U.S. could reap billions taxing Web gambling: study

WASHINGTON Wed Feb 25, 2009 6:10pm EST

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WASHINGTON (Reuters) - The United States could raise nearly $52 billion in revenue over the next decade by lifting a three-year-old ban on Internet gambling and taxing the activity instead, according to a study.

Gambling supporters hope the new analysis prepared by accounting firm PricewaterhouseCoopers will help propel efforts in Congress this year to repeal the 2006 Unlawful Internet Gambling Enforcement Act.

"There is a dramatic need to have a regulated system that protects American consumers. Right now, it's the Wild West," Jeffrey Sandman, a spokesman for the Safe and Secure Internet Gambling Initiative, told Reuters on Wednesday.

That group includes the London-based Remote Gambling Association, which represents European online companies that lost billions in market value after Congress passed the 2006 law and they withdrew from the U.S. market.

The legislation attempted to squash online gambling in the United States by barring businesses from knowingly accepting payments in connection with unlawful Internet gambling, including payments made through credit cards, electronic fund transfers and checks.

But PricewaterhouseCoopers' latest estimate of how much the United States could raise from regulating and taxing Internet gambling is about 22 percent higher than it was in 2007 because U.S. online gambling has grown despite the ban, Sandman said.

The accounting firm's study was specifically done for UC Group, an online payment service company that would benefit from U.S. action to legalize Internet gambling.

House of Representatives Financial Services Committee Chairman Barney Frank plans to reintroduce a bill this year to overturn the 2006 ban, which was approved when Republicans still controlled both houses of Congress and Republican George W. Bush was in the White House.

Gambling advocates hope the U.S. government's need for new revenue in the aftermath of huge bailout and stimulus packages will boost chances for Congress to replace the ban with new measures to regulate and tax online gambling.

The threat of a possible European Union trade challenge also could improve the bill's prospects this year.

The Remote Gambling Association accuses the U.S. Justice Department of singling out European online gambling companies like PartyGaming and 888.com for prosecution while allowing U.S. companies to operate freely.

The European Commission, acting on industry petition, began a formal investigation into that issue last year and is expected to release a report next month saying it has grounds to take action at the World Trade Organization.

Anurag Dikshit, a founder of PartyGaming, pleaded guilty in December to Internet gambling charges and agreed to pay $300 million in fines. He still faces possible jail time under a deferred sentencing arrangement.

EU industry officials said the pressure on Dikshit to make a deal showed the Justice Department had crossed a major line in its prosecution of cases.

(Reporting by Doug Palmer; editing by Matthew Lewis)

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