NCPA - National Center for Policy Analysis

Internet Gambling: The Keys to a Successful Regulatory Climate

November 20, 2012

Many states are turning to legalized gambling as a means to increase tax revenue to help deal with budget shortfalls. Indeed, states like Illinois and New York recently got word of approval of their online gambling schemes from the Department of Justice, says Steven Titch, a policy analyst at the Reason Foundation.

Internet gambling has been a hot button issue for many states. The public is divided on whether it should be permitted or not. But there is little sense in banning it, considering that states have other forms of legalized gambling such as casinos, horse races and lotteries.

Internet gambling helps low end players as well as providing states many economic benefits:

  • First, it creates a demand for high-paying IT jobs.
  • Second, it creates a climate conducive for businesses in the tech industry that would create jobs and increase the tax base.
  • Third, states could use it as an opportunity to expand revenue.

As states craft a structure for license and tax arrangements for legalized internet gambling, there are several guidelines for legislatures to follow:

  • Regulations and licensing arrangements should provide ample room for competition to benefit the consumers.
  • Online gambling has a different cost structure than casinos, which means that any tax and licensing structures should reflect low expectations for revenue and taxes.
  • States should not tax the players, just the internet gambling operators.
  • There should be regulations to protect against fraud.
  • Finally, states should not discount the market as being an effective regulator. Independent game analysts are able to identify problem software and help players make informed gambling choices.

Source: Steven Titch, "Internet Gambling: The Keys to a Successful Regulatory Climate," Reason, November 13, 2012.


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