Gambling Regulation: History Repeats Itself
Prof. Nicholas Tosney of the University of Leeds, in his short paper “Gaming in Britain and America: Some Historical Comparisons” explores how gambling regulations and taxes developed since the 16th century amidst sustained religious and moral objections.
Prof. Tosney unearths two interesting facts which steered governments in Britain and America to start permitting and taxing gambling. The facts are still valid today.
His first assertion is that challenging economic times enabled governments to sidestep moral objections and start taxing gambling. In the early 17th century England was fighting expensive continental wars and the government badly needed additional revenue, so for the first time a centralised system of taxing the manufacture of cards and dice was set up – taxing gambling directly was a step too far. As the experiment proved fruitful, taxes on cards were increased during the Seven Years Wars (1756-63) and the American War of Independence. In Nevada, USA, although some gambling was already allowed, it was the Great Depression that triggered the State of Nevada to permit “wide-open” gambling in 1931. Economic conditions outgunned moral and religious concerns.
Since the 2008-2009 “Great Recession” and the ensuing sluggish recovery, governments across the globe have been in dire need of fresh and sustainable revenue.
Online gambling has forced countries to move hurriedly to regulate so they do not lose out on the tax revenue. But the tax regime that many governments implemented, such as in France, is unnecessarily high. It seems that many legislators are unable to free themselves from the archaic stereotype of a gambling industry dominated by Bugsy Siegel and Al Capone instead of focusing on an industry that employs brilliant statistical modellers, innovative software designers, and uses state of the art technology.
Where gambling and betting is regulated, the sector is an important contributor to GDP growth. In Australia, where it has also reached a degree of maturity, the sector is larger than overall alcohol sales and makes up 3% of household consumption. It also provides Australian states with around 10% of their revenue.
But even if the regulatory framework has progressed, the prohibition/ permission dichotomy has not moved much beyond the 16th century.
In the last three decades economic and social policy has moved markedly towards market oriented solutions in the West as much as in the East. But this policy adaptation has not been extended to the gambling industry. Even the EU’ most successful steps were in creating a single market where services and people were free to move without hindrance. Well, not all services, because the gambling industry was not allowed to exercise this freedom by several member states.