The Current State of the US Gambling Laws
Though not enshrined in the constitution many Americans feel that the right to gamble should be fundamental. This article tells them where gambling laws in the country currently stand.
Gambling came to America with the European immigrants. Constant attempts have been made by the powers that be, both before and after independence, to erase “the scourge” that is gambling. However, gamblers have always found receptive pockets in the country where they survived and from where they spread out again. By the end of the twentieth century, the laws regarding most forms of land based gambling were settled, with the control in the hand of the state legislatures. Sports betting and online gambling were the problem areas.
What you will find below:
- An overall view of the established forms of land based gambling, which are land based casino, horse racing and lotteries.
- Greater focus on sports betting and on regulated online gambling.
- Legal challenges posed and crossed in the last twenty years.
- The states that have finally regulated online gambling and sports betting.
- The states that are likely to follow suit in the near future.
- Online gambling at offshore sites: pros and cons
Land Casino Gambling In The United States
The Federal Law does not prohibit land casino gambling. It has been left to the states to decide whether or not they should allow this activity. Some states, like Nevada, permit casinos being established anywhere in the state. Some states, like New Jersey, have demarcated regions where they allow casinos. Other states, like Utah, do not permit casino gambling at all.
There are two types of land casinos in the United States.
Commercial casinos are founded and run by private companies. These are regulated by the states as to where they can be located, what forms of casino gambling can be offered and to what capacity (number of gaming tables, slot machines etc.). A survey conducted by the American Gaming Association (AGA) in 2016 reported 460 commercial casinos (excluding card rooms and race track casinos) across 25 states.
This refers to casinos operated by Native Americans on their recognised territories, permitted by the Federal Indian Gaming Regulatory Act of 1988. Ultimately, however, the tribes were required to negotiate a Tribal-State compact with their respective states before they could establish casinos. AGA reported 486 tribal casinos across 29 states, with Oklahoma alone having 127.
Horse Racing In The United States
Only pari-mutuel betting on horse races is allowed in the United States, and it is regulated by the states. Some states restrict betting to race tracks, whereas some states permit off track betting. Initially off track betting was restricted to locations within the state. However, after the Interstate Horse Racing Act of 1978 some states allow race tracks to broadcast their races to other states and accept bets.
28 states have race tracks. 13 states do not have race tracks but permit their residents to bet on horse races of other states.
Lottery In The United States
Lotteries are subject to the state laws and there is no national lottery organization. 45 of the states operate lotteries along with the District of Columbia, Puerto Rico and U.S. Virgin Islands. The states that do not permit lotteries are Alabama, Alaska, Hawaii, Nevada (reason being competition to other forms of gambling) and Utah. Consortiums of state lotteries jointly organize games to increase liquidity and allow for larger jackpots. Two major lottery games, Mega Millions and Powerball, are both offered in nearly all jurisdictions that operate lotteries, and are perceived as national lotteries.
According to the Federal Lottery Law, it is illegal to operate a lottery through the mail or over the telephone (not online). In December 2011, the US Department of Justice opined that the Federal Wire Act applied only to sports betting. Since then six states have permitted online lottery ticket sales. They are Pennsylvania, Michigan, Georgia, Illinois, New Hampshire and Kentucky. Some other states may follow suit.
- Online lottery sale went live in the state in November 2012.
- Some of the lotteries are Fantasy 5, Mega Millions and Powerball.
- Keno games and Georgia Lottery’s exclusive interactive Diggi Games are also available.
- Players can use a lottery debit card called iHOPE to preload funds online, buy tickets online and even download winnings.
- Illinois was the first state to offer online lottery ticket sales for a few products in March 2012.
- Today the lotteries covered for online sales include Lotto, Mega Millions and Powerball.
- Daily Lottery Games and Instant Games, the online equivalent of scratch-offs, are also available online.
- Kentucky approved online lottery ticket sales in 2013, but started the actual sales only in 2016.
- The state offers online sales of jackpot and daily draw games as well as instant play games.
- Players have to set up an account and deposit money to buy tickets. Deposits cannot be withdrawn in accordance with money-laundering laws.
- Michigan Lottery began its online initiative in the fall of 2014, when residents were allowed to buy tickets for Instant Keno and electronic scratch-off game equivalents.
- The sales of online lottery tickets commenced in January 2016.
- The popular lotteries included Powerball, Mega Millions, Lotto 47 and Fantasy 5.
- In June 2017, New Hampshire became the fifth state to pass laws allowing for online lottery sales.
- In September 2018, the state officially launched its online lottery offering.
- As part of a large gambling expansion bill, Pennsylvania legalized online lottery in October 2017.
- The Pennsylvania iLottery was launched in May 2018.
- Though currently it only features instant win online scratch-off games.
Online Gambling In The United States
Online gambling includes several verticals, the main ones being casino, poker and sports betting. Some of the others include bingo and financials. Online sports betting has also been constrained by other legal issues and will be discussed in the sports betting section. Online casino and poker are being dealt with here.
History Timeline Of Online Gambling
- 1994: The first online casinos started offering services to customers in the United States from offshore locations like Antigua and the Isle of Man. Online poker sites started soon thereafter.
- 1998: Reports suggested that there were hundreds of online casinos with gambling revenues of over $800 million.
- 1999: The U.S. Senate made its first attempt to ban online gambling through the Internet Gambling Prohibition Act. The bill did not pass.
- 2002: The United States Court of Appeals for the Fifth Circuit ruled the Federal Wire Act (1961) prohibits sports betting, but not online gambling. This was in a case where credit cards were used to fund online casinos.
- 2002: The US Department of Justice (DOJ), however, claimed all online gambling is illegal in the US and that advertising online gambling is aiding and abetting a crime.
- 2004: Search engines Google and Yahoo! pulled out all online gambling advertising.
- 2006: The US Congress passed the Unlawful Internet Gambling Enforcement Act (UIGEA) as a part of the SAFE Port Act. The act does not directly ban online gambling, but makes it illegal for U.S. banks to process transactions for online gambling sites. A number of online gambling operators immediately pulled out of the U.S. market.
- 2008: Kentucky tried to prevent 141 online gambling sites from servicing players in the state in a case that gained notoriety as the “domain name seizure” case.
- 2011: April 15, 2011 has come to be known as Black Friday in the online gambling world. Three of the largest online poker operators in the world, PokerStars, Full Tilt and Absolute Bet, were indicted on various charges including violating the UIGEA. Access to the sites from the US was blocked and the massive U.S. online poker market was effectively closed. During the subsequent years two important outcomes ensued.
- PokerStars settled the accounts of players that had deposits, paid the hefty fines and cleaned its slate. It bought Full Tilt by likewise making payments for that site.
- It came to light that Absolute Bet was actually cheating players and this began the call for regulation of online gambling by American authorities.
- 2011: December 2011 brought good news for U.S. online gambling. The DOJ released a legal opinion that the Federal Wire Act only applies to sports bets. Since there was no federal law explicitly banning online gambling, this paved the way for individual states to consider online gambling verticals such as lottery, poker and casino games.
- 2012: Delaware legalizes online gambling.
- 2013: Nevada legalizes online poker and New Jersey legalizes both online poker and online casino. In both cases licenses would be issued only to existing land casinos in the state.
- 2013: Ultimate Poker, the first legal online gambling site in the United States, went live in Nevada in April. By November, online poker and online casinos went live in Delaware and New Jersey.
- 2017: Pennsylvania legalizes online gambling and both online casinos and an online poker room launched in 2019.
- 2019: The DOJ reversed its earlier opinion stating that the Wire Act applied to all bets, and not only sports betting. However, the generally accepted legal position is that states can legalize all forms of online gambling within its territory. The federal government has not challenged the legislation passed by the few states in permitting regulated online casino and poker gambling.
States That Have Already Legalized Online Casino And/ Or Online Poker
- Offers both online casino and online poker.
- DelawarePark.com and DoverDowns.com are in partnership with 888 Holdings.
- HarringtonRaceway.com is powered by IGT, Bally, Williams, Aristocrat and more.
- Offers only online poker.
- Only one site WSOP.com.
- Has no plans for online casinos.
- Offers online casino and online poker.
- The regulated online market is the largest in the country.
- It is serviced by over a dozen licensed online casino sites and poker rooms.
- Offers online casino and online poker.
- Many of the major land casinos have rolled out online casino sites.
Sports Betting In The United States
At the turn of the twentieth century sports betting was banned (except in a few states) under federal law. Therefore, online sports betting was automatically illegal. Now, with the reversal of this position, both retail and online sports betting is being legalized and regulated through the states.
History Timeline Of Sports Betting
Prior to 1991, there was no federal law banning betting on sports. However, only four states had passed legislation allowing some form of this activity.
- Oregon, Delaware and Montana conducted sports lotteries.
- Nevada had gone one step ahead with licensed sports pools.
The Professional and Amateur Sports Protection Act of 1992 (PASPA):
In 1991, there was a strong move against sports betting. Among other issues, doubts on the integrity of sports persons were raised, given the huge amounts of money involved. In June 1991, the Senate Judiciary Subcommittee on Patents, Copyrights and Trademarks held public hearings on sports gambling. David Stern, the then-commissioner for the National Basketball Association, was one of the prominent persons that testified against sports betting. In light of these findings, Congress exercised its authority under the Commerce Clause to enact Senate Bill 474 Professional and Amateur Sports Protection Act (PASPA) in 1992, codified at 28 U.S.C. The Law came into effect from January 1, 1993.
There were two exceptions to the ban:
- The four states that had sports betting activities could carry on.
- A one-year window from the effective date was provided for states which had operated licensed casino gaming for the previous ten-year period to pass laws permitting sports wagering. It was reported that this was mainly for New Jersey, but the state failed to take advantage.
Opposition to PASPA:
Americans found ways of wagering at offshore sports betting sites. Many of the states saw huge amounts going outside the country instead of the state coffers. New Jersey led the opposition to PASPA and other states like Kentucky and Delaware joined in. The pro-repeal American Sports Betting Coalition, a lobby alliance which included the American Gaming Association and the National Indian Gaming Association was formed to add greater weight to the effort. The following are the milestones in New Jersey’s legal battle that ultimately led to the repeal of the PASPA.
- In March 2009, New Jersey State Senator Raymond Lesniak filed a lawsuit in the United States District Court for the District of New Jersey claiming that the PASPA unconstitutionally discriminated among the states. The Court dismissed the case arguing that only the Governor could bring the suit. The then Governor Christie was not willing to do so.
- In 2010 a referendum in New Jersey showed overwhelming support by state voters to legalize sports gambling.
- In January 2012, New Jersey passed a law, The Sports Wagering Act, which would allow for sports gambling at licensed locations.
- In August 2012, this law was challenged by the all the major sports associations arguing that the new law violated PASPA. The state reiterated that PASPA itself violated the constitution. The United States District Court for the District of New Jersey dismissed the state's claims.
- In September 2013, the Third Circuit Court of Appeals heard the appeal filed by New Jersey against the decision of the lower court. On September 17, 2013, Judge Julio M. Fuentes prohibited the state from enacting the law.
- In June 2017, the Supreme Court accepted the case following many appeals, each of which resulted in a loss for New Jersey. Governor Christie had been replaced by Phil Murphy and the case before the court became Murphy v. National Collegiate Athletic Association.
- In May 2017, the Supreme Court ruled in a 7-2 decision that parts of PASPA were unconstitutional as they commandeered power from the states, and in a 6-3 decision, determined that the whole of PASPA was unconstitutional.
The repeal of PASPA opened the doors for state regulated sports betting in America, including online sports betting.
- The repeal did not legalize sports betting across the United States. It just removed the ban on sports betting.
- The repeal does not mean that anyone can start a sports betting business in America. A state has to enact required laws and issue licenses. Only the licensees can start sports betting operations.
- Operators can service only residents of their state. Inter-state sports betting transactions are illegal.
- Offshore sportsbooks continue to remain illegal.
States That Already Offer Both Online and Retail Sports Betting
- Online sports betting launched October 2019.
- The online sportsbooks are DraftKings, FanDuel, and BetRivers.
- Five more online sportsbooks are likely to launch soon.
- Retail sports betting is also available at 13 casinos and off track betting locations.
- Online sports betting launched in August 2019.
- Operators include DraftKings, PointsBet and William Hill.
- Till January 1, 2022, players have to register in person before betting online.
- Retail sports betting is available at a number of locations.
- Online sports betting launched in August 2010.
- Players have to register in person before betting online.
- Retail sports betting is available from established casinos.
- Online sports betting launched in December 2019.
- DraftKings is the only online sportsbook as of now.
- Five cities have voted to approve retail sports betting.
- Online sports betting launched in June 2018.
- DraftKings, FanDuel, BetMGM and Betfair are the popular sportsbooks.
- There are numerous retail locations as well.
- Online sports betting launched in October 2019.
- It is run by the state lottery.
- Retail sports betting is available at the Chinook Winds Casino Resort.
- Online sports betting launched May 2019.
- Retail sports betting is available at casinos.
- Operators include DraftKings, FanDuel and Unibet.
- Online sports betting legalized in March 2019.
- The only sportsbook is run in partnership with the state lottery and William Hill.
- Both the Twin River casinos offer retail sports betting.
- Online sports betting launched August 2019.
- FanDuel, DraftKings and BetMGM are the online operators.
- Retail sports betting at casinos has been available since August 2018.
States That Offer Only Retail Sports Betting
- The only retail sportsbook at Oaklawn Racing Casino Resort launched in July 2019.
- The law allows for the placement of three more facilities.
- Mobile wagering is not permitted.
- Delaware offers retail sports betting at its three casinos.
- Online sports betting was legalized in June 2018, but has not yet been implemented.
- Retail sports betting was launched in August 2018.
- Bets can only be placed at casinos.
- Only one tribal casino has a mobile app, but it can be used only on the casino premises.
- The state has not enacted any law allowing sportsbooks.
- However, five tribal casinos have opened sportsbooks since October 2018, claiming the right under their state compact.
- None have offered a mobile app yet.
- Sports Betting was legalized back in 2013.
- However, the state waited for PASPA to be repealed.
- There are seven retail sportsbooks (four commercial, three tribal).
- Lawmakers are continuing to work for online sports betting.
States Likely To Launch Sports Betting Shortly
- Online sports betting legalized in November 2019.
- The law allows the state’s casinos to open both online and retail books.
- Actual launch expected after May 2020.
- Online sports betting legalized in June 2019.
- All casinos, all racetracks and even some sports venues can apply.
- Law requires in-person registration for new players.
- Launch seems likely in 2020.
- Retail sports betting also legalized.
- Online sports betting legalized in December 2019.
- Actual launch expected in 2020.
- Online sports betting legalized in May 2019.
- The law allows for both mobile and retail sports betting.
- Betting will also occur through taverns and lottery kiosks.
- State owned lottery giant Intralot will handle the state’s sports betting activities for at least the next seven years.
- Online sports betting legalized in April 2019.
- Sites should launch sometime in 2020.
- The law does not allow for retail sports betting.
- Big names like DraftKings and FanDuel are likely to apply for licenses.
Daily Fantasy Sports
Daily Fantasy Sports (DFS) constitute an independent chapter in American gambling. DFS contests came to their own around 2007 as a substitute for sports betting. Smartphones and the easy availability of sports data have converted DFS into a billion dollar industry across over 40 U.S. states.
Whether DFS is legal or not is decided by the state. There are three scenarios.
- Some states have legalized DFS and are regulating it just as any other gambling activity. A few of these states tax DFS operators and charge licensing fees. Others do not.
- Some states have not taken any stand on DFS. This allows DFS operators to do business without any regulation from the state.
- A very small number of states have made it expressly illegal.
Some of the key states are discussed below.
- California is the largest market for DFS sites.
- However, no legislation has been enacted as yet.
- The state has legalized and is regulating DFS operations. However, there are no taxes or fees charged.
- In Nevada, DFS operators are treated just like casinos and are required to apply for a gambling operator’s license.
- So far, no major DFS operators have sought to operate in in the state.
- In November 2015, the Attorney General declared that DFS was a form of sports betting and declared it illegal.
- In August 2016, after a protracted legal battle the Governor signed a bill allowing DFS sites to serve New Yorkers. The sites pay a licensing fee and 15% tax on gross revenues to the state.
The biggest DFS operators in the U.S. market are:
- Prize Picks
- MKF Prop Betting
Offshore Online Gambling In The United States
Online gambling came to the United States via offshore sites. But soon the federal authorities began to prosecute the online gambling providers under the Wire Act and the UIGEA. One of the much publicized cases was the Kentucky domain name case. This led to many big names exiting the U.S. market like Microgaming the games supplier, Neteller the payments solution provider and Party Casino.
However, a core group of games suppliers persisted in servicing American players through their licensee online casinos and are still doing so. The more popular of these are Realtime Gaming, Rival Gaming, WGS Technology and Betsoft.
These offshore sites are very clearly illegal in the states that have legalized online gambling because they operate in those states without a license from the designated state authority. Their legality or illegality under federal laws is a bit of a grey area. However, there have been no prosecutions in the last decade. It is not illegal for players to wager at offshore gambling sites and no player has ever faced the wrath of the law.
The main problem is the depositing of funds to offshore online casinos. Under the UIGEA it is illegal for financial institutions to transfer funds to offshore online gambling sites. Most banks and credit card companies do not allow such transactions to go through. The offshore sites are now cloaking the payment transfers under the shroud of merchandise purchases to overcome this. The emergence of cryptocurrency has been a big boost to these offshore casinos because players can make deposits and receive winnings bypassing the financial regulatory system in a completely anonymous manner.
Offshore Vs Regulated Gambling Sites - Which Should You Choose?
If you are from a state that has legalized your chosen online gambling vertical (casino, poker or sports betting) and offers licensed sites, then going to regulated gambling sites should be your first choice. There are several reasons.
- They are more strictly regulated than offshore sites and player concerns are better taken care of.
- The software providers are highly reputed and offer quality products.
- Payment transactions to and from regulated sites will never be a problem.
- Regulated sites, unlike offshore ones, are under purview of U.S. legal system and grievances can be taken to court in the extreme case. Though this will not normally arise.
The main advantage offshore sites offer, and it cannot be dismissed lightly, is access to a larger number of software suppliers and therefore a larger number and variety of casino games (or poker events or sports bets). The quality is as good as in the regulated system.
Frequently Asked Questions
Online gambling sites that are licensed by designated state authorities are legal beyond any shred of doubt. The legality of offshore sites is a grey area. There are probably hundreds of offshore sites servicing players from the length and breadth of America. As a player you run zero risk of prosecution by playing at offshore sites.
The details of states offering online gambling products are tabulated below. The table does not include states that have legalized online gambling but as yet do not have operational sites.
In that case the only option available to you is to play at offshore sites because you will not be allowed to sign up at online gambling sites of other states.
- First and most important is that you must ensure that you play at only those offshore sites that have been licensed by reputed regulatory jurisdictions like Malta, Gibraltar and Curacao. There are quite a few unlicensed unregulated sites waiting to cheat players.
- There is no risk of prosecution from any U.S. authority for playing at offshore online gaming sites.
- Though unlikely in the foreseeable future, there is a small possibility that even the licensed offshore sites are forced to stop services to American players by the U.S. authorities without any notice. In that event you may lose any amount lying with such online gambling sites.
Federal regulation of online gambling is not a likely possibility. But more and more states will legalize and regulate online gambling. JPMorgan Chase believes that by 2025 as many as 20 U.S. states will allow legal online gambling. Some states that may do so in 2020 are listed in the article. Once a large number of states are on board, players can look forward to inter-state agreements that allow players from one state to sign up at sites licensed by other states.
You are required to form a team of players from an available pool that would be taking part in a sporting event on a particular day. You will have to pay an entry fee, which is like your stake. Players from your team will be scored on the basis of their actual performances in that event. All entrants to the DFG will be ranked based on the scores of their chosen players. There are different schemes of rewarding participants with high rankings.