You are here

New Rules for Online Gambling Take Force

News Releases

Title

New Rules for Online Gambling Take Force

Gamblers Will Work around, But at Greater Risk

New restrictions on Internet gambling – which financial companies such as banks and credit unions must officially abide by as of today – will not accomplish their stated goals of reducing Internet gambling and the flow of U.S. dollars overseas, according to analysts at the Competitive Enterprise Institute, a Washington, D.C. think tank.

Washington, D.C., June 1, 2010—New restrictions on Internet gambling – which financial companies such as banks and credit unions must officially abide by as of today – will not accomplish their stated goals of reducing Internet gambling and the flow of U.S. dollars overseas, according to analysts at the Competitive Enterprise Institute, a Washington, D.C. think tank.

The current law, the Unlawful Internet Gambling Enforcement Act (UIGEA), created an onerous and confusing environment that makes processing funds related to any Internet gambling activity riskier and more costly for banks. Despite several lively congressional hearings on bills that would have reformed the law, and after an emergency enforcement delay of six months, banks and other credit processing companies must now comply with the regulations.

During those six months both the House Financial Services Committee and the House Ways and Means Committee held hearings on bills introduced separately by Reps. Barney Frank (D-MA) and Jim McDermott (D-WA). Both proposals would have overturned UIGEA and paved the way for licensed Internet gambling, potentially resulting in $57 billion in tax revenue and the creation of 32,000 new jobs over five years.

“Most Internet gamblers will find a way to continue betting online despite the law,” said CEI policy analyst Michelle Minton. “The difference now is that consumers will be denied access to legitimate credit processing companies and be forced to look beyond the banks they know and trust, ending up at a greater risk for fraud and identity theft.”

While the regulations going into effect are federal, they do not apply in states that officially declare Internet gambling to be a legal activity. Last week, California became the first state to introduce a measure that would legalize Internet poker. The legislation, known as SB 1485, was introduced late last week by state Sen. Rod Wright (D-Inglewood).  Wright’s proposal would allow the state Department of Justice to award three licenses for California operators to run for five years.

“I applaud California for taking steps to circumvent UIGEA, which represents a massive over-stepping of authority on the part of the federal government,” said Minton.

While states taking action to opt out of federal restrictions is a welcome trend, observers worry about the necessity of having to decriminalize activities that should have never been criminal in the first place.

“Internet gambling should be legal not because the state government declares it is so or because of the potential revenue it could generate; it should be legal because the government shouldn’t have the authority to prevent citizens from engaging in voluntary behavior that doesn’t violate the rights of another citizen,” said Minton.

CEI is a non-profit, non-partisan public interest group that studies the intersection of regulation, risk, and markets.