Legislation that will legalize and regulate online gambling can have major fiscal and business benefits for the U.S., and Nevada should consider leading that revolution.
About 10 years ago, international poker sites like Party Poker began popping up and taking bets from American players. While the American government heavily frowned on the activity, it could take no legal action because the sites were offshore.
Poker is exempt from the Federal Wire Act of 1961 because it is considered a game of skill and not a game of chance. But what prohibits the U.S. from taking advantage of online poker betting is a law that prohibits domestic companies from using interstate wires to exchange money. There are no restrictions on foreign money exchanges, and, since 2006, about $72 billion has left the U.S. economy and been dumped into foreign online gambling sites.
Gambling is about the chances of winning. And gamblers are willing to bet real money on that principle alone. We in Nevada are no strangers to this concept. But online gambling in the U.S. can only be played for two purposes: education or one-sided betting, meaning the poker site can accept money for additional chips but not reward winnings with money.
While debates rage on in different states over legalizing online gaming, the most logical solution is to clarify and reduce the federal restrictions on returning money to the gambler. Without this legislation, money will continue to leave the U.S. and stream into overseas gambling companies.
There are several reasons why the U.S. should federally legalize the exchange of money for betting purposes: International gambling sites are already making money off of American gamblers, and none of that money returns to the U.S. in the form of business growth or tax revenue. An even bigger issue is the fact that the U.S. is losing some of the best talent and brightest minds by not allowing them to use their skills here. They are departing the U.S. for opportunities to engineer the sites and run the businesses connected to them in other countries.
The ideal solution is for the U.S. to adopt federal gaming laws that allow companies in Nevada and New Jersey, which are already regulated by gaming boards, to develop and release products nationally. Because of the states’ gaming industry knowledge, they can and should play a leadership role in establishing the technology to run the online gambling engine. Nevada, in particular, has an incredible number of entrepreneurs and gaming engineers.
This will put Nevada in a prime role in the online and dot.com revolution. Instead of the Bay area and Silicon Valley leading the way, Nevada can develop the technology and pave the way for a new online business boom. However, if money exchange prohibitions are not lifted, the U.S. will continue to miss out on large sums of taxable funds and Nevada will lose the opportunity to lead the way in online gaming innovation.
James Costa is founder and CEO of 3G Studios Inc. in Reno.
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