CHAMPAIGN, Ill. – Legalizing online poker and other Internet betting would be a high-stakes loser for the still-sputtering U.S. and global economies, a leading national gambling critic warns.
University of Illinois professor John W. Kindt says financial markets would be flooded with investors seeking to cash in on the lucrative new industry, creating a speculative bubble more dangerous than one that spawned the 2007 sub-prime mortgage meltdown.
“With the sub-prime crisis, at least there was real estate left in its wake, though undervalued,” he said. “With gambling, there are no assets at all. Money just changes hands, leaving nothing behind to rebuild on.”
Kindt says a renewed push in Congress to overturn the decades-old ban on online gambling is eerily similar to legislation enacted in 2000 that repealed other anti-gambling laws. The repeal paved the way for betting by means of credit-default swaps, fueling a wave of risky mortgages that sparked a deep global recession.
“Congress must not make a similar mistake by repealing the ban on Internet gambling,” he said. “Instead, the U.S. and its G-20 partners should be taking the lead to stabilize the world economy by expanding bans to other countries.”
About 30 nations now emulate the U.S. ban, but likely would follow suit if Congress enacts a bill approved July 28 by the House Financial Services Committee that would legalize online poker and other non-sports betting, said Kindt, a professor of business and legal policy who has studied gambling for more than two decades.
He says history shows the economic perils of online gambling are real, not conjecture. The London Stock Exchange, which permits trading of online gambling shares, saw those stocks plunge by $7 billion in one day after the U.S. strengthened its ban on Internet gambling in 2006, with many shares becoming worthless within hours.
“Do people want their 401(k)s back and a stable economy or do they want to gamble away what’s left by legalizing Internet gambling?” Kindt said. “Just because you don’t gamble yourself doesn’t mean you aren’t going to lose money.”
The U.S. would also pay steep social costs if online betting were approved, including increased gambling addiction, bankruptcies and crime, he said.
“It’s the crack cocaine of gambling, putting it in every living room, on every school desk and work desk, and on every iPhone and BlackBerry,” said Kindt, a senior editor of the United States International Gambling Report, a 3,000-page collection released in 2009.
He says the “Nintendo generation” is especially addiction prone. Studies estimate that about 4 percent of young people already are addicted to gambling and 8 to 12 percent are problem gamblers, twice the rate of older Americans.
Kindt rejects claims by gambling supporters that online betting is a matter of personal liberty that also could pump new tax dollars into the nation’s sagging treasury.
“The same arguments could be made about illegal drugs, but everyone realizes the economic and social costs,” he said. “But people seem to forget the costs of gambling because of the multi-billion dollar public relations campaigns that the gambling industry is waging around the world.”
