Jobs, taxes rule, help spread legal gaming

May 23, 2017 3:11 AM

Recently a reader wrote: “I would like to see you do an article regarding government protections of the U.S. gaming industry particularly how legislation such as UIGEA has prevented foreign businesses and Americans from engaging in competitive gaming commerce.”

While the request is interesting the premise might be a little off.

Let’s start with a little backdrop on the motivations for legal gaming in general. Most states that permit some form of legal gaming were motivated by two simple arguments: 1) If we legalize gambling we will put thousands of mostly unskilled people to work at good wages, 2) We can raise lots of tax dollars for certain programs.

Not surprisingly those arguments were and have proved to be correct.

Back in the days when the United States had a healthy economy with nominal or no national debt and was a net exporter of manufactured goods, legal gaming was that slightly immoral activity dominated by Las Vegas, Atlantic City and Reno where it served as the dominate economic engine. As time marched on and the strength of the U.S. economy changed, Indian tribes, economically challenged regions, states with particular budget shortfalls all used the above reasons to secure some level of gaming be it casino style, lottery style or racinos.

As gaming is a state’s rights issue the federal government rarely weighed in on it, other than for interstate issues on the registering and transfer of gaming equipment as well as wagering information, and the handle tax on certain bets that was designed as an additional tool to bust illegal bookie operations run by national and regional organized crime groups.

Then in 1992 the federal government passed the Professional and Amateur Sports Protection Act (PASPA), which basically made sports wagering in the U.S. illegal other than in certain states that already allowed it. As gaming is a state’s right, it is very arguable if PASPA is even constitutional. It could also be argued that the very thing the law was intending to protect may have had the opposite effect in that, if certain estimates are to be believed, illegal sports wagering dwarfs all other forms of wagering in the U.S.

Things stayed pretty much quiet for awhile, legal gaming continued to expand in various regions of the country and it continued to be accepted as another form of personal recreation on par with movies and bowling.

Then online gaming took off, most notably led by poker, and became a sensation with activities and profits exceeding some if not most gaming jurisdictions. For reasons ranging from protecting against underage gaming to concerns about the absence of proper regulator oversights to international based companies operating gaming activities unfettered in various U.S. jurisdictions to concerns over money laundering the feds passed the Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006, which basically made it illegal for financial institutions to facilitate the movement of funds via the Internet related to wagers that are illegal at either the federal or state levels.

Unlike PASPA, UIGEA is clearly within the rights of the federal government to insert their will. While UIGEA had a tremendous impact on online poker it also begged questions of if it violated various international treaties related to online commercial activities as well as the notion of net neutrality.

Though online gaming remains a hot topic, Sheldon Adelson and his LV Sands is staunchly opposed to it, citing concerns over underage gaming, while MGM and Caesars are looking to grow that aspect of their business. Though there have been efforts to enhance the interpretation of the wire act to bar the use of the Internet for any form of gaming, there really has not been nor likely will be serious movement on the subject while there are so many other matters on the congressional agenda.

While existing laws may seem defensive on behalf of land based casinos, they are more about providing a basis of control of online activity than prohibition of activity. Any international or national gaming concern is free to lobby and secure respective state and federal permissions to conduct gaming activities and the efforts of the fantasy sports operators very much prove that to be true.

What the laws do not permit though is for anyone with a website to open a gaming site in some obscure poorly regulated environment and legally offer their services to everyone in the U.S. without securing certain licenses and permissions at all relevant jurisdictional levels.

Regardless of how existing and future gaming laws evolve, one thing is for certain: lawmakers would rather have a land based casino resort with 10,000 employees and a nominal gaming tax rate over an online casino with a few hundred employees and an exorbitant tax rate.

Jobs and taxes will always rule!

Robert Mann has Northwestern journalism degree, is a former reporter for the Chicago Tribune and National Enquirer, was in news management for CNN and several TV stations and is a 30 year resident of Las Vegas. Email: [email protected]