Image of Capitol Hill
Image of Capitol Hill

In 2006, the Unlawful Internet Gambling Enforcement Act was passed and it strictly regulated the online gambling industry in the United States. Most forms of gambling were banned and those who break the laws can be subject to severe criminal penalties. Since then, online casino games, poker and sports betting are illegal in the vast majority of US states. Lottery is legal in 44 states and even more accept bingo, many types of charity games and pari-mutuel betting.

Online Casinos Legal in New Jersey, Delaware but not Nevada

New Jersey is one of the American states that made the first steps towards legalizing all forms of online gamblers. State residents can play over the Internet, but only at accredited websites. An online operator must be either owned or partner with the land-based casino to meet the specifications. Live and online poker is legal and New Jersey has the largest population of the three states that legalized Internet poker. The same rules apply as for online casinos, with international and American operators partnering with local counterparts. Sports betting is more restrictive and only pari-mutuel betting is accepted. Lottery and bingo games can be played legally in New Jersey since the 70s.

Online casino games in Nevada are illegal so players have to settle for brick-and-mortar operators. Both live and online poker is legal in this state, but only for players who reside within its borders. The agreements signed in 2014 with Delaware made it possible for players from the two states to enjoy their favorite game and licensed poker websites. No offshore sites are accepted. Sports betting has been legal in Nevada for nearly 7 decades and both raffles and bingo are accepted, but lottery betting is prohibited.

Delaware was the first state to allow online casinos to cater for local players. There are also major casino complexes statewide, for those who want to play slots, table games or video poker. Live and online poker is legal statewide, with the latter being allowed since 2012 when the first licenses were granted. This is also one of the four states where betting on sports is legal since 1992. It is also possible to play bingo or resort to lottery betting while staying in complete accord of the law.

The Most Restrictive States for Online Gambling

At the opposite end of the spectrum we have states such as Utah, Vermont, Tennessee and Hawaii. These went to great lengths to explicitly prohibit most or all forms of land-based and online gambling. They residents can’t play in land-based casinos either, but many choose to travel to nearby states. Utah residents go to Nevada, the ones in Vermont drive to Connecticut and some border states’ inhabitants play in Canada. Another option for those who reside in highly restrictive states is to go on casino cruises.

Screenshot of Party Poker Gambling Promotions

US States Polarized over Online Poker

New Jersey, Nevade and Delaware have their state regulated poker websites, while others made it crystal clear that the game is illegal online. Players can enjoy the game at state based operators and those that are certified for interstate compacts. They serve the purpose of creating a bigger community of players, mainly for smaller states. Nevada and Delaware are the main beneficiaries, given their small population. Larger states such as California and Pennsylvania contemplate the possibility of legalizing online poker.

Oregon, Florida and Washington have passed restrictive laws and show no intention of making any sort of amendments in the foreseeable future. Land-based casinos in states such as Washington or California have poker card rooms and social poker in the form of home games is tolerated nationwide. As long as nobody makes a profit from hosting the poker games and the stakes are low, most states turn a blind eye.

US Sports Betting Laws

Full range sports betting is illegal nationwide and except for the state of Nevada, it is not possible to bet on most events. For a couple of years, Montana, Delaware and Oregon offered similar options but this is no longer the case. Greyhound and horse races are the only betting events accepted in most states. Pari-mutuel betting systems are the ones tolerated by the authorities and a couple of states even accept betting terminals. In Wisconsin and District of Columbia it is legal to bet on horse races.

In New Jersey, Gov. Chris Christie signed a law in 2012 to allow sports betting statewide. He did so in spite of federal law preventions, as the public showed support for legalizing this activity. For the time being, it is only legal to bet on sports at New Jersey racetracks and across Atlantic City casinos. It is not permitted to bet online, which explains why no international or US American bookmakers operate here.

States that Allow Lottery Betting

Lottery betting is accepted in most states and players can purchase tickets for the Mega Millions or Powerball among other games. It is also permitted to play instant win games and use the video lottery terminals. Most states have ratified or plan on legalizing the purchasing of online lottery tickets. Charity gambling and bingo games are accepted nationwide, even in the most prohibitive states. Regular games of bingo are occasionally allowed outside the charity rules at low stakes.

44 US states either have their local lotteries or allow residents to participate in games held nationwide. They can buy the tickets in brick-and-mortar venues and if they win, pay a tax on their winnings. This differs from state to state and winners are also subject to the federal tax. The only states that made lottery games in legal are Alabama, Alaska, Hawaii, Mississippi, Nevada and Utah.

The Sensitive Issue of Daily Fantasy Sports

Right from the start, a distinction was made between sports betting and daily fantasy sports, at least in most states. Three major operators dominate the US market, with FanDuel, DraftKings, and Yahoo operating nationwide. Some states have denied their residents the right to play these games, but the vast majority accepted them. Recently, governments from certain states have changed their stance on daily fantasy sports and others demand clear regulations.

Screenshot of DraftKings Gambling Commercial

It is illegal to play daily fantasy sports in Alabama, Arizona, Delaware, Hawaii, Idaho, Iowa, Louisiana, Montana, Nevada and Washington. Except for the states, the rest allow daily fantasy sports, yet some operators were banned. A distinction must be made between the stakes that allow fantasy sports and those who regulate the industry. Colorado, Indiana, Kansas, Maryland, Massachusetts, Mississippi, Missouri, New York, Rhode Island, Tennessee, Virginia and West Virginia signed legislation to expressly permit daily fantasy sports. Other states are either recently contested, have proposed or have no current laws.

The Provisions of the Unlawful Internet Gambling Enforcement Act

In 2006, the Congress has passed the Unlawful Internet Gambling Enforcement Act, commonly referred to as UIGEA. It bans and criminalizes the acceptance of funds from players by online websites and money operators. It made it illegal to be engaged in the business of betting and to accept the proceeds from any payment method. Both the criminal provisions and the band became effective immediately after the enactment and have remained unchanged. The act doesn’t ban or criminalize mere participation.

The Unlawful Internet Gambling Enforcement Act targeted the ones who were involved in the business of gambling, not the players. If defines betting as the activity of staking real money to win something based on the outcome of a sports event or game of chance. Poker players have argued that their game doesn’t qualify, since it is a skill game rather than a game of chance. Their argument fell on deaf ears, even though some states apply the Dominant Factor test to establish if luck or skill predominates in a game.

The act has excluded from the definition of betting business transactions such as insurance policies, commodities and securities trading. It didn’t prohibit the participation in online games that have no paid to play aspect, therefore free. Fantasy sports contest were also excluded in most states, although recently some chose to pass their own laws to regulate the industry.

What Qualifies as Unlawful Internet Gambling?

It is illegal to place, receive or transmit the bet, using the Internet, but online bets made within states that have passed statute laws are accepted. However, there are currently no such enabling clause, so this remains a theoretical provision. Online interstate bans on greyhound and horse races are illegal in all the states where live betting on these events is permitted. This amendment was introduced in 2000 and greatly expanded the range of lawful bets, since racing bets were already legal in most states.

Screenshot of 888 Casino Gambling Live Dealer
Screenshot of 888 Casino Gambling Live Dealer

Operators are not allowed to accept funds from customers via credit cards, electronic wallets and checks. The Unlawful Internet Gambling Enforcement Act also expressly excludes any form of financial transaction that involves an intermediary. Electronic wallets such as NETeller and FirePay as well as other international payment networks can’t be used either. The Federal Trade Commission has the power to enforce policies aimed at preventing the acceptance of funds from punters by online operators.

Criminal Penalties for Breaking the Law

Those who don’t respect the provisions of the Unlawful Internet Gambling Enforcement face criminal penalties. Operators who accept funds from players can be fined and even incarcerated for up to 5 years. However, the law doesn’t make any significant amendments to the existing Wire Wager Act, yet it affects online operators directly. The criminal penalties are tougher and the authorities are enforcing UIGEA.

While online gambling is subject to criminal penalties in all the states where such activities are illegal, the penalties differ. In most states, the ones at fault commit a misdemeanor although in the most restrictive ones, the same action is a felony. The differences are in regard to whether there is the possibility of incarceration or just the paying of a fine. The length of the punishment as well as whether the sentencing takes place in a county jail or a state penitentiary are also factors used to make this distinction.

The criminal charges are also divided between simple and aggravated gambling. First offenders are usually charged with simple gambling, while those who are at the second violation are likely to be charged with aggravated gambling. The express Internet prohibition highlights the fact that online gambling is strictly illegal nationwide. This means that unless the state passes a specific law allowing Internet gambling, its residents are not allowed to play online.

US financial institutions must comply with existing regulations, but are not liable for blocking betting transactions. Internet service providers must comply with the decision of state or federal attorney general’s to disable access to online gaming websites. With most online gambling websites being hosted outside US borders, it’s not possible for authorities to remove them from the Internet. ISPs are not required to monitor the service or take active action in tracking down customers.