Economic impact at the heart of online-poker legalization debate

Legalizing online poker

A classic moral debate — regulation versus prohibition — has rekindled in California as regulators consider legalizing online poker.

Assembly Bill 2863 would "establish consumer protections and regulations for the safe implantation of intrastate iPoker in California," according to California Assemblymember Adam Gray's office. But the measure has drawn criticism from U.S. Senator Dianne Feinstein, who said that the sites have been involved in "money laundering and other crimes" in other parts of the world.

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It's one of many legislative battles over online poker in recent years that has drawn impassioned discussion from both sides, especially when it comes to the economic impact.

Proponents argue that a sin-tax type model could bring revenue into communities. Right now, gamers "have no choice" but to play on unregulated sites, professional poker player Jason Somerville told CNBC's "Power Lunch" on Tuesday.

"I personally have lost tens of thousands of dollars on unregulated online poker sites that have just vanished in the middle of the night," Somerville said. "I think it's the government's responsibility to tax and regulate it."

But James Butler, executive director of the California Coalition Against Gambling Expansion, argues there could really be an economic loss when problems he's seen associated with gambling — such as crime, unemployment and bankruptcies — are accounted for.

"If they truly are arguing that we need to protect these people from themselves, then the state of California needs to say, 'We're going to enforce the regulations we have and close these sites,'" Butler told "Power Lunch."

A 2010 discussion paper from the Philadelphia Fed attempted to review both sides of the argument, noting that net economic impact of casino gambling in a state such as Wisconsin, for instance, could have been seen as a positive or a negative depending on the degree of social costs, which are difficult to quantify.

"What happens when you take that much money out of the service economy, the retail economy, the manufacturing economy and put it in a sector that does not have the same economic multipliers?" Butler said.

But Somerville, who travels to Canada to play poker online, said his fans can't understand why betting on horse races, fantasy sports and lotteries are treated differently than poker.

"It's a beautiful American social game of wits and wagers and psychology," Somerville said.