AGA Whitepaper Assesses I-Gaming in US

24 May 2006

Americans spent a total of $4 billion last year betting on online casino games, sporting events and poker in spite of a ban on Internet gambling in the United States, according to a whitepaper released Tuesday by the American Gaming Association (AGA).

"An Analysis of Internet Gambling and its Policy Implications," authored by lawyer David O. Stewart from Washington, D.C. law firm Ropes and Gray LLP, examines the current online gambling market and explores contemporary U.S. policies, noting that while online gambling is, for all intents and purposes, illegal in the United States, it continues to penetrate the country at break-neck speed.

Internet gambling among U.S. residents is growing at a rate of more than 20 percent a year, Stewart said.

Online poker saw tremendous growth over the first half of the decade. According to Stewart's report, online poker revenues rose from $82 million in 2000 to over $2 billion in 2005.

"PartyGaming has acknowledged that 88 percent of its in 2005, which totaled close to $1 billion, were generated by poker play and that 84 percent of its revenues came from U.S. players," Stewart said.

Sports betting accounts for about 35 percent (approximately $4 billion in 2005) of the total gambling revenues worldwide, and almost all sports betting sites cater to Americans by offering betting on U.S. sporting events, according to the report.

Casino games, Stewart said, have consistently accounted for about one-fourth of the gaming market and lotteries earned more than $1.5 billion last year.

Stewart said the government's current policy of prohibition only steers citizens toward off-shore Internet gambling sites while failing to protect those gamblers.

"By driving all Internet gambling business to foreign entities, the current regime also ensures that no jobs are created for American workers, no returns are earned by American companies and no tax revenues are paid to American governments," Stewart said.

Stewart said that recent legislative attempts to curb online gambling (Rep. Bob Goodlatte's, R-Va., HR 4777, the "Internet Gambling Prohibition Act", and Rep. James Leach's, R-Iowa, HR 4411, the "Unlawful Internet Gambling Enforcement Act of 2006"), are an important step toward protecting U.S. citizens from illegal, unregulated off-shore gambling, but they do little to solve the problem.

Goodlatte's bill, he points out, would still allow in-state legalization of the use of Internet technologies for betting. For instance, pari-mutuel betting is already authorized under the Interstate Horseracing Act, as long as the Internet is specifically used for a licensed gambling business. Further, the bill would permit online bets placed on tribal lands, as long as the state has authorized the gambling activity.

The report ultimately advocates the AGA's recent petition for the formation of a congressional study commission to address the murky issue of online gambling in the United States.

"A study commission approach could develop an effective, comprehensive legislative approach that would address the complex and often conflicting policies now in place, as well as the general confusion about the legal issues surrounding Internet gambling," Stewart said.

On the same day as the release of the report, U.S. House Reps. Shelley Berkley, D-Nev., and Jon Porter, R-Nev., announced a plan to introduce a bill this week to create a federal commission that would study Internet gambling for one year and have another year to make recommendations. Other supporters of the bill include Rep. Jim Gibbons, R-Nev., and Rep. Frank LoBiondo, R- NJ.

Click here to view a copy of the AGA whitepaper.

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.