Why the chips are down for Internet gambling

Three states jumped into online gaming last year with high hopes. But so far their take is very low. The inherent problems in this addictive form of gambling should give pause to other states and to Congress if they are tempted to follow suit.

AP Photo
This photo shows gambling chips from four Atlantic City N.J. casinos that have either already gone out of business this year, or could do so by September, in part because of their low earnings after their entry into the new business of online gaming.

Last year, three states became the first to launch Internet gambling – but only for people within each state in order to avoid breaking federal law. In New Jersey, by far the largest of the three, Gov. Chris Christie predicted $180 million in revenue by July 1.

But like a gambler who believes in the mirage of luck, he was sadly disappointed. Online gambling revenue turned out to be $10.7 million, far below the predicted $180 million.

At the same time, the number of problem gamblers seeking help from the state went up, a clue to how 24-hour access to online gambling in the privacy of one’s home can lead to trouble, especially for young people. And to add to New Jersey’s dashed dreams, a poll revealed a sharp rise in the disapproval of Internet gambling among residents – from 46 percent to 57 percent – in less than a year.

Internet gambling is off to a slow start in the three states – New Jersey, Delaware, Nevada – and rightly so. The inherent problems of protecting problem gamblers and other necessary regulations give it a troublesome future. In Europe, too, which has nearly half of the world market, online poker traffic is down while concern about the industry’s effect is rising. 

Last week, the European Union recommended to member states that gambling websites be required to check players’ ages and identities when they open accounts. The EU also wants the industry to tell players about the risks of gambling and enable them to set spending limits.

“We must better protect all citizens, and in particular our children, from the risks associated with gambling,” said an EU commissioner, Michel Barnier.

The online gambling industry in the United States is worried. It needs one big state to succeed in order to break open the market nationwide and also convince Congress to drop a federal law against Internet gambling across state lines. As hopes fade for New Jersey’s experiment, the industry is turning its sights on Pennsylvania as the next big state to jump on board.

About 4 to 8 percent of young adults are vulnerable to compulsive gambling, according to New Jersey officials. And a Canadian think tank, the Alberta Gambling Research Institute, estimates that problem gambling touches about 10 percent of families in North America.

As more elected leaders make big predictions about the revenue from Internet gambling, voters must not only puncture those rosy predictions but also tally up the social costs of expanding gambling to the Web. The winnings are often an illusion, but the costs from gambling addiction are real.

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