In this video Ron Paul does a very good job explaining not only why the federal government should stay out of regulating internet gambling, but why the government should stay away from regulating the internet on principal. Essentially, Dr. Paul says that the government should not regulate internet gambling because it takes a responsibility that isn’t the government’s to take. It isn’t the job of the government to regulate moral or economic behavior, and, essentially, that’s what the government would be doing by regulating internet gambling.
Though it’s not directly addressed by Dr. Paul, one may also recognize that there’s no constitutional basis for the censorship of the internet or of gambling. Furthermore, people should have the ability to spend the moeny they earn how they would like, regardless of how wise or foolish the spending of said money may be.