Ending the cycle of casino cronyism

When powerful gaming interest are spearheading the fight to ban online gambling, it should give you pause.  Their main policy objective is focused on federal legislation to ban online gambling outright – stifling their competition before it ever reaches the market. It is a glimpse of crony capitalism in its most naked form, and represents a very troubling assault on Internet freedom, giving government a foot in the door for a broader regulatory regime and usurping our federalist system. 

The 2011, the Department of Justice’s position interpretation on Internet gambling threw the issue to state legislatures--where it should be. Almost immediately, Nevada, Delaware, and New Jersey passed legalizing legislation.

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The Restoration of America’s Wire Act, sponsored by Sen. Lindsey GrahamLindsey GrahamGun-control supporters plan next steps versus NRA Bipartisan gun measure survives test vote Senate Republicans may defy NRA on guns MORE (R-S.C.) and Rep. Jason ChaffetzJason ChaffetzOvernight Energy: Obama signs chemical safety reform into law House caucus to focus on business in Latin America Freedom Caucus urges vote on impeaching IRS commissioner MORE (R-Utah) would prohibit interstate sports betting using wire services, effectively killing online gambling across the states where it’s legal. While their pretense is to advance a moral good, this policy would undermine the free market, encourage crime, and erodes the constitutional concept of states’ rights.

Proponents of the regulation have brought in political heavyweights to undermine legalized online gambling, including former Arkansas Sen. Blanche Lincoln (D), who represents the Coalition to Stop Internet Gambling, claiming that legalizing online gambling would promote fraud, addiction, and money laundering.  

"I think it's going to be very difficult to work something out,” Lincoln said, "I think it's important to put a time-out on this and to stop and think about what it's going to mean to us as a nation in our economy, to our children and to our society."

However, these problems already exist with black market gambling mostly run from overseas with profits funding shady and potentially dangerous operations outside the jurisdiction of state regulation and consumer protections.

Alan Feldman, an executive vice president of MGM notes that online gambling “is here, and it’s been here for a very long time.” Legalizing online gambling would likely see more of a shift from illegal to legal play instead of funneling customers away from traditional casinos and their trappings.

Free market advocates agree that consumers would enjoy more security were this pursuit made legal. “In this black market, where virtually all sites are operated from abroad, consumers have little to no protection from predatory behavior.” wrote officials of the Institute For Policy Innovation to several congressmen.  They then shared wider concern that “Perhaps even more concerning is the fact that this bill allows the federal government to take a heavy hand in regulating the Internet, opening the door for increased Internet regulation in the future.”

Just like Prohibition in the 1920’s, banning this vice would actually incentivize criminal behavior. Those fearful of fraud, child participation, and profits diverted to gangs or terrorists should push for legalization in every state to make the industry as transparent as possible. Legalizing this long-established, multibillion dollar business gets the profits out of the shadows, expands market opportunities, and puts revenue into the coffers of both legitimate business and state governments that will benefit.

Telford is senior vice president at the Franklin Center for Government & Public Integrity.

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