After the Department of Justice issued a memo in late 2011 clarifying that federal law does not prohibit states from regulating online gambling inside of their own borders, three states—Delaware, New Jersey, and Nevada—passed legislation within the next year to do just that.
Many of us believed other states would follow in their wake, but that didn’t happen. While many heatedly discussed the possibility of regulating online betting, the possibility of federal interference—fueled by the efforts of one casino owner and major GOP donor—seemed to put igambling progress on ice.
During the last five years, Pennsylvania legislators have wrangled over the possibility of legalizing online betting. Being close to New Jersey, both geographically and as the state with the second most gambling revenue, the move made financial sense.
But Pennsylvania is also home to the Sands Bethlehem Casino and its owner, Sheldon Adelson, threw his weight and considerable fortune behind stopping the spread of Internet betting. His million-dollar ad campaigns and action taken by his allies in Congress and the Pennsylvania legislature seemed to make the prospect of online gambling in the Keystone State particularly fraught.
Of course, the debate ostensibly focused around the alleged social ills that might come from allowing adults in the state to bet online. But claims that Internet betting is somehow more dangerous or more addicting than real-world gambling, or that it would allow children to gamble, have long been discredited.
CEI and other free-market organizations helped to change public opinion in the state. Furthermore, the successful implementation of legal online gambling in the three other states clearly demonstrated that states could not only profit from online betting, but keep it within their own borders and regulate it in a way that protects vulnerable individuals as well as—if not better than—brick-and-mortar gambling sites.
But like most political issues, it came down to money. While online gambling was projected to raise millions in tax revenue for the state, many lawmakers’ opposition was openly based on their concern for how the new competition for Pennsylvanian gamblers’ dollars would affect the state’s brick-and-mortar casinos.
In the end, it seemed even Adelson’s millions weren’t enough to compete with the long-term revenue online gambling was projected to generate for the state, with some putting the first-year profit around $200 million. A large budget gap and a growing deficit, combined with reports that Adelson was planning to sell his Pennsylvania casino (which presumably meant he would put less pressure on local lawmakers to block online betting expansion), seemed to seal the deal.
The big question now is: Will Pennsylvania jumping into in the online gambling market convince other states to join in? There are reasons to be optimistic on this front.
Now that four states have legalized the activity, efforts by Congress to enact a national prohibition on Internet gambling has been dwindling. With yet another large state relying on revenue from the activity, it’s hard to imagine members of Congress would stomach a measure that not only threatens this revenue, but also represents a huge intrusion on state sovereignty—while they remain deadlocked on more important national issues like tax reform and health care legislation.
As we have been saying for almost a decade now, online gambling has never been prohibited at the federal level. Congress should not move to ban it now. State lawmakers should be free to raise revenue as they see fit and to act on the will of their voters—not forced to legislate based on Congressional opinion.
As with almost any other product or service consumers want, prohibition doesn’t stop it or make it safer; it only forces it into the black market. In the case of online gambling, this would merely push players toward the offshore gambling websites, where they would be unprotected from criminals who are beyond the reach of U.S. authorities. Congress should stick to its proper role and let states deal with their own business.