The President ElectTom Lippiett wonders if we will now see a new approach to the regulation of online gambling under Barack Obama.
The election of Barack Obama and a Democrat majority has been cause for a degree of optimism in the online gambling sector. Certainly, online gambling will not categorically remain prohibited, as it would have had the election result been different: the Republican party’s manifesto included a pledge to maintain a prohibition on online gambling. However, the absence of an expressed desire to uphold the ban is a world away from a proactive desire to fully legalise the sector.
While, given the proliferation of internet gambling and increasing mainstream acceptance of the activity, regulation may be something of a long-term inevitability, it remains to be seen whether broad legalisation of the online gambling sector is a short, or even medium-term goal of the new Democrat government.
On the one hand, the Obama led government is looking to ‘unify’ the US in turbulent economic times. With this in mind, controversial domestic policy (gambling invariably polarises opinion, and never more so than in a country with such influential opponents of the sector) is not necessarily at the top of the agenda. In an economic downturn, however, the benefit of a fully-taxed online gambling industry is clearly vast. At present, billions of untaxed dollars leave the US annually for operators licensed in Europe and the Caribbean, for example (with tax revenues, if any, solely being paid to the local licensing government).
In short, the US ‘ban’ on online gambling is not preventing US citizens from playing online, but it certainly prevents the US authorities from receiving the tax benefit of such activity. In times of economic hardship, the attraction of such revenues may be hard to resist. There may also be pressure from the land-based casino operators, whose share prices have dropped dramatically in the last few months, to provide them with a new business revenue stream.
Inevitably, the economic downturn in the US has also led to cuts in central funding for state governments, a move which will has led to states reviewing options for cash generation, with online gambling an obvious possibility. Widespread state demand for the legalisation of online gambling is certain to have an effect on policy makers. Further, the US Congress has reportedly adopted a hard-line stance to expensive new legislative initiatives by politicians, by requiring them to demonstrate their financial viability, in many cases through spending cuts or tax generation in other areas. Pro-online gambling is certain to pass any ‘cost-effectiveness’ threshold and while it therefore has a financial attraction of its own, it may gain further support if it enables more popular policy to be effected elsewhere.
In terms of clear-cut indicators, steps to legalise online gambling in the US have been driven by Democrat politicians. Obama is a long-term ally of Barney Frank, the Democrat politician who recently introduced the ongoing HR 2046, a bill to establish the federal regulation of online gambling. Frank is a particularly vocal politician, and the fact that he is now part of a Democrat majority, with a direct line to the President, is only likely to augment the chances of passage for HR 2046, or variations on this bill. However, whether a wholesale federal overhaul of online gambling will be the preferred method of regulation for the US remains to be seen.
Political manoeuvring and national sensitivities aside, perhaps one of the biggest ongoing barriers to acceptance of the online sector is its infancy and lack of any widespread operation in the US. States simply do not have experience in regulating the activity and, as such, have been somewhat reactionary in their attitudes to a nationwide licensing regime. The onus is therefore on central lawmakers to not only demonstrate the substantial revenues that can be generated by taxing the activity, but to ensure that a comprehensive, transparent and workable system is proposed that states can embrace (and in some instances perhaps opt out from), rather than seeing it as a mandatory burden. In this sense, new legislation may be best served by adapting existing state legislation and/or beginning with the more widely accepted forms of gambling such as online poker, while the country as a whole accustoms itself to the concept of legalised online gambling. As the revenue streams begin to run, there may be few states that see the activity as one they should continue to restrict.