May.24, 2010
One of the main reasons that legislators are pushing for legal and regulated online gambling is that of taxation security. With multiple pieces of legislation being concocted over a regulated online gambling industry, the prospect has been discussed with heavy scrutiny. The most recent discussion took place in the House Ways and Means Committee, and many arguments were put forth.
Representatives Barney Frank (D-MA) and Jim McDermott (D-WA) appeared on the first panel in order to put forth their testimonies on the benefits of legalized online gambling, while Bob Goodlatte (R-VA) cited his testimony as to why online gambling should remain a shadowy, illegal racket.
A secondary panel was also present, which included Christopher Wagner, Commissioner of the Small Business and Self Employed Operating Division of the IRS, and Charles M. Steele, Deputy Director of the Financial Crimes Enforcement Network, to state facts on the online gambling industry as it pertains to the current state of affairs regarding taxation and regulation.
Frank and McDermott’s arguments kept true to the benefits of Internet gambling. Both testimonies would, arguably, stem from the lack of a regulatory body for legal online gambling. McDermott highlighted the fact that, as with the prohibition of alcohol in the 1920’s, the prohibition of online gambling is all but a failed endeavor. Hundreds of thousands, if not millions, of Americans continue to gamble over the Internet. Representative Frank chose to accentuate the fact that these online gamblers are unprotected in the event that an unscrupulous operator of an online gambling venue decided to turn to fraud or blatant thievery in regards to the player’s money.
Both McDermott and Frank offered ideas on how to not only protect gamblers from these fraudulent transactions, but also methods of taxation that could be enforced.
Frank’s testimony kept with the fact that the regulatory body would ensure that only legal bets would take place. If a form of gambling were illegal in one jurisdiction, either because of local, state, or tribal law, then the online version of these wagers would also remain illegal. Frank sought primarily to protect players and prevent money laundering and other illicit activities.
McDermott’s views on the taxation of online gambling kept with his initial idea of funding many programs with the estimated $40 billion that could be collected over the years from gambling tax. The collection of licensing fees, as well as the taxes, was stated in his testimony. Not only would each gambling operator be required to pay a licensing fee in the United States, but each deposit and all winnings would also be subject to some form of tax or another.
Bob Goodlatte, one of the major opponents to legal online gambling, also went to work in offering his testimony. His testimony included the alleged weakness of current technology in preventing money laundering and protecting minors, an allegation that has continuously been proven false by many authorities in the online gambling world. His argument also included how HR 2267 would reportedly dismiss existing laws, such as the Wire Act of 1961, as well as introduce illegal forms of betting into the United States.
The secondary panel’s arguments were based on the current structure of tax law and security measures that are in place. Both Wagner and Steele attempted to remain neutral in regards to online gambling, and simply put forth the facts.
Christopher Wagner of the IRS put forth the fact that the current taxation scheme should, in theory, cover online gambling. As with any gambling victory a player may experience in a land based gambling enterprise, a series of taxes are to be collected on gambling winnings – regardless where they were won. The IRS currently has a long list of taxes should certain requirements be met.
Charles Steele of the Financial Crimes Enforcement Network put forth his facts pertaining to security measures relating to money laundering in the gambling industry. Regardless of the reasons for a transaction, certain measures are in place to prevent money laundering in the gambling industry. Most of these measures are on the shoulders of financial institutions, though the regulatory laws for American gambling enterprises have not yet spilled over into online gambling sites, again due to the lack of a regulatory body. Still, banks are required to file Suspicious Activity Reports and similar reports when financial transactions entail shady details, international transactions, or when they exceed certain limits.
The hearing in the House Ways and Means Committee has not yet yielded results, but the USA online gambling industry has not yet been abated neither by recession nor prohibition. A full text of each testimony can be found here, as well as video excerpts of each testimony given.