Talk of a Sheldon Adelson
-backed lame duck attempt to ban regulated online gambling
has heated up
over the last week.
That attempt – The Restoration of America’s Wire Act (RAWA) – is reportedly in play as a possible rider to a must-piece pass of legislation such as the cromnibus.
Most media coverage focuses on RAWA’s juicy storylines – Harry Reid allying with Adelson? A casino billionaire pushing a gambling ban?
But that glosses over the actual impacts RAWA would have should it become law: risking thousands of jobs and millions in tax revenue while doing nothing to decrease the demand for or availability of online gambling.
How passing RAWA would cost thousands of jobs
As written, RAWA would immediately render the regulated online casino industries in New Jersey, Nevada and Delaware illegal under federal law.
Regulated online casinos directly employ hundreds
Online poker and casino sites are labor-intensive operations – especially in highly-regulated, newly-launched markets where companies are battling for share.
As such, the regulated online casino industries in those states directly employ hundreds of people:
- New Jersey law requires top-level customer support, accounting and fraud prevention positions to be located in the state.
- All three states require gaming servers to be located within the state, creating more positions related to upkeep and oversight.
- Other core functions – such as marketing, compliance and business development – add to the total of high-quality, skilled jobs that are necessarily domestic.
Atlantic City has shed some 7,000 jobs in the last year. Why are Adelson and his supporters so intent on pumping that number even higher?
Thousands of additional jobs connected to industry
Regulated online gambling supports thousands of additional jobs via the broader economic ecosystem surrounding the industry:
- Companies like Geocomply that provide geolocation services to regulated operators.
- Companies like Sightline that provide payment processing solutions.
- Companies like CAMS that support identity verification and similar functions.
- Dozens of media outlets and similar entities profit from marketing spend by regulated online casinos.
- Hundreds of registered independent marketing affiliates draw revenue from promoting regulated online poker and casino sites.
How passing RAWA would cost states millions in tax revenue
Regulated online gambling is already pumping millions of dollars into state coffers.
RAWA would immediately halt that badly-needed revenue flow.
Online gambling will generate $20 million in direct tax revenue in 2014
- Through October, New Jersey had booked $15.3mm in direct tax revenue from online gambling operators for 2014. The state’s final tally for 2014 will be around $18mm.
- Delaware is on pace to collect nearly $2mm in tax revenue from operators in 2014.
- Nevada, which offers online poker only, will realize between a half a million and a million in tax revenue in 2014.
Indirect revenues add up to tens of millions more
I’d argue that $20mm for states is real money worth protecting.
But the tax benefits for states continue beyond the direct revenue paid by operators:
- States realize substantial tax revenue from job creation (and are saddled with a larger cost when jobs are lost).
- States realize income tax revenue from players who win at regulated casinos (such as this $1.3mm jackpot winner).
- States realize material revenue from economic activity surrounding regulated online gambling. Consider the benefits that flow to the state from deals like Party Poker’s multi-million dollar marketing partnership with the NJ Devils and Philadelphia 76ers.
Why online gambling would continue even if RAWA passes
The irony of it all is that RAWA won’t even stop online gambling in the United States. Why?
RAWA contains a litany of carve outs
Hype aside, RAWA is far from a blanket ban on wagering online. In fact, it contains a number of carve outs.
Should RAWA become law, you will still legally be able to:
- Place online bets on horse racing in the majority of states.
- Place real-money wagers on fantasy sports.
- Bet online using closed-circuit systems for gambling – such as the mobile blackjack and casino games Mr. Adelson offered his guests at the Venetian.
And the political reality is that, to become law, RAWA will likely have to expand that list to include even more carve outs – certainly the lottery, for one.
RAWA does not curb the black market
Politically-motivated carve outs aside, RAWA provides no additional tools, resources or funding for US officials to address the issue of black market online gambling.
Literally hundreds of unregulated online casinos, sports books and poker sites – located offshore and beyond the reach of US authorities – will continue to accept American wagers if RAWA becomes law.
And those sites have none of the age verification, identity verification, consumer protection or anti-money laundering systems that regulated sites are required to utilize by law.
There’s a reason why an incredibly diverse coalition opposes RAWA, and why RAWA’s supporters are generally limited to those benefiting from Adelson’s financial largesse.
It’s bad policy that will kill jobs and cost real revenue while doing nothing to solve the problem it purports to attack.