Don't fold on Internet gambling ban

A 2006 US law has cut Web-based betting. If anything, the law needs to be toughened.

from the March 25, 2008 edition

Last year, the percentage of American college students who gamble online fell to 1.5 percent from 5.8 percent the year before. The reason? A 2006 federal law restricting Internet gambling. Now some in Congress who want to tax this type of addictive betting plan to roll back that progress.

Rep. Barney Frank (D) of Massachusetts is expected to hold congressional hearings next month to explore overturning the 2006 Unlawful Internet Gambling Enforcement Act and replace it with legalized online betting, which in turn could generate taxes and fees to the tune of billions of dollars. His bill to legalize online gambling has so far found more than 40 cosponsors.

Not included in the cost of this revenue stream, of course, would be the social price paid from the suffering and financial ruin that online gaming inflicts on a minority of players who become addicted to gambling. And the privacy of Internet gambling provides a particular problem for this vulnerable group.

Last November, the National Association of Attorneys General voiced "grave concerns" over Mr. Frank's bill. Current law bars banks and credit-card companies from processing payments for online gambling, essentially shutting it down. The attorneys general said the result was that many Internet-based gambling operators had been driven out of the US market.

In 2006, Frank's party helped pass the current law. One hundred and fifteen House Democrats voted for it, while only 76 opposed it. "Internet gambling is a growing problem in the United States, particularly among young people and college students," Rep. Darlene Hooley (D) of Oregon said in a floor speech at the time. "It is known to destroy families, marriages, and entire lives." (In Frank's state of Massachusetts, the House of Representatives last week soundly defeated a plan to create state-run casinos.)

Whether Frank's bill, or another from Rep. Jim McDermott (D) of Washington that would also legalize and tax online betting, has enough momentum to pass remains to be seen. If pressures to find new revenue sources continue to grow, the glitter of billions of dollars could blind Congress.

Complicating the issue are concerns expressed by the European Union that the US is not playing fairly according to World Trade Organization rules. The EU, which favors Internet gambling, points out that the current American law doesn't ban Internet gambling on horse racing in the United States. And the US law discriminates against European-based online gaming companies, EU officials say. The EU plans to investigate the law over the coming months with the possibility of filing a complaint to the WTO.

Betting establishments in EU countries would love to return legally to the US market and see the inconsistency in the US law as a handy wedge to force the US to back down. But Congress should go the other way and strengthen the law by banning Internet gambling on horse racing as well.

Meanwhile, a bill by Rep. Shelley Berkley (D) of Nevada would fund a study of online gambling by the National Research Council, an arm of the National Academy of Sciences. Gathering better data on the effects of this form of gambling is a better first step than a rushed and ill-considered chase after tax revenues on gambling.