The Economic Incentive Behind the Unlawful Internet Gambling Enforcement Act

Abstract:     
This piece looks at the difference between the stated and underlying purposes of the Unlawful Internet Gambling Enforcement Act of 2006. While the Act's proponents cite protecting family values and preventing money laundering and terrorism as the motivation for the legislation, the underlying purpose of the Act seems to be economic in nature. The number of Internet gamblers has grown in recent years to over twenty million, with as much as eighty percent of players residing in the U.S.. Further, because of Federal laws prohibiting domestic remote gambling, most, if not all Internet gambling companies operate outside of the U.S.. Consequently, American money is constantly leaving the U.S., being deposited at off-shore sites, and the government misses out on tax and other revenue from this lucrative phenomenon. While the Act's supporters claim that it is in the interest of family values, legislators promoting the Act recognize the profit that is made from Internet gambling outside of the U.S. and want to keep that money in the country to stimulate the domestic economy. If the Act were solely about protecting the morals of society, it would have banned all gambling; instead, the Act carves-out exceptions for State lotteries, horseracing, gambling on Tribal land, and fantasy sports. This Act has several stated intentions, yet one unstated purpose: to exclude foreign gambling entities while allowing domestic gambling to continue. Although the Act does not make Internet gambling illegal, keeping Americans from funding their online accounts does just that.

Working Paper Series