There is considerable misunderstanding around whether online gambling is illegal in the US. The legislation in question is the Unlawful Internet Gambling Enforcement Act 2006 which states clearly prohibits US based companies from offering online gambling services. The exact wording is:
“prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law.”
Unlawful Internet Gambling Enforcement Act 2006
Depending on established laws the level of legality does vary from state to state. In some states it is clearly illegal and in others, such as Nevada, it is legal. Players typically escape prosecution but online gambling being technically illegal the effect on the market is huge. Will online casinos be made legal in the US any time soon?
The Arguments For
Worldwide revenues from online casinos are currently $38bn and growing fast. With companies like reel bonanza showcasing new and innovative options for players in legal European based countries, consumer demand has never been higher. There are companies which have the funds and infrastructure to build out these casinos fast and the demand is increasing all the time. With funds comes pressure and lobbying and political bargaining. If citizens want to gamble online then lawmakers will certainly feel this pressure.
Currently people gamble online but are forced to do so through illegal operators. The need to use illegal means generates opportunity for criminals, and then States are left to deal with all the issues this presents. This also puts a citizen who wants to gamble in a difficult situation: they may feel as though the law is punitive and they want to use their money in a way they see fit doing something that in many parts of the world is completely legal. But doing so may lead everyday people to take an illegal path.
Gambling can generate all important tourist dollars and can provide a boost to the economy, creating a multiplier effect. Revenues don’t just come from tourism but direct taxes on gambling as well as employment and business taxes. These dollars are very hard for States to resist, particularly in a world which is as uncertain as ever.
The Arguments Against
Around 2% of US adults have a gambling disorder and compulsive gambling costs the government $6bn per year. The average debt for a male gambling addict is between $55,000 and $90,000 and many people have no realistic way of paying those debts. This can lead to a range of problems for the government like people turning to crime to help them; alcoholism and drug abuse is rife in people with gambling debts.
So what is going to happen?
It looks like it’s very much a case of deciding whether cash will be king. States that legalise gambling will see an immediate cash boost. Sure, this could be offset against societal problems which are expensive down the line, but that is hard to quantify and when the money is on the table it will be tempting to cash in. Some State governors have also suggested that people should be left alone to make their own decisions, but this philosophical point is secondary to the point about cold hard cash.
Michigan has been through a legislative process recently which is set to legalise gambling in the State. The process was thorough and built a detailed framework around the legalisation of gambling. This has implications that go much further than Michigan: one of the main problems with legalising gambling is that no legal framework was in place which was a barrier to States wanting to take on the process. Michigan has shown that it can be done but also that terms can be built in a way that are favourable to the State. Michigan has levied a 10% tax on gambling and companies will accept this because the market opportunity will be so big.
Expect the house of cards to fall over the next few years as States use the Michigan legislation to legalise gambling.