02 Jul Internet Gambling Is the Next Big Thing-Or Is It?
After three states lifted their restrictions against it in 2013, legalized Internet gambling seemed poised to sweep across the American landscape like an out-of-control wildfire. But the online gambling industry’s plans for conquest have run into unexpected roadblocks, and at least for now the anticipated firestorm has been reduced to a smoldering pile of embers.
When New Jersey, Delaware and Nevada made the decision to hop on board the Internet gambling train, fabulous profits for the states’ tax collectors were predicted. In 2014, 12 other states were considering legislation that would remove sanctions against this booming sector of the international economy, and the anticipated success in the aforementioned localities was expected to push these bills over the top. But as we all know, the best laid plans of mice and men often go astray, and the developments of the past several months have left Internet gambling proponents holding an empty cheese tray.
Rolling the Virtual Dice
The trouble started not from the outside, but the inside. Online gambling entrepreneurs were caught off guard when a small but influential faction of casino owners, led by Sheldon Adelson of the Las Vegas Sands, launched a campaign to squelch the rise of legalized online wagering. These mavericks managed to persuade the industry’s primary trade association, the American Gaming Association, to do a 180 and withdraw its support for the decriminalization of Internet gambling. This set off a round of infighting among casino owners who fear unrestrained competition and others who hope to take their business into virtual realms.
The latter group had pinned its hopes on prospective legislation called the Internet Gambling Regulation, Consumer Protection Act of 2013, which had been introduced in the House of Representatives by Congressman Peter King of New York. This bill would have established legal protections based on uniform national standards for online gambling entrepreneurs and investors, clearing away any regulatory obstacles that might interfere with the successful operation of (legal) casino-based online platforms.
But lobbying from the Adelson contingent put the kibosh on all that, at least for the time being. His group claimed online gambling sites and the payment networks that supplied them with funds could function as money laundering havens for terrorists and drug dealers. The Adelson group also asserted that Internet gambling venues would attract huge numbers of underage players and that restricting access to those who could not gamble legally would be next to impossible in the Wild, Wild West of cyberspace.
In the first full year of legalized online gambling in New Jersey, Delaware and Nevada, those monitoring the implementation of the new system found no evidence to back up the hysterical claims of the Adelson junta. But that did not mean the rollout of Internet wagering and gaming was a rousing success; on the contrary, the profits accrued by legally sanctioned online gambling providers fell well short of expectations and projections. In New Jersey, for example, only $111.8 million in revenues from online gambling sources was reported in the first 12 months of operation, a pittance in comparison to the $1 billion in profit that had been projected.
Consumer response to the sudden availability of legalized online gambling options was nowhere near as enthusiastic as expected, which helps explain the great monetary divergence between expectations and reality. But another negative factor was the effect of the 2006 Unlawful Internet Gambling Enforcement Act. This congressional edict gave the Department of Justice the authority to go after offshore gambling ventures using cyberspace to carry out illegal operations inside U.S. borders. Under the auspices of this act, banks and other financial service providers can be found liable if they permit restricted gambling transactions to take place, but would not face penalties if they choose to block financial activity that is actually permitted under state or federal law. For this reason, banks doing business in New Jersey, Delaware and Nevada have been reluctant in many instances to transfer funds connected to online gambling activities, and this pattern of conduct has disrupted the smooth functioning of Internet gambling in these three states.
Future of Online Gambling in the U.S.
While legalized online gambling has not taken off in the United States as expected, this situation is probably only temporary. The states are now working with the federal government to see what can be done to alleviate the fears of banks and regulators so that the 2006 Unlawful Internet Gambling Enforcement Act will no longer be an obstacle preventing legal business transactions from taking place.
At some point, legislation may be passed in Congress that will harmonize the rules of the game, a move that many casino operators are currently seeking. In the meantime, in New Jersey the Internet gambling mega-corporation PokerStars has applied for a license to open an online gaming platform in conjunction with Resorts Casino in Atlantic City. If the Department of Justice approves this application, it could represent a breakthrough in the spread of Internet gambling, regardless of whether further legislation is passed.
One thing is certain: Internet gambling is a multibillion dollar business, and even if the push to legalize it across the United States remains stuck in neutral, millions of Americans will continue to gamble online through illegal offshore venues if that is their only option. Prohibition against gambling in general and online gambling in particular is impossible to enforce, and that is a reality that will not change any time soon.
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