Over the past two years, Congress and anti-gambling lobbyists are tightening the noose and pushing for a formal prohibition of online gambling. “Such initiatives might spring from a moral viewpoint, they are unlikely to succeed in limiting online betting, because Internet gaming operations are often located outside of the US, there is little Washington can do to restrict their actions,” says Koleman Strumpf, Associate Professor of economics at the University of North Carolina-Chapel Hill.

Professor Strumpf is referring to more than 1,800 online gambling sites most of which are located offshore in countries as diverse as Antigua, Costa Rica and Australia basically outside US jurisdiction. “Such a prohibition policy has perverse effects and encourages the behavior it seeks to curtail,” he says. He believes prohibition or restriction will only create a much large parallel or underground market for online gambling, which makes it even harder to control.

“ There is a large demand for sports betting, and a large illegal sector has arisen to provide this activity despite a long-standing policy of prohibition. A similar ban on all Internet-based sports betting also is likely to fail. A legalized regime is a better way to mitigate the potential dangers of Internet betting,” cautions Strumpf.

If Congress does make inroads and succeeds in the prohibition he expects two consequences. Firstly, there will be a growing alliance between Internet bookmakers and the more traditional illegal bookmaker. The on-street bookmakers have experience in providing and servicing financial credit, which would be difficult for the Internet books to provide given the difficulty of enforcing a debt contract from afar. “There is already evidence that Internet operations have started to pay their illegal on-shore cousins to run their credit business. Such interaction will help reinforce the influence of the illegal sector and will exacerbate the perceived problems of sports betting, such as facilitating money laundering.”

“ Second, prohibition will drive the Internet operators further from the U.S. An important feature of the Internet is that it makes physical distance largely irrelevant, and from a bettor's perspective it is just as convenient to wager on-line with an Antigua bookmaker as with one down the street.”

He advises that a far more sensible policy would be to legalize Internet bookmakers. In doing so, policies will be put in place to limit the potential excesses of gambling and minimize the role of the criminal element. Secondary benefits will include a legalized regime that will displace the widespread illegal operations.