US Online Gambling Law
The United States has a large and complex online gambling market with a number of competing forces seeking to achieve different goals. Some states embrace online gambling while others do everything they can do enforce a modern day prohibition on the activity. Some politicians are fighting right now to legalize it outright while others campaign on ending all internet gaming.
To top it all off, gambling legislation is vague and open to interpretation. We have the Wire Act, the UIGEA, and dozens of state laws that all appear to have been written by people with no familiarity with the actual business of gambling. Judges in different jurisdictions contradict one another while state prosecutors embark on wild crusades to seize the domains of legitimate international poker sites.
Despite these troubles, the United States is the world's largest market for e-gaming dollars. More internet wagers originate from the United States than any other single nation. Neither prohibition nor seizure of funds has yet to stem the action that comes from the USA.
We're going to do our best to give you a simple and straightforward guide to a complex situation. We're going to simplify some things and thoroughly explain others. The goal is to give you a big picture look at the state of gambling in the United States.
Federal Gambling Law
Federal gambling law presides over the United States as a whole. Individual states may have their own laws, but federal law sets the larger stage for internet gambling. There are two pieces of legislation in particular that have had a big impact on the overall state of gambling.
The Wire Act
The Wire Act of 1961 was passed well before the advent of the internet, but it has been used extensively to make rulings against online gambling. The most important piece of text in the Wire Act is as follows.
"Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both."
The key words in that passage are "wire communication." For a long time, the Wire Act was used by lawmakers to argue that no form of internet gambling could ever be legalized in the US – even at the state level.
However, this all changed in 2011 when the US Department of Justice released a statement saying that in its interpretation, the Wire Act only applies to online sports betting and not other forms of gambling or wagering.
The effect of this simple statement was profound. It gave individual states the authority to legalize and regulate online gambling within their borders (excluding sports betting). Many states have since expressed an interest in doing just that, with three states actually fully implementing a system for online poker and/or gambling.
New Jersey, Nevada and Delaware now all have some form of internet poker or casino games. California and several other states have also looked into the issue and may be following a similar path soon.
The Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) was added to an unrelated piece of legislation and rammed through Congress in the last hours before Congress adjourned in 2006. In short, the UIGEA made it illegal for banking institutions to knowingly facilitate financial transactions to and from online gambling sites.
After the UIGEA was passed, several major poker and gambling sites left the US market. This plus shoddy media reporting led to much of the general public believing that the UIGEA made it illegal to place bets or play poker online. In reality, the UIGEA only targeted banking institutions and not individual people.
The actual effect of the UIGEA was to make it more difficult for customers inside the United States to deposit and withdraw from gambling sites. Operators struggled to find alternative payment processing methods and remain liquid. Customers had a hard time making deposits and often suffered from delays in getting their withdrawals.
Eventually, things settled down and operators did find other ways to move money around. These new payment methods didn't always work as quickly as they did in times past, but they worked well enough to get the industry back to a good spot.
However, many people are still under the assumption that online poker, gambling, and sports betting are forbidden in the United States. The US market for gambling is still healthy, but it's not as healthy as it was pre-2006.
There are still dozens of gambling sites that accept Americans today. It's interesting to note that these sites are based out of countries where online gambling is 100% legal. They aren't breaking any laws where they reside and are not subject to US law. Their claim is that what they are doing is legal and regulated and are therefore under no obligation to change their business to accommodate the laws of a foreign land (in this case, the USA).
The United States takes a different view of course and contends that those entities are indeed breaking US law. If any of the CEOs of those companies steps foot on US soil, they are subject to arrest and prosecution.
State laws took on new importance after the DOJ reversed its stance on the Wire Act in 2011. Before that, state laws didn't have much of an impact because the overarching law of the land was that all forms of online gambling were illegal.
It would go way beyond the scope of this one page to dig into the details of the law in all 50 states, so for now we'll just cover the most noteworthy state laws on this page.
New Jersey managed to pass legislation in 2013 allowing for regulated online casinos and poker sites within state borders. Anyone located inside New Jersey may now access real money games at any of the state-approved gambling sites.
Online gambling and poker also went live in 2013 in Delaware. The games are open to anyone located within Delaware state borders at the time. There are only a few operators in Delaware at the present time and revenue to the sites has been disappointing. This is probably due to a smaller population than New Jersey, a burdensome tax rate, and fewer competing options for players.
Nevada legalized online poker in 2013. Ultimate Poker and WSOP.com were the first two poker sites to go live. These sites are open only to people inside state lines.
Washington State has a terrible environment for internet gaming. In 2006, Washington passed a law that made it a Class C felony to play online poker. This is the only law in the entire United States that actually targets individual players with the threat of real prison time. Anyone prosecuted for such could face up to 5 years in prison and a $10,000 fine per violation.
Fortunately, this draconian law has pretty much joined the list of other ridiculous laws in the US that make for good comedy articles, but that are never enforced. To date, we know of no poker player in Washington to ever be charged with or convicted of a felony poker violation.
The only real impact this law has had is that several major poker sites such as Bovada.lv don't accept residents from Washington.
In 2012, Utah passed a law that pre-emptively opts the state out of any future online gambling legislation. That same law also made it a misdemeanor offense to play online poker. We don't know if anyone has yet been charged with a violation.
This isn't much of a surprise. Utah is one of only two states in the United States that has always been against all forms of gambling: including physical casinos.
State Pacts and Other Developments
Individual states aren't allowed to accept customers from states that haven't explicitly legalized online gambling. However, states do have the option to set up agreements with other states that do have a legal framework in place.
This is especially noteworthy for online poker. For a poker site to be successful, it must have access to a large player pool. People simply don't want to sign up at unpopulated sites. All three of the gambling-friendly states mentioned above have expressed an interest in forging agreements to combine forces and share player pools. This is excellent news for all the poker players out there.
A few other states have expressed interest in joining the move towards internet gaming. Most noteworthy is California. Two different bills have been introduced to the state legislature there and it's looking pretty likely that we'll see some form of online poker in that state at some point in the next couple of years.
We've also heard rumblings from certain groups and lawmakers in other states who are interested in getting in on the action. There's nothing major to report right now other than the future looks fairly bright for online gambling in the USA.
Author: Wesley Burns
Updated: March 2015