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US outlaws online gambling
 Government
chooses prohibition over regulation, leaving
billions in tax revenue on the table
C. Medford, Red
Herring
July 12, 2006
The United States House of Representatives passed up
a taxable $6-billion pot by choking off the flow of
money to online gambling sites, choosing to deal
what it believes is a death blow to online gambling
in the U.S.
By a vote of 317 to 93, the House, after a number of
unsuccessful attempts in the past, passed
legislation Tuesday that updates the Wire Act, a
1961 statute that made it a felony to use wire
communications facilities to transmit bets. The bill
now moves to the Senate.
The Internet Gambling Prohibition and Enforcement
Act makes the Internet the latest addition to the
list of “wire communications facilities” specified
in the Wire Act.
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The new measure also increases the maximum penalty
for violations of the Wire Act from two to five
years in prison and preserves the rights of states
to regulate intrastate gambling—gambling that occurs
within the borders of a state.
Mike McComb, marketing director of Betmaker.com, a
10-year-old online gaming company based in Costa
Rica, said the U.S. government had a chance to
regulate online gambling and take advantage of the
tax revenue afforded by the $6 billion generated by
online gambling in the U.S.
“This was an opportunity for regulation rather than
prohibition,” said Mr. McComb. “This bill simply
transforms financial institutions into the police.
There was a real opportunity for the government to
protect consumers.”
The law makes allowances for the Department of
Treasury and the Federal Reserve to develop policies
to monitor and prevent the settlement of online
gambling transactions.
In cases where the criminal law overreaches, the
federal government will use its jurisdiction over
financial systems to block the settlement of
gambling transactions.
“In many other countries the government has chosen
to embrace regulation rather than prohibition
because it is more practical,” Mr. McComb said. “It
is a form of recreation that many people enjoy.”
He said the industry has already developed software
that allows for the monitoring and management of
many of the problems addressed by opponents of
online gambling.
“There is software that keeps minors from gaming,
systems to identify and help problem gamblers,” said
Mr. McComb. “I have heard online gaming tied to
money laundering and terrorism, all of which is
untrue. A lot of it is fear-mongering.”
He believes that prohibition is fool’s gold because
it will not stop online gambling enthusiasts whose
demand has built casinos and legal lotteries, and
has made poker a popular TV sport.
A recent study estimates that Internet poker alone,
if regulated and taxed, could net the federal
government $3.3 billion each year (see Online Poker
Rakes in $3.3B).
“That gambling can be enjoyed at these venues, but
not in the comfort of your home, is an inconsistent
message,” said Mr. McComb.
Many in the online gaming community see the new law
as an inconvenience but not a major obstacle to
online gambling as it amounts to the U.S. government
closing the barn door well after the horse has
bolted (see US Tries to Stop Web Betting).
“Most U.S. banks won’t touch online gambling
settlements as it is,” said Christopher Costigan,
president of Gambling911.com, a gambling
entertainment and information web site. “They use
Neteller, a publicly traded clearinghouse that
focuses on online gambling” (see
Feds Bust Net Bets).
Neteller is an online funds transfer service based
in Douglas, Isle of Man. The company claims a user
base of 2.5 million people who posted $7.3 billion
in transactions in 2005. More than 3,400 online
merchants accept payments through Neteller’s system.
Under the new law, the U.S. government will seek
international cooperation in law enforcement efforts
against online gambling, although the law does not
spell out exactly what this means in the context of
legitimate financial institutions located in other
countries.
The legislation gives law enforcement the right to
remove advertisements that promote online gambling
from legal businesses.
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Originally published
on Gambling911.com July 12, 2006 10:26 pm EDT |
