why was this law passed?

[westmt01]

You used the key word: "State". The government gets a piece of all those activities. Of course if Congress had been smart enough to regulate online gambling instead of trying to squash it, the federal gov't would make money (tax revenue), B&M casinos would make more money (more people playing poker = more people visiting their poker rooms = more profits = more tax money for the State), abuses such as 11-year-old Junior playing on daddy's credit card would decrease dramatically, the number of fish would explode attracting even more fish increasing the scope of all of the above, and basically everyone would be happy.

But the government can't have that.