Internet Gambling Laws in the U.S. To Take a Dramatic Turn

The U.K. introduced sweeping changes to its internet gambling laws with the passage of the Gambling Act of 2005. The stated purposes of the act were very noble: to prevent gambling from being a source of crime and disorder; to ensure gambling would be conducted in a fair and open manner; and to protect children from being harmed by enforcing the legal gambling age of 18 years. In practice, of course, the act led to a surge in onsite operators moving to the country and a corresponding increase in tax revenues as a result.

In the U.S., the situation is much different. Gambling is legal under Federal law but prohibited in many states, with some local exceptions. Legal gambling states include Nevada and New Jersey, although many states have passed laws that legalize gambling in certain municipalities as well as on Native American lands. Internet gambling laws, on the other hand, have effectively prohibited operators from doing business within the states.

In 2006 Congress approved an act that dramatically affected the internet gambling laws and effectively proclaimed the industry illegal. That act threw the industry into turmoil, and drove virtually all of the U.S. based operations out of the country. Sites operated out of the U.K. and the Bahamas now garner a majority of this profitable business. But numerous faults in the 2006 legislation and the feeling that Congress has more important things to worry about have now pushed the country to the brink of legalizing the industry.

If the U.S. is to proceed with the legalization of gambling over the internet, congress must first do away with its awkward attempt at making it illegal under the 2006 Unlawful Internet Gambling Enforcement Act (more easily referred to as UIGEA). The purpose of that act was fairly simple: make it illegal for banks, credit card companies, and other payment processors to transfer funds from gamblers to online casinos and from those online casinos back to the gamblers.

You must understand, however, that the preference of lawmakers has always been to prohibit online gambling. But concerns about the constitutionality of such a prohibition as well as the mind boggling problems associated with enforcing the ban have consistently killed any possible actions along those lines. So Congress chose instead to try to attack the problem by preventing the flow of capital between the gamblers and the casinos under the UIGEA.

Now, thanks in no small part to the national financial meltdown, Congress is poised to reverse its approach to internet gambling laws and scrub the problem-plagued UIGEA. Under a couple of proposed House bills including one sponsored by Barney Franks and Ron Paul, Congress now appears poised to legalize and regulate the industry.

Whenever Congress actually considers such a sensible approach you can assume that there are potential tax revenues to be gained. So it shouldn’t come as a surprise to learn that one of the major benefits of legalized gambling is additional revenue for the government. Recent studies have indicated that the tax revenues the government stands to reap from a legalized online gambling industry could reach more than $50 billion over the next 10 years.

Hopefully, based on current sentiment in Congress regarding internet gambling laws, U.S. based online gambling fans will soon be able to enjoy their sport legally through U.S. based operations that will be under the scrutiny, and taxing power, of the Federal government.