Does Internet Gambling Strengthen the U.S. Economy? Don't Bet on It

Article excerpt

I. INTRODUCTION

Commercial gambling in the United States is a mammoth industry. In the past few decades, the United States developed from a country with few gambling options to one permitting some form of legalized gambling in every state except Utah and Hawaii. (1) A series of incremental decisions by local and state governments paved the way for tremendous growth in the gambling industry. (2) Presently, a new wave of technology affects this industry. Legislators and regulators must deal with the phenomenon of Internet gambling--once dubbed "the crack cocaine of gambling." (3)

The advent of the Internet introduced an entirely new medium for individuals to participate in gambling activities. Unlike traditional land-based casinos, the action at online casinos is perpetual and available to anyone with Internet access. (4) Many online gambling sites operate from locations such as Antigua and Belize, unsupervised by U.S. government regulators. (5) Perhaps the most frightening aspect of Internet gambling is the rampaging growth of the young industry. The Internet gambling explosion poses serious concerns to society.

This Note asserts that Internet gambling must be curbed to lessen its negative impact on the American economy. Many state and local governments are dependent on tax revenues associated with traditional forms of gambling. Internet gambling not only deprives the economy of these valuable tax revenues, but also costs the economy valuable jobs and assorted fees associated with traditional gambling. In order to lessen its negative impact on the economy, Internet gambling must be more judiciously regulated in the United States.

This Note provides a general overview of Internet gambling in Part II. Included in this section are discussions on the history of gambling, the current statutory landscape of Internet gambling, and relevant cases on Internet gambling. An analysis of the negative consequences of Internet gambling appears in Part III, followed by a discussion on viable options to curb Internet gambling in Part IV. This Note concludes in Part V with recommendations for limiting the negative effects of Internet gambling on the economy.

II. BACKGROUND ON INTERNET GAMBLING

In order to understand the impact of Internet gambling in America, it is critical to understand how this phenomenon developed. This section begins with a broad overview of the history of Internet gambling. The overview discusses the legalization of traditional gambling in America, as well as the rapid increase in Internet gambling over the past few years. Next, this section analyzes the statutory landscape surrounding Internet gambling. This portion includes a detailed discussion on four laws, or proposed laws, that impact Internet gambling. This federal legislation includes the Interstate Wire Wager Act (Wire Act) and the Indian Gaming Regulatory Act (IGRA), as well as two failed bills--the Internet Gambling Prohibition Act of 1997 (IGPA of 1997) and the Internet Gambling Prohibition Act of 1999 (IGPA of 1999). Lastly, this section considers relevant Internet gambling cases. Due to the infancy of the industry, few Internet gambling cases have been tried. The cases that exist, however, possess broad implications for the entire Internet gambling industry.

A. History of Internet Gambling

Gambling predates America. According to some philosophers, gambling began in the Garden of Eden. Some have posited that Eve ate the infamous apple to settle a bet she made with the serpent about the number of seeds in the apple. (6) In America, different forms of gambling, notably lotteries, remained popular until the 1890s when lotteries and all other forms of gambling were made illegal by direct prohibition. (7) Gambling was reintroduced to Americans during the 1920s. During this time, gambling became more accepted due to the holding of bingo sessions by churches and the building of legitimate racetracks. …