Gambling in the USA: what you can and can not do
- The Interstate Wire Act, passed in 1961
- The Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006
Gambling in the USA appeared almost immediately with the formation of the state itself: the first casino in the USA was opened in the 19th century. At the same time, the attitude of the US authorities to gambling has often changed (as well as to other bad habits), much also depends on the type of gambling and the particular state, which gives rise to many contradictory but sometimes true stories about how things work. Many people still mistakenly believe that gambling in the US is completely illegal and it is impossible to run such a business in the US. In this article we will dispel this myth and look at how gambling is currently regulated in the US and what the conditions are for obtaining a license (particularly for online gambling).
To begin with, it should be noted that gambling (both online and offline) in the US is mainly regulated by legislation at the state level, while at the federal level there are 2 main laws:
The Interstate Wire Act, passed in 1961
The Interstate Wire Act, passed in 1961, was originally formulated to combat organized crime, especially illegal gambling operations that could use wire communications. The essence of the law is that it prohibits the use of wire communications or interstate communications (including the Internet) to transmit betting-related information and betting itself. Up until 2011, the law was widely interpreted as applying to all forms of Internet gambling: this included betting, casino games and poker. However, in 2011 the US Department of Justice stated that the Wire Act only applied to sports betting and did not apply to online gambling in other forms. This position was later confirmed by several US courts. The new interpretation of the Act has essentially opened the door to legalization and regulation of online casinos and poker sites. Thus, Nevada, New Jersey, Delaware and Pennsylvania were among the first states to take advantage of this opportunity and legalized online gambling.
The Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006
This is the law that, by its name, created the myth that online gambling is illegal in the USA, when in fact UIGEA is a law concerning payments related to online gambling. It does not state that online gambling is illegal. The main point of the Act is that it prohibits Internet gambling operators from accepting payments related to any online gambling that violates state or federal law, such as accepting payments from players who bet on the Internet in a state where gambling is illegal. Hence, the law only imposes liability on operators, not players, and that liability is criminal.
The Law defines illegal gambling as(1) placing or receiving a bet or wager (2) using the Internet at least in part (3) where such bet or wager is illegal under applicable federal or state law. For Internet gambling to be legal, it must meet the following criteria:
- bet must be initiated and received within the single state;
- game shall include age and location verification requirements designed to block access to minors and persons located out of such state;
- bet or wager and the method by which it is initiated and received are expressly authorized in accordance with the laws of such state;
- game has standards to prevent unauthorized access by any person whose age and current location have not been verified in accordance with the laws of such state.
Thus, it is a criminal offence for an operator holding a foreign license or a national operator holding a license from a state where gambling is permitted to accept payment from a person physically located in a state where gambling is prohibited. However, the law contains a number of exceptions, such as fantasy sports (an online game where participants assemble virtual teams of athletes whose prototypes are real professional players), state lotteries, and a number of other forms of gambling. It should not be overlooked that this very law has had a negative impact on the gambling sphere in the USA: for example, the share prices of the largest US gambling companies fell by almost 60% overnight after its adoption, and many foreign gambling operators banned participation of players from the USA. However, the law preserves the right of each state to determine the status of gambling independently.
Therefore, online gambling is legal in the US as long as it does not violate federal or state law. Although the law effectively prohibits placing and accepting bets within multiple states, this functions differently in practice, as many states that have legalized online gambling have signed a joint gaming agreement (e.g. Nevada, New Jersey and Delaware).
In addition to the two laws above, gambling in the US was long regulated by the Professional and Amateur Sports Protection Act (PASPA) of 1992. The Act prohibited sports betting in all but a few states in the US, but it was repealed in 2018: in a May 2018 decision in Murphy v. National Collegiate Athletic Association, the US Supreme Court ruled that PASPA violated the 10th Amendment to the US Constitution, under which federal government has only those powers delegated to it by the Constitution, and that all other powers not forbidden to the states by the Constitution are reserved to each state. This repeal had a positive impact on the development of the gambling industry in the USA: many states have since legalized sports betting.
In general, if we include state lotteries in gambling, 48 states allow some form of gambling. Land-based gambling in the form of casinos is allowed in 24 US states. While online sports betting is currently allowed in over 30 US states, online casinos are only allowed in 6 states:
- New Jersey;
- Pennsylvania;
- West Virginia;
- Michigan;
- Delaware;
- Connecticut.
The latest state to legalize online casinos was Rhode Island: the relevant law was signed on 20 June 2023, but it will come into effect on 1 March 2024.
The conditions for obtaining a license for online gambling vary from state to state, but mostly include 3 basic requirements: having a registered legal entity in the state, entering into a commercial agreement with a land-based casino and going through the company disclosure process and successfully testing the gambling game itself. The fee for obtaining a license and its duration also varies between states, for example in New Jersey the fee is $100,000 and the license is for 5 years, in West Virginia the license has the same duration but the fee is $250,000 and the renewal fee is $100,000.
So, we can see that gambling (including online gambling) is not prohibited in the US: the legal status of gambling is determined at the level of each individual state, and almost all US states allow some type of gambling. Online gambling is actually legal in a small number of states, but it is expected that several states will soon join the ranks of those where online casinos are allowed, further contributing the growth of the industry in the country. The requirements that online gambling operators must meet are indeed quite high and stringent, from licensing requirements to receiving payments from players, for this reason the US is not the most popular jurisdiction for gambling business, but it remains an attractive jurisdiction for those who are willing to comply with the rules and standards.
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