On Thursday, the Safe and Secure Internet Gambling Initiative (SSIGI) released the results of a study performed by U.S.-based PricewaterhouseCoopers (PWC). The financial advisory firm found that up to $51.9 billion over a ten year period could be added to the pockets of the U.S. Government by taxing and regulating the internet gambling industry. The internet gambling study, which is dated September 26th, 2008, comes on the heels of a similar examination performed one year earlier.
The study utilizes Congressman Barney Frank‘s (D-MA) HR 2046, the Internet Gambling Regulation and Enforcement Act. The bill provided a complete licensing and regulatory framework for the internet gambling industry in the United States, which was largely stunted by the Unlawful Internet Gambling Enforcement Act (UIGEA) upon its passage in 2006. HR 2046 generated 48 co-sponsors, but was not acted upon during the 110th Congress and now must be reintroduced for consideration. Frank told the Reuters news agency that he plans to sponsor internet gambling legislation in March.
PWC utilizes Congressman Jim McDermott‘s HR 5523, the Internet Gambling Regulation and Tax Enforcement Act. It was a companion bill to HR 2046 and imposed a licensing fee of 2% of deposits on internet gambling companies operating in the United States. HR 2046 allowed individual states, Indian Tribes, and professional sports leagues to opt out. Therefore, PWC’s two page write-up includes a wide range of scenarios. A total of 10 states – Illinois, Indiana, Michigan, Nevada, New Jersey, New York, Oregon, South Dakota, and Washington – have some form of brick and mortar gambling. Others, such as Florida and Kentucky, have legalized race tracks.
Under the scenario where only a few states opt out of HR 2046 and HR 5523, a total of $21.4 billion over a ten year period from 2009 to 2018 could be raised. This total is determined by adding up revenue derived from licensing fees ($3.1 billion), wagering taxes ($4.6 billion), individual income taxes ($12.1 billion), and corporate income taxes ($1.6 billion). This number also assumes that all professional sports leagues do not allow legalized internet gambling.
Under the scenario where a high percentage of states opt out, as do all professional sports leagues, the total that could be generated over the a year period from internet gambling is cut in half to $10.9 billion. This total is determined by adding up revenue derived from licensing fees ($1.5 billion), wagering taxes ($2.4 billion), individual income taxes ($6.2 billion), and corporate income taxes ($803 million).
If professional sports leagues did not opt out of the bill, then revenues generated from internet gambling would skyrocket. PWC asserts, “We estimate the legislation could increase federal revenues by as much as $51.9 billion over the 2009 to 2018 period in the event that no sports leagues or states opted out of the regulatory regime.” If sports leagues were to opt in, PWC expects that at least $12.9 billion over a ten year period could be raised, even if a large number of states opted out. If sports leagues opted out, but no states followed suit, then $39.9 billion could be raised.
The report assumed an effective date of October 1st, 2009. Ironically, that would come exactly two months before the financial services industry must come into full compliance with regulations of the UIGEA, which were pushed through as midnight rules by the outgoing Bush Administration.
A similar study was conducted by PWC one year ago and the latest results were generated using updated revenue projections from H2 Gambling Capital. SSIGI spokesperson Jeff Sandman commented in a press release distributed on Thursday, “We are optimistic that the Obama Administration and Congress will pay closer attention to this issue as they seek to find new revenues that can be generated without raising taxes for critical federal, state, and local government programs.”
The UIGEA was passed during the waning moments of the 2006 Congressional session and attached to the SAFE Port Act at the urging of former Senate Majority Leader Bill Frist (R-TN). The SAFE Port Act was passed by a 421-2 vote in the House of Representatives and by unanimous consent in the Senate.
