New Report Details Opportunities for Effective Regulation of Online Poker

WASHINGTON—The American Gaming Association (AGA) today released a new white paper entitled Online Gambling Five Years After UIGEA that warns of the growing risk to U.S. consumers of the government’s current Internet gambling policy and details technology, methods and processes that have proven effective in mitigating the legal and social risks that led to the current policy.

 “Americans like to gamble online. Millions of Americans bet billions of dollars a year at offshore foreign websites and have demonstrated that they will do so even if their government tells them not to,” said Frank J. Fahrenkopf, Jr., President and CEO of the AGA. “This report illustrates that the United States can and should establish a safe and regulated online poker experience.”

The report makes three specific recommendations for improving the Unlawful Internet Gaming Enforcement Act (UIGEA):

• "Reinforce law enforcement tools and proscriptions to protect Americans from gambling websites that now operate from offshore jurisdictions with minimal or no regulation.
• “Authorize a state-focused program to license U.S.-based operators to offer online
  poker only, preserving the ability of every state government to decide whether online poker should be available within its borders.
• “Make certain tough regulations are in place to ensure the fairness of the games, exclude underage gamblers and provide tools for pathological gamblers to control their gambling.”

The report tracks the growth of Internet gambling in the U.S.  It shows that while the number of Internet gamblers dipped after UIGEA passed, it soon rebounded to the point that some 15 million U.S. residents gambled a total of $4 billion on the Internet last year. “That pattern suggests that the illegal online gambling market for U.S. bettors will recover again,” according to the report.

In fact, DOJ enforcement activity, in a laudable effort to enforce U.S. law, could well have the “perverse effect” of forcing U.S. gamblers to play with the approximately 1,000 remaining foreign operators most of whom, according to the report, are less regulated and less trustworthy than those the DOJ recently indicted.

The report describes a number of technologies and processes currently used by well-regulated online gambling jurisdictions that the U.S. could adopt to protect online poker players. These include the ability to exclude underage gamblers, confirm the true identity of each online gambler, ensure fair play, limit problem gambling, restrict bets from jurisdictions that prohibit online gambling and ensure that gambling websites are not used for money laundering and other illegal purposes.

Another effect of current U.S. law is the loss of jobs and tax revenue. The report estimates as many as 10,000 jobs and $2 billion in annual taxes would be generated in the U.S. if the law were changed so U.S. companies could provide online poker.

Inconsistency in the government’s treatment of different types of online gambling is also an issue discussed in the report.  For example, online gambling in the U.S. is currently being conducted on horse races and, in some states, with the state lottery.  Even UIGEA allows states to license intrastate online gambling. 

“It is time that the U.S. government clarifies its laws on Internet gambling in the United States once and for all,” Fahrenkopf said.  “Licensing and regulation of online poker in the U.S. would ensure American consumers are protected and that the jobs and revenues associated with this billion-dollar industry are realized here in the United States.”

The white paper was authored by David O. Stewart, counsel at Ropes & Gray LLP in Washington, D.C.  It provides an in-depth look at the global and U.S. online gambling markets, current regulatory models and legalization proposals in the United States.  An appendix covers U.S. enforcement efforts against online gambling operators.

To access a full copy of the paper, visit www.americangaming.org.  For a hard copy, contact Brian Lehman, AGA communications manager, at 202-552-2680 or blehman@americangaming.org.