D. Platzer Specialist in Industrial Organization and Business
once widely outlawed, is now a regulated, taxed activity that is legal in some
form— bingo, card games, slot machines, state-run lotteries, casinos—in
all but two states. State governments have the main responsibility for
overseeing gambling, but Congress historically has played a significant
role in shaping the industry. Since passage of the Unlawful Internet Gambling Enforcement
Act (UIGEA; P.L. 109-347) in 2006, congressional focus has moved to remote gambling.
As used in this report, remote gambling refers to gambling that does not occur
in a casino, a bingo hall, or a store selling lottery tickets. Remote
gambling includes gambling over the Internet as well as gambling using
devices that may communicate by other means, such as by telephone or
direct satellite links.
UIGEA, while preventing payments to illegal gambling-related businesses, does
not outlaw any form of remote gambling. It allows states and Indian tribes
to offer remote gaming within their territory if certain conditions are
met. A majority of states already allow remote betting on horse racing,
and a number use the web for lottery promotions. A number of Indian tribes and
gaming companies have created entities to develop remote gaming and seem
likely to expand them rapidly if the legal issues are clarified.
While UIGEA did not outlaw remote gambling, it also did not clarify the scope
of long-standing laws that the U.S. Department of Justice (DOJ) has used
to prosecute Internet gambling, such as the Wire Act, 18 U.S.C. 1084. With
wide-ranging implications, a recent DOJ interpretation of the Wire Act
authorizes states to allow online gambling, except for sports betting.
Currently, Delaware and Nevada are the only two states to permit some form
of Internet gaming, but several others are debating legislation to
legalize online poker or other games. The global market for Internet
gaming is currently estimated at more than $30 billion a year. If the United
States passes federal online gambling legislation and all states opt in,
H2 Gambling Capital, a consulting firm, predicts a national online gaming
market of some $20 billion five years after enactment.
Gambling companies hold divergent views on the desirability of allowing remote
gambling. Some casino operators, particularly the larger ones, foresee new
opportunities for profit. On the other hand, many operators of smaller casinos
are concerned that remote gambling could draw customers away. Complicating
matters, total gambling revenues are only now recovering from declines in
2009 and 2010, and many established casinos are struggling due to increased competition
as more states legalize casino gambling.
Several lawmakers have introduced legislation to allow, regulate, and tax
remote gaming, and House and Senate committees have held hearings and
roundtable discussions on the issue. Those favoring expanded remote gaming
cite potential federal revenue from taxes and registration fees, as well
as the need for comprehensive national regulation. Opponents question whether
it is possible to have stringent regulation of online gambling, which they
say holds the potential for increased fraud and money laundering. Among
other issues Congress faces are the proper balance of federal and state
regulation and the possible social costs of expanded gaming, including problem
Date of Report: November 8, 2012
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