Study Shows US Regulatory Regime Could Generate Billions

Internet gambling in the United States: regulated and taxed. A big-bucks proposition? One study says it could be.

Recently, PricewaterhouseCoopers (PWC) was retained by law firm Alston & Bird, counsel to UC Group, to estimate the federal revenue effect of two bills currently before Congress: Rep. Barney Frank's H.R. 2046 and Rep. Jim McDermott's H.R. 2607, also known as the Internet Gambling Regulation and Enforcement Act and the Internet Gambling Regulation and Tax Enforcement Act, respectively.

Briefly, Frank's bill would create a regulatory and licensing regime in the United States, while McDermott's bill would serve as a "companion bill" to Frank's and impose a fee on companies licensed to provide I-gaming services in the States.

Between 2008 and 2017, if the United States were with certain conditions to enact both bills, PWC estimated that revenue derived from individual income taxes, wagering tax, licensing fees and corporate income tax could total between $8.7 billion and $17.6 billion.

The first figure, $8.7 billion, represents what the study calls the "High State Opt-Out Scenario." This scenario assumes that 10 states which currently prohibit Internet gambling would decide against opting in to the federal regulatory and tax structure laid out by the two bills -- regardless of whether these states allow certain forms of land-based gambling.

The second figure, $17.6 billion, represents the "Low State Opt-Out Scenario." This scenario assumes that states do not opt out with respect to online games that are currently authorized in land-based form within their jurisdictions.

Both scenarios, though, assume opt-out on behalf of all U.S. amateur and professional sports leagues.

Were all states and sports leagues to opt in to the regulatory regime, however, PWC speculates that between 2008 and 2017, federal revenues could increase by as much as $42.8 billion.

In the study, PWC said specifically that it had not taken any position whatever in relation to the legislation. Simply put, PWC said the revenue analysis was undertaken to "provide Congress with information that may be useful in the official scoring of the legislation's revenue effects."

Of the study, McDermott, D-Wa., observed: "To be clear, these are not mostly new taxes -- the bulk of the revenues generated would come from taxes required under existing law."

UC Group, a U.K.-based firm specializing in payment processing, teamed with international accountancy firm Baker Tilly last May to launch the Safe and Secure Internet Gambling Initiative (SSIGI). SSIGI aims to educate the American public about Internet gambling, and thereby garner support for Frank's bill.

Click here to view a copy of Rep. McDermott's letter to Congress.

Click here to view a copy of the PWC study.