House Passes Bill That Could Ban Internet Gambling

As expected, lawmakers in the U.S. House of Representatives passed a bill Tuesday that would clear the way for a crackdown on Internet gambling.

The long-term prospects for the legislation is less clear, however, and the legislation is already being assailed as an election-year ploy by Congressional Republicans seeking to appeal to their conservative constituents.

Activity Has Always Been Illegal

The bill, known as HR 4411 and the Internet Gambling Prohibition and Enforcement Act, merges legislation that has been making the rounds on Capitol Hill for some time. The bill is sponsored by Bob Goodlatte of Virginia and Jim Leach of Iowa, both Republicans.

“The Internet has transformed the way we communicate, how we work, the things we buy and the way we buy them,” Goodllatte said. “However, some unfortunate challenges, such as illegal gambling on the Internet, have accompanied this explosive growth and it is time to bring an end to these illegal activities.”

Online gambling has always been considered illegal in the U.S., but that hasn’t stopped the industry from growing significantly in the U.S. and globally, where it is believed to generate some US$12 billion in economic activity annually.

Many U.S. gamblers are able to access off-shore sites, many of which set up shop in the Carribbean or elsewhere. Concerns have long been raised that such sites are not equipped to effectively limit gambling by minors and that those with gambling addictions are vulnerable because of the always-open nature of the virtual casinos and sports betting parlors.

“This is a scourge on our society,” Goodlatte added. “It causes innumerable problems.” Debate on the bill began Tuesday morning.

The bill would ban various forms of online gambling, including betting on sporting events and online games involving gambling, such as Internet poker. Horse racing is not banned, as it is controlled under existing legislation, and lotteries, a key source of revenue for many states, have also been exempted.

Regulate, Don’t Terminate

The debate over how to handle Internet gambling has raged nearly as long as the Internet has been in existence, with no clear consensus reached on the best approach. While some support a ban and accompanying enforcement, others say the industry should be regulated, which could mean a windfall of taxes for governments.

A study released Tuesday by the Poker Players Alliance argued that $3 billion in federal and state revenues could be raised if Internet poker alone was regulated and taxed.

“This study validates that the benefits of regulating online poker in the U.S. far exceed the value of prohibiting the activity,” said Michael Bolcerek, president of the alliance. “Internet poker is an incredibly popular pastime for millions of Americans. Keeping Americans away from this game is not only unfair, but as this study shows, would be costly, denying state and federal coffers an important source of revenues.”

Bolcerek said there is already bi-partisan support for legislation that would call for a study of ways to regulate online gambling within the U.S. and accused Republican lawmakers of playing politics with an important issue. He noted that just last year, the UK adopted laws to regulate and tax Internet gambling.

The frenzy of activity to get the bill to a vote in the House may go for naught, however, as there is less support for such a sweeping measure in the Senate, and time is running out on the current legislative session as the fall and election season approaches.

Whose Problem Is It?

Some have criticized anti-gambling legislation efforts for placing the burden on others to identify and curtail the activity, and the bills have been modified to answer those criticisms.

For instance, in earlier versions of gambling legislation, banks and credit card companies were prohibited from processing payments to gambling sites, meaning they were required to screen transactions for such activity, and Internet service providers were ordered to block access to gambling sites from U.S. connections. Both of those provisions have been watered down in the most recent legislation.

University of Illinois economics professor John Kindt said the gambling industry considers online gaming a killer application for the Web because it enables gambling to be brought into “every living room, work station, and school desk.”

Kindt noted that the last in-depth study of national gambling’s impact — which looked at pathological gambling and related problems — suggested that Internet gambling should continue to be prohibited. It also recommended re-criminalizing forms of gambling that cause the most problems, such as easily accessible slot machines.