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Con: Prohibition spurs black market, creates long-term consequences

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Mark Lipparelli
February 6, 2014

EDITOR’S NOTE: The writer is addressing the question, “Should online gambling be banned?”

LAS VEGAS -- Prohibition doesn’t work. As our history books show, the Volstead Act, prohibition of alcohol in the 1920s, closed the doors of legal, regulated businesses and opened a Pandora’s box with unintended consequences.

These consequences—criminal activity, illegal manufacturing and distribution, and more—took years to fully combat and significant resources. All for the act to later be repealed.

Let’s not let history repeat itself. Americans enjoy entertainment, especially gambling. Gambling is woven into American history, having existed in some form since our nation’s establishment.

Let’s rely on common-sense safeguards and consumer protections by extending well-established and effective gaming regulations to the newest form, online gaming, on the onset—not retroactively.

Naively assuming a ban would absolve American’s interest and participation in online gaming sets up local, state and federal law enforcement with tremendous expenses and turn millions of average American citizens into criminals.

The black market exists. Today’s unregulated online operators are flouting their products in clear violation of state and federal law with no regulatory controls or tax obligations.

Estimates show growth in unregulated online gaming markets is explosive: an estimated 1 million Americans or more spend nearly $3 billion annually on overseas gaming sites. Most of these Americans aren’t criminals; they’re simply looking to participate in the newest form of gaming—online.

The U.S. should harness this practice, not vilify or ignore it. Moreover, the billions of dollars this new form of gaming technology generates presents a healthy funding model to cover costs associated with regulation and legal enforcement.

Modern technologies associated with online gaming exist to protect consumers—including minors, gambling addicts and others—and these safeguards are being tested in states such as New Jersey that allow for online gaming within its state borders. These technologies, while not perfect, will continue to improve for the financial, health care and gaming industries.

Moreover, when properly implemented, the tax revenue generated through online gaming can cover not only the necessary expenses to ensure consumer protections for Americans but also to support local communities’ budget deficits to pay for essential public services such as education.

As with previous versions of draft legislation, states and licensed industry participants should have the option of whether they support online gaming at all. For those that do, many will likely limit online gaming to competitive poker only.

It’s no secret that many state and local governments are woefully in need of new revenue streams. Online gaming holds the potential to assist with these budgetary shortfalls.

State lotteries are a perfect example of leveraging long-standing entertainment to help subsidize public-sector treasuries. However, the large number of states that have kept up with 21st-century technologies by offering online lottery would also be jeopardized through wide-sweeping federal prohibition.

The slippery slope of a proposed ban, doesn’t stop at the state level. The Fantasy Sports Trade Association was recently warned that popular sports fantasy leagues could end up banned by this legislation as well.

It wouldn’t be surprising if other forms of popular online gaming—through social media channels such as Facebook and others—were brought under scrutiny through federal prohibition, too.

America is well known for its entrepreneurs. Innovators such as Henry Ford, Bill Gates, Steve Jobs and others are as tied to American history as U.S. presidents and policymakers.

Let not federal government impede innovation. Set up the parameters to let Americans innovate—and play—on a level playing field with the rest of the world.

Instead of pretending that innovation and the Internet doesn’t or shouldn’t exist, America should look back to both our historical mistakes and our historical innovations for inspiration on how to best navigate the challenges and opportunities associated with Internet gaming today.

Mark Lipparelli is the founder of Gioco Ventures and former chairman of the Nevada State Gaming Control Board. He serves as a consultant to the gaming and entertainment industries. Readers may write to him at the American Gaming Association, 1299 Pennsylvania Ave. NW, Suite 1175, Washington, D.C., 20004.



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