sales. RAWA would cut off all of that revenue with the flick of a pen.

And the revenue benefits for states continue beyond the direct streams. Indirect tax revenue from job creation, players who win at regulated casinos, and material revenue from increased economic activity surrounding online gambling will add up to tens of millions of dollars as the market continues to grow.

Finally — and most troubling — RAWA will not stop online gambling. At all. 

RAWA contains a litany of carve-outs, including online betting on horse racing, wagering on daily fantasy sports and closed-circuit systems for Internet gambling – such as the mobile blackjack and casino games Adelson offers his guests at the Venetian in Las Vegas.

And the political reality is that, to become law, RAWA will likely have to expand that list to include even more carve-outs.

Most importantly, RAWA provides no additional tools, resources or funding for U.S. officials to address the issue of black market online gambling. It will only serve to prop up unregulated markets that have none of the age verification, identity verification, consumer protection or anti-money laundering systems that regulated sites are required to utilize by law.

There’s a reason why an incredibly diverse coalition (of parties that are generally not politically aligned) oppose RAWA, and why RAWA’s supporters are generally limited to those benefiting from Adelson’s financial largesse. It’s bad policy that will eliminate good jobs and cost real revenue while doing nothing to solve the problem it purports to attack.

Grove is editor of OnlinePokerReport.com and consultant for various stakeholders in the regulated online gambling market.