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Richard Grenell

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It's Time to Tax Internet Gambling and Make it Legal

Posted: 11/08/11 04:39 PM ET

One of the complaints from the Occupy movement protesters is that gambling by the banking sector is what created the economic crisis gripping the globe. And they're partially correct in placing blame at the feet of bankers who recklessly played the markets like a game of Monopoly. But risk is an inherent part of business, politics and life -- and demonizing the private sector for taking chances without presenting viable alternatives is nonsensical. Ironically, one of the surest bets for the super committee in Washington currently looking for ways to cut spending and balance the federal budget involves opening the United States to regulated, safe and legal gambling. It's time for Washington lawmakers to pass the bill that taxes online gambling revenues and makes it legal.

Just a few years ago, conservative Republicans in control of the White House and Congress moved to block online gambling in order to appease the religious right and their concern that gambling is a sin akin to drinking and smoking. But the far right's worry should be no concern for governments. Drinking and smoking are already legal, and so are many other societal behaviors that the far right and far left try to control. America is founded on the principal that if you don't like it, then don't do it -- but don't stop someone else from enjoying it.

A Congressional joint committee on taxation found that the online gambling industry could bring in $42 billion to the federal government over 10 years. That's a new and big source of revenue at a time when Medicare and Defense spending are facing massive cuts over the next several years. Sooner or later, Washington politicians will give-in and realize that internet gambling tax revenue is too good to pass up.

The federal legalization of Internet gambling is inevitable for a number of reasons:

The U.S. is missing out on a growing revenue source: As lawmakers struggle to clamp down on American free choice, the rest of the world is experiencing explosive growth in online gambling. Worldwide, the industry is worth $30 billion annually, of which $4 billion comes from America in spite of a government ban. It's staggering to watch that kind of money flow overseas while the U.S. spends money on anti-gambling enforcement.

Prohibition is useless: Speaking of law enforcement, it's a huge mistake to believe that prohibition works now any better than it did a hundred years ago. There are too many grey areas and dark alleys on the web to allow effective monitoring and enforcement. The government would do better to focus its enforcement energy and dollars on real crimes at the U.S. border.

Jobs, jobs, jobs: Federal regulation could stimulate the creation of 30,000 American jobs. Given the national unemployment rate is 9% this should be a no-brainer.

Gaming is a growing industry: There was a time not long ago when Las Vegas and Atlantic City were the only places in the nation to gamble legally, but Indian casinos, video gambling, slot machines, lotteries and more are popping up across the country. Florida, Illinois, Minnesota and New Hampshire are just a few of the states currently discussing the issue. It's time for the federal government to catch up.

Free choice: America learned long ago that it can't restrict consumers' free will. This is America, not the Middle East. Regulation and education are the best ways to clean up perceived vice industries.

Consumer protection: the Unlawful Internet Gambling Enforcement and Protection Act (UIGEA) of 2006 -- the most significant piece of federal legislation restricting online gambling -- effectively eliminates all protections for the 10 million Americans estimated to currently gamble online. While many states enact legislation to allow some forms of gambling and protect consumers, Washington ignores the problem.

Industry support is finally here: the American Gaming Association, the trade organization for the industry, has long opposed online poker but recently reversed direction and now openly supports regulation of online gambling. Industry support is critical in making any regulation successful, and the welcome mat put out by the industry is a game changer.

In April, a crackdown by the Department of Justice on online gambling companies sent shock waves through the industry. The Obama Administration's aggressive enforcement surprised many pro-capitalism allies. With recent bills in support of online gambling by Rep. John Campbell (R-CA) and Rep. Joe Barton (R-TX), GOP opposition has softened. The roadblock to regulating Internet gambling is the Obama Administration. Rep. Barney Frank (D-MA), a longtime proponent of regulating online gambling and Obama supporter, recently went so far to say that President Obama was "protecting the public from the scourge of inside straights."

At a time when both parties seem to make sport out of creating gridlock in Congress, President Obama ought to join the bipartisan support for regulating Internet gambling. The famously risk-averse president should double down on a sure bet.

The author is a former spokesman for Ways and Means Committee Chairman Dave Camp (R-MI).

 

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