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Would Online Gambling Hurt State Revenue?

31 October 2011 by admin

congressAs the U.S. federal government desperately searches for ways to trim the national deficit, reduce spending, and increase revenue, online gambling has become a hot topic. Last week, the U.S. House of Representatives held a hearing on regulating the industry, presided over by Republican chair Mary Bono Mack, a proponent of regulation.

There are many objections to federal online gambling regulation from many different groups. There are the groups who oppose all gambling on moral grounds. There are the tribal groups who are worried about losing business at their tribal brick and mortar casinos. And now we are starting to hear more opposition from leaders in state governments.

Maryland Governor Martin O’Malley wrote a letter to Congress, saying that in Maryland “federalized poker and casino gambling would put at risk the $19 million annually we generate from our state Lottery – our state’s fourth largest source of revenue – and jeopardize the jobs and survival of lottery retailers, many of which are small businesses.”

It is a very real concern. Just as online versions of other businesses have become tough competition for their brick and mortar counterparts (think of the Amazon.com effect), the same could happen with gambling. If people can play their favorite games online from home, would fewer people make a trip to state casinos? Probably.

That is why it is important for the states to get onboard with the regulation. If online gambling regulation happens at the federal level, states need to be involved to get a piece of the pie. Many states, such as New Jersey and California, are attempting to pass their own laws regulating online gambling. If no federal regulation is passed, the states could only allow gambling to take place within state borders. That limits the size of the casino’s customers, but at least there is no federal encroachment. If the federal government regulates the industry, though, the state-licensed online casinos could accept customers across the entire country (and possibly internationally). The feds would get some of the tax revenue, but the state would as well.

The great challenge facing lawmakers is not whether or not to regulate the online casino industry. Most people believe that will happen eventually, and probably soon. The challenge will be finding out a way to benefit everyone, so the states and tribal casinos don’t suffer.

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