On Wednesday, the House Ways and Means Committee will hear testimony about the potential tax benefits of legalized Internet gambling. Given the current fiscal climate, a discussion of dollars makes sense. But the consumer protection concerns raised by Internet gambling are far more imperative.
Internet gambling is not a new issue for Wired Safety. We first identified online gambling as a problem in 1997 when kids, even then, were gambling online using birthday money or money earned babysitting and delivering papers. And when things went wrong, they contacted us. Not only did we hear from parents and kids, when websites failed to payout or acted fraudulently, we also heard from many average Americans from college students to senior citizens. We helped when we could and devoted resources to educating all online users about the risks of Internet gambling. But Internet gambling continued to be a problem, as steady increases in reported fraud, rigged games and collusion using old-fashioned schemes upgraded for the digital age continued to proliferate. Today, there are no legally mandated safeguards against criminals using these sites to launder money or spread malicious code and spyware. Effective protections against problem gambling are virtually nonexistent on these sites.
After more than a decade analyzing the risks posed by unregulated Internet gambling, ironically, we have reached the conclusion that the best way to protect families and consumers from illegal online gambling is through legalization. Prohibiting online gambling and pretending it does not exist in an interconnected world is no longer realistic. Sadly, the statistics reflect the real truth; Americans spend approximately $6 billion per year on Internet gambling and that figure is on the rise. According to recent studies, more than 700,000 teens and young adults between the ages of 14 and 22 gamble online at least once a month.
The unintended but inevitable result of the current U.S. legal approach to Internet gambling is to force millions of American consumers to offshore sites out of the reach of U.S. courts and regulators, exposing them to significant risks without effective legal recourse. Prohibition isn’t working now any better than it did during the days of Al Capone.
The only way to approach this, effectively, is through a carefully-crafted combination of strong regulations that set and enforce legal compliance of the entities qualifying for U.S. Internet gambling licenses. Such regulations should include: auditing of the fairness of the games and player practices, enhanced security tools and technologies for age verification, consumer education, parental control technologies, effective dispute resolution systems and recourse against fraud, and problem gaming technologies and help resources.
Unless we take this approach the U.S. will continue to find itself in the unfortunate position of incurring all the social costs of online gambling while having abdicated control over the gaming sites accessed by its consumers. While all gambling is, by its nature risky, and something Wired Safety does not endorse either online or offline, unregulated gambling is substantially worse. We need well-thought-out help from government. The status quo offers no way to protect U.S. consumers. Yet, strict and smart regulation coupled with state-of-the-art security and technology can offer significant improvements to the risks consumers face, as well as all risks associated with Internet gambling.
As U.S. citizens, finding new sources of tax revenue is enticing, but Congress’ primary focus when it comes to Internet gambling should be protecting families and consumers through a legal, legitimate, licensed and regulated Internet gambling industry. Fortunately, this is one of the few issues facing Congress where the answer is good for the economy and good for consumers—a win-win.
Parry Aftab is an Internet privacy and security lawyer, author, award-winning columnist, consultant, public speaker and child advocate. Her website is aftab.com and wiredsafety.com.