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Dec
21st

Internet Gaming and the Fiscal Cliff

In the United States there is news every day about the impending ‘fiscal cliff’ which will happen if there is no agreement reached by the end of the year. The ‘fiscal cliff’ is a combination of tax cuts and spending cuts that will go into effect in 2013 if no action is taken. Many economists say that a failure to reach an agreement could throw the United States economy into a recession. There is one source of revenue that congress has consistently overlooked; internet gambling. Republicans don’t want to raise taxes but currently internet gambling is not taxed because it is in a legal grey area. Legalizing internet gambling could be an easy revenue addition and could clarify confusing and contradictory regulations for gaming operators, players and the states.

As things stand now the Justice Department stance on internet poker and gambling is that it’s legal if states allow it. Several states have announced plans to offer residents legal intrastate internet gambling. Nevada is already issuing licenses and other states have made inroads. This week the New Jersey legislature voted to legalize internet gambling in the state. Most large gaming companies want federal regulation. MGM Resorts, Wynn Resorts and Caesar’s Entertainment have all backed federal poker legislation. Only far right winger Sheldon Adelson remains opposed to internet gambling.

Nevada has already issues licenses and Boyd Gaming and MGM Resorts will launch an internet gaming site once BwinParty is approved by regulators. SHFL Entertainment, Station Casinos and Golden Nugget have also been approved for internet poker licenses. Wynn has also applied for a Nevada license. Once New Jersey, California, Iowa legalize internet gaming pressure on the federal government will ramp up. When the internet gaming industry entered a legal grey area in 2006 it did not attract the attention of most people outside the gaming industry. The Unlawful Internet Gambling Enforcement Act was passed by slipping it into a totally unrelated port security bill. Most lawmakers said they were unaware of its existence until after the bill was passed.

If poker becomes legal at the federal level internet bingo and casino players will be left out in the cold. The federal bill only legalizes poker and all other forms of internet gambling will remain illegal. This will result is a loss of billions in potential tax revenues. While internet gambling will not solve the fiscal cliff it will help to eventually balance the federal budget and will provide billions in new tax revenues.