Will Congress Act Wisely?

by Lou on April 25, 2006

In a recent plea agreement, Tony Rudy, a former aide to Rep. Tom DeLay (R-TX) was charged with lobbying members of Congress to oppose Internet gambling bills similar to those in Congress now, while receiving gifts from disgraced lobbyist Jack Abramoff in return for his efforts. This backlash against Jack Abramoff has led some in Congress to cosponsor this legislation as a way of distancing themselves from their previous opposition to similar bills.

Rep. Bob Goodlatte’s (R-VA) bill still provides for online gambling and online lottery sales within states that have laws permitting such activities. This, of course, has positioned Christian conservatives against it, since they view the Goodlatte bill as flawed because it allows for horseracing and fantasy sports, while prohibiting other forms of gaming.

Another bill, sponsored by Rep. Jim Leach, (R-IA), seeks to crack down on offshore operations through measures designed to cut off the flow of money from U.S. gamblers.

Joseph Kelly, a business law professor at Buffalo State College who studies gambling issues, said that offshore gaming operators will use foreign financial institutions in order to skirt restrictions the Leach bill seeks to impose on banks and credit card companies.

Revenue from online gambling around the world has grown from $3 billion in 2001 to $12 billion last year, according to Christiansen Capital Advisors, a marketing research firm that I’ve quoted before. Half that total came from Americans in 2005.

It’s clear that the genie is already out of the bottle. To enact legislation designed to prevent what’s already transpired is both foolish and foolhardy. If Congress feels a need to get involved in offshore gaming as a means to protect American customers — I’m still not sure what, specifically, their legislation would protect us from — they ought to follow the UK’s model: Recognize online gaming, regulate it, and tax it.

That would provide whatever measure of protection our elected officials deem necessary. But more importantly, it would encourage online gaming providers to locate in the United States, to take their firms public in this country, and prevent the massive flight of capital and jobs from our shores.

That’s the wise position. But only time will tell whether Congress will take it.

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