Jeff Haney, at an IRS seminar, explores the debate over expanding legal sports betting

By Jeff Haney (contact)

Wednesday, May 21, 2008 | 2 a.m.

A story in Philadelphia magazine a few years ago detailed the travails of federal law enforcement as it built cases against the local branch of La Cosa Nostra.

At one point, the article’s author speculated that perhaps the government was overly obsessed with the mob — “or what’s left of it” — and asked, “Why not legalize gambling and let the IRS extort the bookies?”

Photocopies of the story could be found at an Internal Revenue Service seminar on federal excise taxes last week at the MGM Grand, where that very issue — legalizing sports betting — dominated the discussion at one session.

Two days before Delaware’s House of Representatives passed a bill that would allow betting in the state on pro and college sports, Howard Schwartz of the Gambler’s Book Shop told the gathering of IRS workers they were leaving money on the table by not supporting the expansion of sports betting.

Schwartz noted that bookies operating illegally fail to pay about $7 billion a year in federal wagering excise taxes, according to an IRS estimate based on the National Gambling Impact Study Commission.

“You’re kicking in too many doors right now,” said Schwartz, proprietor of the 44-year-old store for gamblers at 630 S. 11th St. “There’s so much going on in the world today. People just want to go home, relax and watch a ballgame. And they want to have some action on it. Let them have the action on it.”

In Schwartz’s model, once a state approved sports betting, prospective legal bookmakers would undergo background investigations before being licensed and taxed at a “reasonable” rate.

“You’re missing out on a lot of money,” Schwartz said. “I can understand that there’s some logic to (the argument stating), ‘OK, you’re gambling, gambling (proceeds) are used to buy drugs, drug money is used for guns, guns are used by terrorists.’ But that’s kind of stretching it.

“Among sports bettors, very few become mass murderers. They’re too busy betting. They’re betting, watching games, talking about it, planning their next bets. People are using their minds, they’re escaping reality for a little while and they’re having fun.”

Doug Dunlap, a supervisory forensic examiner with the FBI, warned that even widespread legalization would never wipe out underworld bookies, primarily because they extend credit to gamblers but also because they are often more convenient and sometimes offer better odds.

Others attending the seminar wondered whether instances of compulsive gambling would increase if legal sports betting became more widely available, a concern addressed by David Schwartz, director of the Center for Gaming Research at UNLV, another speaker at the session.

Schwartz said he has read reports that place the number of compulsive gamblers in society between 1 percent and 10 percent of the population, though he figures about 2 percent is the most credible figure.

“There are a lot of horror stories, and they are bad,” Schwartz said. “But we live in a country with 300 million people, so even if it’s 2 percent of the adult population, that’s a lot of people with horror stories.

“The question is, do we prevent 98 percent of the population from doing something that’s enjoyable to them because of that 2 percent? That’s a moral, ethical question that I can’t tell you how to answer.”

Another common anti-sports-betting view was expressed by NFL spokesman Brian McCarthy when he told The News Journal of Wilmington, Del., regarding the possibility of sports betting in the state, “Simply put, gambling and sports do not mix. Sports gambling threatens the integrity of our games and all the values they represent, especially to young people.”

When an IRS agent attending the seminar at the MGM expressed a similar concern, Las Vegas’ Arne Lang rejected the argument even as he remained ambivalent on the topic of expanding legal sports betting.

“Do I believe sports betting should be legalized as it exists here in Nevada?” said Lang, the author of the 1992 book “Sports Betting 101,” which was distributed to IRS agents at the seminar. “I’ve been thinking about it for 30 years, and I’m not sure. I haven’t made up my mind ... (but) I do not think it would affect the integrity of sports.”

Lang did have a distinctly modern-day reservation, though: More sports bettors across the country losing more bets could lead to an increase in the number of “knuckleheads” spewing vitriol on the Internet — like the guy who wrote after the Kentucky Derby that if we’re going to euthanize second-place finishers, we should start with the University of Memphis basketball team.

Now that, Lang said, sounds suspiciously like someone who lost a bet and is still bitter about it.

“That’s what bothers me,” Lang said. “When an athlete makes a bad play at a crucial time, there are people who attack them anonymously on the Internet. You would probably get more of that if there was widespread legalization of sports betting.”