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Iowa Not Rushing to Mobile Gambling

9 February 2011 by admin

iowa-lotteryThe U.S. state of Iowa is looking for additional sources of revenue to close next year’s predicted budget deficit. That is why Governor Branstad, unwisely, wants to raise the tax rate on state casinos from 22% to 36%. The next logical step, you might think, would be to follow the lead of New Jersey, Florida and California and push for intrastate online gambling.

That’s not going to happen, though – at least not in the immediate future. It seems that allowing online gambling makes far too much sense for the state of Iowa. Raising taxes on existing businesses to make more money is great, according to the governor, but regulating and taxing an industry that right now exists without any government oversight or taxation – well, apparently that’s not on the agenda.

Speaking in front of a state panel on Tuesday, Iowa Lottery Chief Terry Rich said that he believes the state is losing out on $1 billion per year in tax revenue from unregulated online gambling and sports betting. Still, he said that his has no plans to move ahead with any online gambling or mobile gambling plans for the lottery. In fact, he joked that when he hears the words video gambling, “I run.”

His squeamishness regarding electronic gambling technology is due to the TouchPlay debacle. The slot-like TouchPlay machines were a major source of controversy for Iowa. In 2004, the Iowa Lottery encouraged private companies to purchase the machines so they could be taxed and generate revenue for the state. The businesses complied and more than 6,700 machines were installed in around 3,200 restaurants, bars, convenience stores and supermarkets. Some Iowa residents protested, not liking the overwhelming presence of the machines (it seems that most Iowa residents are fine with gambling as long as it’s confined to the casinos and pari-mutuels). In response to the public backlash, the legislature banned the TouchPlay games in 2006.

As you can imagine, the business owners who operated TouchPlay games weren’t happy. Many filed lawsuits against the state for an unconstitutional confiscation of their private property, also citing financial damage by the loss of revenue-generating machines. The state eventually settled the lawsuits for a total of $18.4 million.

With the TouchPlay disaster still fresh in his mind, Rich has no plans to bring the Iowa Lottery online. He also doubts that the legislature would approve of such a plan, saying that “politically, it would be crazy.” State Representative Chris Hagenow (R) agrees, saying that there isn’t any “groundswell of support” for online and mobile gambling and “until we hear that, I think it’s a dead issue, frankly.” Senate President Jack Kibbie (D) agrees, saying that it will take some time for lawmakers to be comfortable with trying another new gambling technology.

Rich admitted that not moving forward with online and mobile gambling plans is costing the state money, though. He also worries about Iowa, which has one of the best gambling industries in the country, falling behind the rest of the nation. He admitted that there are drawbacks to being “an offline state in an online world.”

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