There is a new danger lurking on teens’ smartphones – online gambling. As a father and the former attorney general of Nebraska, I’m appalled at how easy it is for kids to get access to online gambling sites and rack up tremendous amounts of debt. There’s a huge risk of gambling addiction and it can be found right in their pockets.
With the Supreme Court’s recent decision to toss the federal sports betting ban, kids will now be able to use their phones to bet on their favorite sports team. Several states have already legalized online gambling and sports betting and even more are considering it next year with hope of generating tax revenue.
But let’s be clear, the only pot at the end of the sports-betting rainbow is filled with fool’s gold. Sports betting is a low margin venture. Nevada sports betting only generated $18.5 million of the nearly $800 million total gambling tax revenue collected. That’s less than 3 percent.
While sports betting was only legal in Nevada before the Supreme Court tossed the federal ban, over 90 percent of all sports betting took place outside of Nevada. Illegal operations — such as offshore sites and local bookies — do not pay taxes, have no compliance costs and do not report winnings to the Internal Revenue Service. As states begin to tax sports betting, gamblers will be driven to these illegal operations which offer bigger bonuses, better odds and more “free play.”
What’s worse, these illegal sites can be found on any smartphone, tablet or laptop and it is virtually impossible to pinpoint a player’s location. The anonymity afforded makes online gambling even more dangerous. An inability to regulate this online environment creates opportunities for online gambling companies to defraud players and launder money for nefarious purposes.
The foreign companies running these online gambling sites fully understand the difficulty of prosecuting illegal online gambling. Without exposure to a federal investigation, there is little incentive for these companies to invest in proper safeguards to prevent gambling by users in states where online gambling is prohibited. In fact, there is a distinct disincentive given that illegal gambling by out-of-state users lines the coffers of the foreign company.
The Federal Bureau of Investigation has warned Congress that “online casinos are vulnerable to a wide array of criminal schemes,” and “may provide more opportunities for criminals to launder illicit proceeds with increased anonymity.” Additionally, the Justice Department informed Congress that “Internet gambling carries a potential for fraud and money laundering.”
State law enforcement agencies simply lack the resources and legal authority to protect our citizens from online criminal ventures operating in the Caribbean. That’s why it is so critical for the federal government to restore and enforce the Wire Act and other federal gambling laws to prevent illegal online gambling sites from exploiting the expansion of sports betting.
Parents can take some solace in the fact that the House Judiciary Committee recently held a hearing on sports betting where they recognized the significant threats of online gambling to children and gambling addicts. Without federal guardrails to protect Americans, we’re exposed to the same issues currently facing the United Kingdom. House Judiciary Committee Chairman Bob Goodlatte (R-Va.) and Rep. Jim Sensenbrenner (R-Wis.), who chairs the panel’s subcommittee on crime, terrorism, homeland security and investigations, explained that more than half of 16-year-olds in the U.K. have gambling apps on their smartphones, while two out of three of those teens say they feel “bombarded” by online gambling advertisements. One particularly troubling report involved a 13-year-old British boy who lost more than $140,000 on betting apps with his father’s credit card as “it was just far too easy … it took literally seconds to register and start gambling.”
In the United States, the industry is already targeting our kids and addicts. Earlier this year, Business Insider found online casino ads on websites intended for children and problem gamblers in search of help to overcome their addiction. Online casinos have also placed advertisements in front of young Green Bay Packer fans searching for details on local NFL Play60 programs.
More than 50 percent of the U.K.’s online gambling industry’s profit comes from addicts, making their advertisement tactics even more shameful. Other schemes employed overseas to lure children include using cartoon and storybook characters, placing online gambling links on youth soccer fan pages and listing a gambling website on a package of free jellybeans without a warning label.
The Judiciary Committee’s hearing was a good start in combating the issue, but Congress must do more. They need to restore the Wire Act, and more importantly, they need to dedicate significant federal resources to crack down on illegal online gambling and sports betting sites. Online casinos will continue to prey on our most vulnerable, and we need to fight back with the same vigor.
We would never send our kids to a casino with a fake ID and our credit card. But in allowing illegal online gambling companies to exploit our kids with no threat of prosecution, that’s exactly what Congress is doing.
Jon Bruning is a former Nebraska attorney general and president of the National Association of Attorneys General. He is managing partner of Bruning Law Group and is counsel to the Coalition to Stop Internet Gambling.
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