Can the US Turn Its Back on $3 Billion?

14 July 2006

The Poker Players Alliance (PPA) released a study Tuesday showing that proper regulation of Internet gambling in the United States could bring in federal and state tax revenues upwards of $3 billion.

"Keeping Americans away from this game is not only unfair, but as this study shows, would be costly, denying state and federal coffers an important source of revenues."
- Michael Bolcerek
Poker Players Alliance

The study, prepared by Judy Xanthopoulos, an economist with Quantria Strategies, LLC, examines the existing Internet poker market and concludes that the U.S. government would collect a significant potential source of revenue if it were to incorporate this industry into the U.S. economy.

"This study validates that the benefits of regulating online poker in the U.S. far exceed the value of prohibiting the activity," said Michael Bolcerek, president of the Poker Players Alliance. "Internet poker is an incredibly popular pastime for millions of Americans. Keeping Americans away from this game is not only unfair, but as this study shows, would be costly, denying state and federal coffers an important source of revenues."

According to the study, an estimated $60 billion was wagered worldwide on Internet poker in 2005, with approximately $3 billion in commission revenues. Based on other industry estimates, nearly 90 percent of these wagers were made by U.S. citizens.

Xanthopoulos said the economy could benefit from online poker in three specific ways: revenues from individual income taxes, user fees and corporation income taxes. She said estimates suggest that individual income taxes alone would bring in approximately $2.5 billion each year. In addition, she said, a 1 percent user fee applied to all transactions would generate approximately $800 million to $1 billion in revenue per year.

Finally, allowing U.S.-based casinos to enter the Internet market and offshore operators to relocate to the United States would result in approximately $350 million in additional tax revenue from income taxes on corporate profits alone, on top of the $3 billion already proposed, according to the study.

"Our organization enthusiastically supports regulation and taxation, rather than an outright ban," said Bolcerek. "We remain hopeful that opponents of Internet poker will come to the realization that prohibitions don't work and will embrace the idea of creating a regulated environment so that Americans can have an even higher level of comfort when playing poker online."

The study may be futile though, as Congress passed HR 4411, the Unlawful Internet Gambling Enforcement Act, the very same day the study was released.

"You can only bake a cake so quickly," Bolcerek said of the timing. "There is still legislation in the House to build a study. We'll look to build support with that."

That legislation, the "Internet Gaming Study Commission Act," authored by Rep. Jon Porter, R-Nev., would create a bipartisan panel consisting of nine appointed members to conduct a comprehensive study of Internet gambling. Rep. Shelley Berkley, D-Nev., also had significant input on the creation of the legislation.

The Unlawful Internet Gambling Enforcement Act is bound for the Senate, and Bolcerek said the PPA is keeping its collective chin up and will continue to lobby for regulation.

"We still believe the best public policy is to regulate and tax Internet poker," he said. "We will introduce the study to senators and use it to educate them on the benefits of taxing and regulating Internet poker. We are hoping out policy arguments will overtake the political arguments."

Click here to view the Poker Players Alliance Internet Poker Revenue Study.

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