The Monitor's View

Obama's new tax on the poor: Internet gambling by states

The Obama Justice Department quietly issued a legal opinion – just before a long Christmas weekend – that allows states to set up nonsports Internet gambling. The opinion upends decades of contrary decisions, but its real effect will be on the poor (and young) who suffer the most from gambling.

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    Las Vegas Sands Chairman and CEO Sheldon Adelson waves to reporters as he arrived for Sands China's annual meeting in Hong Kong. Mr. Adelson, the world's richest casino billionaire, says he's against online gambling because he doesn't believe available technology is good enough to prevent young people from making wagers on the Internet.
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A campaign by powerful gaming interests to legalize online gambling in America has won a crucial victory from the Obama administration. On Friday, the Justice Department issued a legal opinion that allows states to authorize Web-based, nonsports gambling within their borders.

The 13-page memo opens a door to a host of problems.

For one, big doubts remain over whether states can indeed restrain such digital games of chance to residents while also keeping children from playing them. State lotteries, for examples, have a poor record of preventing retailers from selling tickets to minors.

Recommended: Online gambling 101: What the new gambling expansion means for states

And even if states can outsmart tech-savvy teens or out-of-state gamblers, once enough states jump into Internet gambling they will likely be able to work together and create a national scheme for such activity. That would violate the spirit if not the letter of a 2006 federal law banning such interstate activity.

Most of all, bringing Internet gambling to America would hurt the poor, who are most affected when people lose money in government-approved games of chance such as state lotteries or casinos – not to mention the way it would reinforce a belief that one’s future depends on “luck” instead of individual merit.

In effect, President Obama and his appointed Justice officials have bowed to political pressure from states that seek a new source of revenue in Internet gambling rather than taking the difficult decisions to raise taxes or cut spending.

The timing of the memo’s release is telling about its politics. It was dated last September but was quietly made public just before the long Christmas weekend, perhaps to prevent political waves. And it came a day after Nevada officials approved in-state online gaming.

Critics also point to another possible political connection. The memo was written by Virginia Seitz, head of Justice’s Office of Legal Counsel and a possible Obama nominee to the Supreme Court. To win Senate approval to serve on the court, she would need the support of Senate majority leader Harry Reid (D) of Nevada. Last year, most of Nevada’s big casinos became big backers of an effort to overturn the federal Unlawful Internet Gambling Enforcement Act of 2006.

Still, Ms. Seitz’s professional opinion tries to make a case that the 1961 Wire Act – which deals with communication of bets – was passed only to prevent interstate betting on sports, thus allowing states to approve nonsports Internet gambling.

While the law’s language is not totally clear, her opinion overturns decades of contrary interpretations under previous presidents, as recently as 2007. She contends that she is correcting a “syntax error” following a request from New York and Illinois for a department ruling.

The Obama Justice Department can hardly be that indifferent, however, to the research about effects of Internet gambling, whether on the poor, children, or the 1 to 2 percent of people prone to gambling addiction. Regulatory safeguards to contain Internet gambling would require a vast and intrusive scheme to keep Web-based gambling from slipping over borders or being used by underage users.

And states seeking revenue from Internet gambling have yet to add up the millions of dollars in additional costs to prevent abuse or deal with the effects of such gambling on individuals, families, and communities.

The annual social costs of gambling-related addiction, bankruptcy, and crimes is nearly $7 billion, according to the National Council on Problem Gambling. Nearly half a million teens are gambling addicts, or about the same number as those who abuse prescription drugs.

When will states, and now this administration, drop the political and economic reasons for Internet gambling, and wake up to its harm on the poor and the young?

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