U.S. gaming operators have been aware for years that the next big thing would be online gambling. In fact, in 2010, global revenue for online gambling was billion; less than 15 percent came from the U.S. This, of course, is because Congress passed legislation in 2006 that was designed to squelch the U.S. online gambling market.
The American Gaming Association has been involved in the online gaming discussion for almost a decade. We have been cautious about legalization in the past because we were uncertain online gaming could be regulated with strong safeguards to protect against illegal activities. We also wanted to be certain that there was robust technology to prevent underage online gambling and that these gambling websites could provide tools to effectively address problem gambling.
Five years ago, our industry called for a national commission to investigate the potential risks and benefits of online poker. Though that study never came to fruition, real-world examples of well-regulated systems now exist.
Western Europe and Canada have years of experience with legalized online gambling, as does the U.S., through its experience regulating online gambling for horse racing and the lottery. These examples demonstrate that regulatory tools have evolved, and that the technology now exists to protect consumers and ensure the integrity of the games.
The AGA began the year with legalization of online poker as a top priority. However, the current makeup of Congress makes the path forward extremely difficult. Republicans, many of whom are not sympathetic to gambling, control the House of Representatives. Add to that the fact that several major national issues—the federal budget, the debt ceiling, etc.—are crowding the legislative docket, and the situation is all the more difficult.
However, with the Department of Justice’s recent indictment of 11 individuals who operate three major online poker companies, there is new interest in addressing the weaknesses of existing U.S. law governing internet gaming.
The AGA supports strong law enforcement oversight and applauds the Justice Department for bringing charges against those companies that have shown no respect for the laws of the U.S.
But, it is clear the indictments have not dissuaded other offshore gaming companies from taking U.S. bets.
Even after the indictments, players will and are finding ways to gamble online. In fact, in the immediate aftermath of online poker’s “Black Friday,” the companies that continued to operate in the U.S. in spite of the law saw a surge in new business. As we speak, there are more than 1,000 real-money websites operated by nearly 300 offshore operators that are still targeting the U.S. market. It is just further proof that offshore operators will continue to cater to demand and develop new techniques to circumvent the barriers we put in place.
The recent indictments and the reaction to them by U.S. online gamblers and offshore gambling websites prove that law enforcement alone will not work. That’s why we need to use this moment to create a safe, regulated online gambling experience. But we still face a major challenge, and it is vital that the industry speak with one voice to legitimize our call to action on this issue.
To help educate stakeholders on this issue, the AGA recently published a white paper, Internet Gambling: Five Years Later, that outlines the current state of online gambling and establishes a case for licensing and regulation in the U.S. The white paper is one of many activities planned as we work to build a coalition of support. We will soon be calling on our allies in the industry and beyond to join with us and lend their voices to this cause.
It is time the government authorizes states to license and regulate online poker. We know without a doubt that U.S.-licensed gaming companies, following proven and rigorous gaming regulations, will provide safe, honest and responsible sites for American men and women who want to play online poker. It will also protect Americans from unscrupulous operators and bring the jobs and revenues associated with this billion-dollar industry back to the U.S.
The creation of the infrastructure to support this industry will add an estimated 10,000 high-tech jobs—jobs that our country desperately needs right now. Once a well-designed system is in place, legal, regulated online poker can generate $2 billion in tax revenue every year. That is money that will go back into American communities and help Americans everywhere.
In conclusion, the AGA believes the federal government can and should set standards to ensure that only the states where a safe regulatory structure exists will be able to issue a license and regulate online poker. Thanks to new technologies, the industry can provide tools that allow customers with gambling problems to limit their gambling or self-exclude themselves entirely from online gambling. Age-verification technology can prevent minors from gambling online. Through the use of IP tracking technology, we can exclude bets from states and jurisdictions where online gambling is illegal. And we can prevent money laundering with careful screening and auditing of online transactions.
By passing legislation that removes the current ambiguity of the Unlawful Internet Gaming Enforcement Act and provides a strong regulatory framework that preserves states’ rights to determine what gambling options are available to their residents, Congress can eliminate the problems presented by inconsistent regulatory and legal practices.
The licensing and regulation of online poker —coupled with strong enforcement of the law—is the only way to capture the jobs and public revenues it generates, to closely control any social risks it might post and to stop the cycle of illegal activity in the U.S. once and for all.