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Online gambling and states

An interesting debate has crept into the issue of regulating online gambling in the United States. Previously most of the opposition to federal online gambling regulation has been from those morally opposed to gambling. There has also been opposition from owners of tribal casinos and, for a time, from the brick and mortar casinos in Las Vegas (though they have changed their position). Now there is a debate about whether federal regulation would help or hurt the states.

Martin O’Malley, the governor of Maryland, sent a letter to the House of Representatives saying that federal online gambling would hurt his state. He says that gambling is Maryland’s fourth-largest source of revenue, at $519 million annually, and federal online gambling would put all of that revenue at risk. In the letter, Governor O’Malley said that regulation would not only cost that revenue, but also “jeopardize the jobs and survival of lottery retailers, many of whom are small businesses.” Politicians in some other states have echoed O’Malley’s sentiment. So is there truth to it?

Absolutely. Innovation always puts lesser competition at risk. Amazon hurt brick and mortar bookstores and Netflix buried Blockbuster. In each case, the lesser business was hurt because they didn’t adapt. For that reason, the gambling industries in each state need to adapt to remain lucrative. People will spend less money at local casinos and buying state lottery tickets if it is easier to play casino games online. The states have to adapt to regain a piece of that pie.

One suggestion is to regulate it at the intrastate level, but that has problems. Intrastate online casinos can only accept customers within that state’s borders if they don’t want to be subject to federal regulation (and taxes). If the state opts to keep the market inside the state, they will lose business, not only from customers in other states, but also in their own. Players would rather be at a casino or poker room that is bigger and has more players, which would make the national online casinos more popular than the state casinos.

It is a complex issue, but the states need to get a place at the bargaining table and make sure that when federal regulation happens, their interests are taken into consideration. Trying to block the legislation out of protectionism won’t work, because most believe the regulation will happen at some point anyway. Instead of opposing, it’s time to get onboard and make sure you get something out of it.

Tags: gambling regulation, intrastate online gambling

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Categories: Casino, Gambling News
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