The Ramifications Of A Federal Online Gambling Ban Are Nothing Short Of Devastating

April 19, 2017 916 Reads
federal online gambling ban disaster

Rumors began swirling on Monday that newly appointed Attorney General Jeff Sessions is mulling over a federal ban on online gambling.

In the immediate, the rollback of legal US online gambling would result in the shutdown of a burgeoning, yet still underutilized industry. At this juncture, it still has an uncapped potential.

The long-term ramifications of a nationwide ban are far more ominous, and speak volumes about the administration of President Donald Trump.

A federal ban on online gambling is a job destroyer

The NJ online gambling industry employs some 3,300 workers. More people work in regulated markets in Nevada and Delaware. That’s not to mention the four states where online lottery sales are legal.

Most, if not all, of these positions would go away with a federal ban as a result.

And while three or four thousand jobs may seem like a pittance in a nation that created 11.3 million new jobs since 2009, we’re only talking about existing positions, not prospective ones that would be created by the industry.

Pennsylvania, New York, Michigan, and Massachusetts are all considering passing legislation that would legalize online gambling. Collectively, these states have a population 5.5 times greater than New Jersey.

If regulated online gambling is as effective a job creator in these states as it is in New Jersey, we’re talking about an additional 18,000 jobs. And that’s discounting any other states that would enter the mix down the line.

It also discounts jobs that exist around the industry. For example, regulated US online gambling has resulted in jobs in the marketing and media fields.

Bottom line: If the Restoration of America’s Wire Act (RAWA) or a like-minded bill passes into law, it would fly in the face of one the key rallying points of Trump’s presidency: job creation.

Regulated online gambling is a reliable (and growing) revenue stream

Online gambling in New Jersey has generated over $536 million since its inception in November 2013. This year, it’s on target to surpass $240 million in gross gaming revenue. That will put it well over $100 million paid in tax revenue.

New Jersey’s industry continues to grow unabated. It also continues to defy conventional logic that a capped market can only reach so high. Is $300 million, or even $400 million, in annual revenue possible somewhere down the line? At present, there are no indications that point toward the “no” column.

Online gambling has also played a contributing role in the revitalization of Atlantic City. Total gaming revenue was up in 2016 for the first time in nearly a decade, and investors are beginning to take note.

Going further, regulated online gambling in Pennsylvania is projected to generate nearly $1.5 billion over the course of its first five years (if legalized). That would result in an estimated $300 million in tax revenue. And that doesn’t include the more than $125 million the state stands to take in from online gambling licensing fees.

In the absence of gaming reform, Pennsylvania will most likely resort to tax hikes to fulfill its budgetary shortfall. In the state’s most recent proposal, $250 million is currently earmarked for new gaming revenue over the next one and a half years.

Without online gambling, it’s the average resident, and by extension, state economies, that will suffer.

Illegal US online gambling operators would remain unchecked

Without regulation, the proliferation of unregulated online gambling sites operating in the US would continue. For every dollar lost on a unregulated site, that’s a dollar filtered out of the US economy.

Regulation has proven a severe threat to gambling sites operating illegally in the US. Big-name offshore sites have pulled out of the New Jersey market. New Jersey regulators have taken a hard line with affiliates that promote offshore sites.

In short, the more states that jump on the regulation train, the less influence sites that operate unfettered would have.

Just how influential are offshore gambling sites?

  • According to Poker Industry Pro via PokerScout, US offshore online poker sites boast an average of 2,800 concurrent cash game players — ten times that of regulated NJ sites.
  • The American Gaming Association estimated that Americans wagered $4.7 billion, most of it illegally, on Super Bowl LI.
  • Countless millions more move through unregulated online casino sites.

Access to unregulated gambling sites is both easy and unfiltered. And most casual players aren’t aware of the difference between regulated vs. unregulated gambling. Most Google searches lead them to believe that online gambling is perfectly legal throughout the United States.

A federal ban on online gambling would go unnoticed by most. They will continue to believe what the Internet was telling them: that gambling on unregulated site ‘X’ is perfectly OK.

The good regulated online gambling does

But in reality, it’s not OK, because regulation affords players a number of safeguards not present on unregulated sites, including:

  • Identity protection — All new accounts must be verified via the user’s social security numbers. Players can opt-in to strong authentication, providing a layer of account protection beyond the usual login/password.
  • Fund protection — Regulated NJ online gambling sites must hold player deposits in segregated accounts, and must have enough cash on hand to cover all player balances.
  • Responsible gaming protocols — By law, US regulated sites must provide comprehensive responsible gaming tools so that gamblers can customize their gambling habits.

Online gambling ban sets an ugly precedent

By banning online gambling on a federal level, the current administration would be sending a message that it’s fine to impose federal regulations on issues that should be left up to individual states.

This further centralization of power in Washington will have far-reaching ramifications for a number of issues that are currently left in the hands of state legislators.

It would also undermine the good efforts of the hard-working people that have led to the overwhelming success of regulated US online gambling.

In the industry’s stead would be an unpopular (and likely unsustainable) law. And it would be designed primarily to appease one man: casino mogul and billionaire Sheldon Adelson.

Federal regulation, job loss and crony capitalism is not the message the Trump administration preached during the 2016 presidential campaign. We shouldn’t stand for actions that go against those tenets.

Editorial credit: Joseph Sohm / Shutterstock.com