Legalizing online gambling could hit economy hard

Posted by Emma Woollacott

Legalizing online gambling could have dire consequences for both individuals and the economy, a University of Illinois professor says.

John W Kindt says he expects a bill legalizing online gambling to be floated by outgoing House Democrats on the pretext of revenue generation.

"The Unlawful Internet Gambling Enforcement Act, which increased the sanctions against outlawed online gambling, was passed just prior to the Republican lame-duck session of 2006," said Kindt, a professor of business and legal policy.

"Some of the most vocal advocates for the legalization of online gambling don't like the 2006 law, and would like to see it repealed before the Republicans take control of the House in January."

Keenest is Rep Barney Frank, the Massachusetts Democrat who chairs the House Financial Service Committee. Frank points out that legalization would give the government the opportunity to tax what could potentially be tens of billions of dollars in revenue.

"Barney Frank is going to try and run the table on every piece of gambling-related legislation he can push through before he loses his supermajority," says Kindt.

But Kindt reckons that legalization would further destabilize the financial system and could have dire consequencies for individuals.

The social costs include an increase in personal and professional bankruptcies, up anywhere from 18 to 42 percent, as well as an increase in crime by at least 10 percent, he says.

"Legalizing online gambling is basically creating a huge social problem where none existed before," Kindt said. "All of these social consequences create huge demands on states and municipalities. In particular, social services and law enforcement really suffer."

He says gambling also cannibalizes from the consumer economy by taking money out of consumers' pocketbooks.

"In high gambling areas, people buy at least 10 percent less food and 20 percent less clothing, because they're raiding their bank accounts in order to gamble," Kindt says. "The banks are losing liquidity and money while children are losing food and clothing, and their parents are going broke."

Kindt is particularly concerned about the ability to put a gambling or casino app on a smart phone.

"That would truly be a killer app, because the number of personal bankruptcies and people addicted to gambling would just absolutely soar," he says.

Illegal online gambling in the US has been estimated to be worth as much as $5.8 billion in 2007.