Academics say online gambling regulation a positive thing

The publication MSU Today carried an article this week describing the US government’s attempts to control Internet gambling as “a convoluted mess” that would benefit from properly defined licensing and regulation designed to protect the consumer.

The piece references a new study by Michigan State University business scholars, who claim they are the first to estimate the costs and benefits of the Unlawful Internet Gambling Enforcement Act of 2006, and note that despite ongoing uncertainty and confusion stemming from the law, the industry has reacted positively, with the value of publicly traded online gambling firms increasing nearly 3 percent.

“The online gambling industry is at the point where it wants controlled regulation,” Mark Johnson, MSU finance professor and study co-author says.

“We conclude that both the industry and individuals – including underage and problem gamblers – would be better off if regulation exists.”

The piece goes on to give a layman’s description of the UIGEA, observing that the US Department of Justice seemed unsure of its own enforcement strategy until 2010. It covers the watershed policy decision by the DoJ in December 2011 that the 1961 Wire Act applied only to sports betting

Professor Johnson and his team studied the public value of online gaming firms in the years following UIGEA, finding that values increased when such positive signals were given. The Justice Department’s 2011 ruling, for example, was associated with a 3.5 percent boost in firm values.

The team found that globally, the online gambling market has nearly tripled in the past decade, from $14 billion in 2005 to $41 billion in 2015.

“Internet gambling is expected to continue to grow,” Johnson observes. “And while it’s unclear which types of online gambling will be and won’t be legal in the future, if the U.S. government more clearly defines ‘legal gaming,’ the benefits and risks associated with investment in all areas of the industry will be altered.”

Johnson’s paper appears in the Journal of Hospitality Financial Management.