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Organization Stresses Need For Federal Oversight To Curtail Illegal Online Gambling

The Campaign for Fairer Gambling points to a study that says three states are being robbed of billions by illegal gambling and calls for more federal oversight.

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Derek Helling Avatar
4 mins read

The Campaign for Fairer Gambling (CFG) has assessed the impact of illegal online gambling in parts of the United States and recommended ways to address unregulated gaming. While the impact estimates might have a basis in hard data, the prescribed course for minimizing that impact is rooted in the imaginary.

Using data from Yield Sec, the CFG states that illegal gambling operators are robbing the states of Minnesota, New Jersey, and New York of $9.5 billion in gross gaming revenue. As a result, the CFG calls for greater federal intervention.

Those pleas aren’t likely to fall on deaf ears, however. A better analogy is tied hands.

Campaign for Fairer Gambling shares its take on illegal gaming in three states

The CFG put its number to the impact of illegal online gambling in Minnesota, New Jersey and New York in a report out May 30. Yield Sec, an online marketplace intelligence platform, produced the revenue and other estimates.

Yield Sec relied on data from web users’ browsing activity to produce its revenue estimates. For example, Yield Sec would measure the duration of time on illegal gambling sites and the frequency of such visits associated with millions of IP addresses in the three states.

Using its artificial intelligence analysis tools, Yield Sec assigned dollar values to that activity. While the CFG believes analysis and the resulting estimates are sound, it doesn’t give much credence to the current regulatory systems in the same states regarding their ability to limit the activity of unlicensed online gambling operators.

CFG official says current framework accommodates illegal gambling

In a May 30 news release, CFG founder Derek Webb made his opinion about the enforcement efforts around gambling laws clear.

“The dominance of illegal online gambling operators remains unchallenged despite the expansion of legal gambling,” Webb said. “Sector-friendly legislation, regulation, and tax rates have not made much of a dent. Despite wildly different legal regimes, these three states continue to accommodate over 800 illegal operators who operate with zero regard for state law. This is one reason why we need federal involvement in the oversight of online gambling.”

While Webb raises legitimate concerns over the impact that illegal gambling has on communities, the course he prescribes to address the problem suffers from one logical fallacy. The grass is not necessarily greener.

Federal oversight doesn’t guarantee better results

In 2018, the US Supreme Court decision in Murphy v. NCAA made two things clear about online gambling in the US. Congress can act to regulate online gambling throughout the country. In the absence of such activity, however, each state can do as it will.

Another simultaneous reality is there is existing federal legislation regarding online gambling. The Wire Act of 1961, the Indian Gaming Rights Act of 1988 and the Unlawful Internet Gambling Enforcement Act are all examples of such statutes.

However, there are mitigating factors when it comes to the actual enforcement of these laws. Those are efficacy and will. Both of those impact the other as well.

Many of the companies that operate illegal gambling sites in the US are not based in the US. Thus, making arrests is difficult if not impossible.

While the government does wield some influence over web traffic, the principle of net neutrality on the federal level prevents government agents from censoring content on the Internet. Furthermore, even if the government did make an exception for gambling sites, it would be like playing a game of Whack-a-mole. The very hour that internet service providers blocked access to one site, another would spring up in its place.

The likely futility of these enforcement efforts determines the will to attempt them. Without assurances of probable successful prosecution, the attempts are seen as wastes of resources.

Shifting the onus for enforcement of gambling laws from state to federal agencies doesn’t come with a guarantee of more effectiveness in terms of limiting unregulated activity. Additionally, doing so might be premature.

State-level law enforcement needs time to show its quality

The wheels of justice do often turn slowly despite how many bemoan that fact. To some degree, that is a positive aspect.

When considering depriving a person of their liberty and rights, prosecutors should have to build an airtight, solid case that laws were being violated. At the same time, legal online gambling and the various statutes associated with it are quite new in many US states.

For example, regulated online sports betting in New York is merely in its third year currently. There are some signs that state bodies can be effective in deterring unlicensed gaming activity, too.

New York’s regulation of online sports betting was sufficient to convince offshore operator Bovada to voluntarily stop accepting deposits from residents of the state. Since then, threats of enforcement actions against unlicensed online casino operators in Michigan have had a similar effect.

Layered issue needs response from society as a whole

Before calling the efforts of state regulators and law enforcement officials to curtail illegal gambling a failure and tossing the responsibility to federal agencies which have shown little will or ability to enforce the laws that are on the books, state agencies should have ample opportunity to prove their competence or the lack thereof.

Illegal gambling is a problem, and it could be robbing states of billions of dollars in economic activity. Unregulated online gaming is also a public health concern as it poses a danger to people who struggle with gambling-related behavioral pathologies.

There is no simple solution to this problem, however, like just putting it in the federal government’s hands. Interventions from many facets of society, public and private, are necessary to halt the damage.

While federal and state governments can play a role in those interventions, real change will come from the millions of people behind those IP addresses in Yield Sec’s survey choosing not to gamble illegally.

Derek Helling Avatar
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Derek Helling is the assistant managing editor of PlayUSA. Helling focuses on breaking news, including finance, regulation, and technology in the gaming industry. Helling completed his journalism degree at the University of Iowa and resides in Chicago

View all posts by Derek Helling

Derek Helling is the assistant managing editor of PlayUSA. Helling focuses on breaking news, including finance, regulation, and technology in the gaming industry. Helling completed his journalism degree at the University of Iowa and resides in Chicago

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