III. Lost        Revenue

 IV. Organized
       Crime

 V.   Ban or
       Regulate?

Lost Revenue

Federal Level

Legalized forms of gambling in the United States are subject to strict revenue reporting regulations. U.S. casinos must file tax returns for their own revenues, and when a gambler wins more than a set amount ($600 to $1,500, depending on the type of game) they must submit the gambler's personal information and the exact amount won. In addition, for winnings of $5,000 or more, the casinos will automatically withhold 25% of the payout for taxes. In the world of online gambling, however, there is no comparable regulatory schemes in place. This in effect facilitates tax avoidance by casinos and winning gamblers and results in a significant amount of lost tax revenue to the federal government.

       References:  

• Yolanda Roche and Roger Roche, The Taxman Cometh, at http://www.casinogaming.com/features/taxlaws.html
• Kay Bell, Reporting gambling winnings, deducting losses, Feb. 6, 2006, at http://www.bankrate.com/brm/itax/tips/20010131a.asp

State and Local Levels

Many states have instituted certain forms of gambling—state lotteries being the most common—to raise revenue for public interests such as school systems and highways.  These systems are typically approved to help meet budget deficiencies within the government.

Online gambling threatens these establishments because many individuals choose to spend their money gambling on the internet in lieu of state-sponsored forms of gambling.  This increased competition leads to lost revenue at the state and local levels.

       Reference:  

• Tech Law Journal , Net Gambling Bills Protect Established Gambling Interests, at http://www.techlawjournal.com/internet/19991025b.htm