Legalisation of Online Gambling the Way to Go

When students are taught about the role of the public sector in a mixed economy, they are often taught that one of the demerit goods that governments ban is online gambling and, frankly, any sort of betting apart from de facto state-run lotteries like the Mark Six in Hong Kong. Betting is classed along with other demerit goods like cigarettes and drugs. While smoking and drug-taking are genuinely harmful, I believe that governments (particularly in the EU) which are considering the legalisation of online gambling should go through with it.

In the current economic climate with many governments struggling with large budget deficits, online gambling has suddenly become a very promising potential revenue source. Europe, the largest online gambling market in the world, accounts for US$12.5 billion of the industry's US$29.3 billion total revenue this year (Source: H2 Gambling Capital). Taxing this revenue could spell billions of dollars of revenue for cash-strapped governments. Italy, which has only partially liberalised the online gambling industry earned Euro150 million in tax revenue last year.

One of the biggest arguments against liberalisation is that it hooks young people in much the same way as a social drug. However, the point is that online gambling is rampant anyway in countries like the US and China where it is de jure illegal. Governments can't stop it so at least they should tap it to gain something from it. As for the addicted gamblers, regulating the industry would go some way to protecting them.

I also believe that it is hypocritical (of some EU countries in particular) of governments to ban gambling yet keep their own state-run casinos and lotteries running. One the one hand, they talk loudly about the need for free trade, implementing organisations like the WTO as well as forming trading blocs. And on the other hand, they use the bans as a way to protet their state-run gambling institutions. In the name of freer trade and consistency of values, online gambling should be legalised.

For these reasons I feel that governments must legalise online gambling sites. With countries like Germany, Spain, Switzerland, and Greece considering liberalisation, the outlook is good for this industry.