Reason Foundation

Reason Foundation

Internet Gambling: The Keys to a Successful Regulatory Climate

How the government can embrace and regulate online gambling

Steven Titch
November 13, 2012

As cash-strapped states explore ways to expand commerce and fill their coffers, many are considering increasing the reach of state lotteries through permitting online gambling. Indeed, Illinois and New York late last year received word from the Department of Justice indicating that as long as it does not involve sports betting, such gambling would not violate the federal Wire Act. Other states have taken note and are examining their options for this potential tax revenue stream.

Yet any discussion of gambling sparks controversy from citizenry and special interest groups, which legislators must address. This paper makes the principled case for legalized Internet gambling, and recommends a policy approach that would create win-win-win regulatory environments for consumers, game site operators and state governments. In keeping with American ideals of personal freedom, U.S. citizens should be free to gamble online, just as they legally can in casinos throughout the country. It is irrational and hypocritical for states that benefit from brick-and-mortar casinos or horse-racing to then attempt to ban Internet gambling.

From the consumer perspective, Internet gambling stands to offer better value for low-end players. It also offers states significant economic benefits:

Although states will likely differ in the particulars of how they structure license and tax arrangements, a successful climate for legalized Internet gambling is likely to derive from a number of fundamental principles. This report recommends several guidelines for state legislators:

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