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United States Internet Gaming Economy

by Suleman
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What Impact does Sports Gambling have on the United States Economy?

Background Information

United States Internet Gaming Economy states that Gambling has been on rise with many people trying their financial fate in online sites. In most countries across the world gambling is a legalized act, allowing people to engage in such activities. Under the United States federal law, gambling is legal although there strict restrictions and regulations set to control the online gambling. Each state in the United States has the power to set regulations to prohibit or encourage the gambling practice within its jurisdiction. Examples of online gambling sites include online casinos, sports bet, lottery etc.

This paper will present a well and detailed research on the effects of gambling to the economy. The main agenda of the article is to pinpoint and analyze the economics of online gambling. Some of the issues examined include the effects of gambling on economic growth and development, the relationships among the gambling firms, the contributions of gambling to the net government tax revenue, costs of gambling, gambling and crime, gambling and political corruption and issues of cost-benefit analysis applied to gambling.

Literature Review

There are many scholars who have conducted research on gambling and its economic effects to the economy of united states. Their documentaries provide viable information on the gambling econometrics that we can refer to, to dig deep into the internet gaming environment.

Rose 1998, conducted a study for the national gambling impact study commission to appraise studies previously conducted on the economic effects of casino gambling. Her report captured both direct and indirect economic positive effects such as increased construction, improved operations and increased tax. It also captured the negative impacts such as drain on public services, crime and education interference.

Rose study excluded the social costs of gambling. Majority of jobs were relatively low paid, jobs of low skilled service, but casino workers had more chances of benefiting from health and pension provisions. She discovered that casino was the only means of employment in some areas. Taxes generated from casino activities were spent on road construction, policing and fire protection although they were not enough to fully cover the “boomtown effects”

Nichols et al 2002 used some survey data from 1999 to scrutinize people’s perception on the effects of gambling especially casino on their local economy. He wanted to establish whether positive effects outweighed negative effects. Some of the positive effects of casino he considered were revitalizing local economy, attraction of new industries and tourism increment. The negative effects included whether it led to some business closures and taking out more than it brings in to a community. Their survey found that casinos were generally seen as boosters for development of tourism industry.

Gerstein et al 1999 analyzed a variety of surveys to analyze both economic and social effects of gambling. They found that lottery and casinos are the most common type of gambling. Their findings estimated that approximately one in every two adults play lottery and about 29% of adults play casino. Further their results found that Bingo and Horserace betting had reduced within 20 years since their previous survey and more older people aged 45 years and above were also likely to gamble. The availability of casino was also likely to increase the number of problem gamblers within every 50 miles. Problem gamblers were more likely to be declared bankrupt or have been arrested or in prison.

prob gamblers costed the United States society approximately $5billion per year, in addition to $40 billion in lost productivity, general social services and creditor losses. In areas close to newly started casinos, the rates of bankruptcy, health indicators and crimes were not significantly changed. The rates of unemployment and general welfare of people decreased by about one seventh. Incomes from construction, transport, hospitality, transport and recreation sectors increased while earnings in bars, restaurants and general merchandising went down. Generally, the general community perception was that crimes, alcoholism, child neglect, forgery, credit card theft and domestic violence increased.

League Royalties

In United States, the disagreements over nationwide states gambling were easy and simple for years. Casino wanted it to be legalized but the leagues of the major sports didn’t. There is a petition in the Supreme Court and the decision of the court could reshape gambling in the United States. The leagues, professional baseball and basketball want a reduction of the profits, creating a new battle field with casinos and fueling a state versus state lobbying war.

The national basketball association and major league baseball want the court legislators to force casinos to pay the leagues one percent on all wagers that are placed on their sports. Casinos and sportsbook operators are fully opposed to this. The Supreme Court is expected to make a new ruling before the end of June, on New Jersey bid to refute the federal prohibition on sports gambling. Should this ruling on New Jersey win, it will now be the task of every state within the US to determine whether it will offer sports gambling or not, and if yes, then under what terms and conditions.

About 22 states have either introduced or have already passed the sports gambling laws and are eagerly waiting for the verdict of the court. As the state law makers and legislators hash out the details, the league and casino lobbyists have gone down to all statehouses across the country to oppose the so called integrity fee. There are many factors that puts barrier to leagues wish list entry but the fee is by far the most controversial barrier on entry.

Every league will benefit from the fee which currently stands at 0.25 percent, but so far, the NBA, and MLB have been in the forefront of the public lawmakers. While the major soccer league supports the stated fee, , the National Hockey League Deputy Commissioner Billy Daly said the NHL had no current position.

Impacts Sports Gambling has in Las Vegas

Las Vegas is rebounding. Many casino companies have been vying for licenses in Massachusetts and native American operations are progressively expanding the United States gambling industry is in pieces and it would be difficult to tell whether the house is winning. The American gaming association has commissioned, and for the first time, an economic effect report that gambling industry will have on the economy. The following are some of the importance of gambling that the association pinpointed;

A direct employment of 570 000 people, with total jobs impact of 1.7 million – including approximately 200 000 government jobs.

Revenue of $81 billion in 2013 including $30 billion from Native American Casinos.

$38 billion in taxes paid.

$102 billion in direct economic impact, and when you include all the expenditure made by the industry employees  in the general economy, the total economic effect gets to a value of about $240 billion , this value excluding the expenditures met in casino construction.

The senior vice president for public affairs of American Game Association, Sara Rayne, suggested that the gambling industry is indeed larger than the airline industry. The association says that the industry labor income has currently gone beyond its peak, hitting $25.5 billion. The consumer expenditure on gambling has maintained at its all-high value of $67 billion.

Rayne says that one of the biggest challenges is agreeing with law makers to allow the manufactures of gaming tools to move their goods across state boundaries. He suggests that game manufacturers should be mandated to go around states as they market their products. Such freedom will even amount to much economic benefits to United States.

Economic Effects

the increased legal gambling in the united states have been boosted by the by the increasing public acceptance  of gambling as partly a form of recreation and by the promise of economic benefits and tax revenue benefits that would follow to the communities in which the gambling is carried out.. The benefits are straightforward and they include;

  • increased employment
  • increased revenue
  • Increased tax revenues
  • enhanced tourism
  • enhanced recreational opportunities and
  • rising property values

the American communities have seen more positive effects of gambling compared to the negative effects. Gambling has also led to economic and social costs to people, families and even communities. examples of these costs include traffic congestion, the urge for more public infrastructure and social amenities such as roads schools, police, fire protection etc., increased crimes, problem gambling and environmental effects. It may lead to pathological gambling which is known to cause bankruptcy and bad debts, which raises the economic credit costs.

The main question here is whether the benefits to the economy are greater and if so, by how much. The answer to this can be determined theoretically with benefit-cost analysis. However, social and economic benefits may be difficult to quantify especially for intangible social costs such as emotional and psychological pain or other losses met by family members of a gambler. In addition, productivity losses of pathological or problem gamblers may be difficult to measure. The following are positive and negative economic impacts of gambling;

Positive Economic Impacts

Gambling such as casino provides more job opportunities for local employees. Majority of gambling jobs are relatively low-skilled, low-paying service types although there is evidence that they receive higher than some other occupational groups. In some areas, casino is the only opportunity of employment

Economic development is a multifaceted phenomenon that considers numerous concerns which are not captured by conventional income statistics. Per capita income is a measure for economic well-being of individuals in a given state. Per capita income grew nearly 5 percent faster in counties with casino compared to the counties without them.

Gambling is a powerful economic tool for development-states with gambling activities gains a more amount of taxes from gambling industry. If for example casino is opened in a specific place, more business hotels, parks are likely to do better.

Negative Economic Impacts

Gambling activities also has negative impacts such as;

  • Consumption of public services such as sewers and road maintenance.
  • Gambling activities and philosophies affects business principles and economic development.
  • Gambling activities affect education negatively.
  • They increase social-economic costs and reduce the quality of life
  • Gambling is also addictive
  • States in United States that with gambling

Gambling in United States especially the sport betting is now legal in various states while many others are just watching. Just some few months after the Supreme Court overturned a law prohibiting the states from sports betting, several states have begun accepting wagers. Some states have already legalized it while others are considering it.

The American gaming association, which is a gambling trade group in the united states, have estimated that there are about 4150 BILLION ILLEGAL SPORTS BETTING market in the united states, which provides a solid evidence that sport betting is already occurring. But the nature, regulations and conditions of gambling may vary state by state in America. Some legislators are insisting on mobile gambling while the others are just relaxing waiting to see what will happen in the gambling industry.

Some states such as Pennsylvania and Rhode Island have considered high taxes while legislators in some other states have opted for the controversial integrity fees to be paid to sport leagues for monitoring and keeping the betting activities under surveillance.

The following is a list of countries with legalized sports betting, however not all have begun accepting wagers yet.

  • Nevada,
  • Delaware,
  • New jersey,
  • Pennsylvania,
  • West Virginia,
  • Mississippi,
  • Rhode Island,
  • New York

In some other states, gambling bills have been tried, they include;

  • Michigan
  • California
  • Connecticut
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maryland
  • Missouri
  • Ohio
  • Oklahoma
  • South Carolina

Other countries have not taken any action yet. Examples of such states include;

  • Washington dc
  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • Colorado
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Maine
  • Massachusetts
  • Minnesota
  • Montana
  • New Hampshire
  • New Mexico
  • North Carolina
  • North Dakota
  • Oregon etc.

The following is a summary of the number of states with gambling;

  • Casinos; 22 states and most native land
  • Sports betting; Nevada, Oregon, Delaware, Montana
  • Horse racing (in person);all states
  • Horse racing (online); 38 states)
  • Fantasy sports; 40 states

It is worth noting that online gambling that isn’t licensed by the state is illegal, but if caught or known, penalties are usually charged on the payment processor rather than the better or the gambler.

Is Online Gambling Safe?

Many people are naturally concerned about the safety of their finances, and possibly their private information when using the gambling sites. Considering an economic concept of risk-return trade off which stipulates that, no gain without risk, it is pretty confusing on how you would recommend a person about gambling.

Definitely, to gamble one must table or deposit some funds prior, but there are chances of losing or winning which actually balances. Many people today are gamblers especially the youth. Gamblers have different motivations. Some gamble as a mean of recreation while others gamble to earn money. Whatever the category, gambling should be done with moderation to avoid financial frustrations upon loss. Much gambling has amounted to the problem and pathological gamblers. These categories of gamblers have created social and economic problems to their family members, community and even to their states.

Ultimately, gambling without control or limit is dangerous, possibly being the reason why United States is ambivalent about the gambling laws, whether to legalize it or not. However, all of us must risk if at all we need to get to another level, and surprisingly everything we do in life is all about risking.

Results

There are seemingly disagreements in the betting industry of United States. Some countries have already legalized betting after the Supreme Court judgment while many American states are just reluctant and are only using a wait-and see approach. When weighing both the positive and negative impacts of gambling, it is clear that positive impacts outweigh the negative impacts.

As it has already been discussed above, there are so many economic benefits that are experienced by states that have legalized gambling, not forgetting the negative effects. Gambling industry attracts a alarge pool of betters who anticipates to risk their money and possibly multiply it in order to increase the cash at their disposal.

Conclusion

Gambling industry should be legalized in all states because they contribute to overall economic growth and development. These industries are among the major firms that attracts a large pool of customers and employees. They also give high returns to the investors and economic benefits accrue to the whole economy. However, gambling industries should be closely monitored by enacting effective laws because they are prone to causing some negative effects to the welfare of people.

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