Is Online Gambling Legal In Us

Is online gambling legal in the US? Well the answer to that question keeps on changing.

Back in 2011 the U.S. Fifth Circuit Court of Appeals ruled that the Wire Act prohibition on the transmission of wagers applied only to sports betting and not other types of online gambling. In 2019 they reversed their decision returning to the previous position that the Wire Act does apply to online casinos and poker rooms.

To avoid confusion, we have marked US states which offer state-regulated gambling options in the table below with a check mark. At this moment in time, eight US states have legalized and regulated online gambling in some form. 31 USC §§ 5361-5367 Unlawful Internet Gambling Enforcement Act of 2006 This law prohibits companies from accepting money for internet gambling, if the gambling is illegal under existing federal or state laws. It doesn't address gambling directly, but rather the transfer of funds from credit cards and bank accounts to online casinos. First and foremost: online gambling is legal in the USA. Gambling laws are constantly changing on a state-by-state basis, but here is what you need to remember: while running your own casino, sportsbook, or poker room inside the United States is not legal, individual U.S. Residents will not be prosecuted for making online bets.

Opinion issued about seven years ago that the 1961 Wire Act only banned sports gambling was a misinterpretation of the statute, according to a 23-page opinion by the department’s Office of Legal. It is currently the biggest market for regulated online gambling in the US. Over a dozen licensed and legal online casino websites and poker rooms compete for their place in the sun in a market that is worth over $255 million per year. In PA, online casinos were launched in July 2019 and online poker in November 2019.

Even though the Department of Justice (DOJ) changed its long held position on online gambling in 2011, stating the Wire Act only applied to sports betting, as far back as the Clinton administration, the DOJ had asserted that all forms of online gambling, especially Internet poker, were illegal.

In June 2020, a federal appellate court heard arguments between the New Hampshire Lottery Commission and the federal government over the interpretation of the Wire Act. When the appellate's court decision is made, it will help determine whether online gambling is illegal under federal law.

The 2011 decision, which stated that the Wire Act only applied to sportsbetting, paved the way for individual states to more or less choose for themselves whether to legalize online gambling. This is because it is at the state level that online casino operators need to go to purchase licenses to operate. At that time, Delaware, Nevada and New Jersey legalized online gambling. Pennsylvania followed in 2019.

In Nevada and New Jersey, state regulations have tied online gambling to land-based casinos and the activity can only take place legally within the state’s borders. In 2014, the state of New Jersey had sent cease-and-desist letters to out-of-state online gambling companies that were marketing to New Jersey residents.

David Rebuk, director of the New Jersey Division of Gaming Enforcement, wrote in January 2015 that although Nevada and Delaware started online gambling operations several months before New Jersey, New Jersey's authorized online gambling sites, from January 2014 through October 2014, generated $25 million or 75% of the total online poker revenue in the U.S. They also generated $78 million or 98% of all Internet non-poker casino revenue. He said that according to a University of Las Vegas Center for Gaming Research study, New Jersey online gaming accounts for over 90% of the legal U.S. online gaming revenue.

Like Washington's Bill HB 1114, California's various bills introduced in 2015 were specifically geared towards authorizing and regulating online poker. In 2013, the Associated Press quoted California gambling control commissioner Richard Schuetz as saying that over 1 million people were betting over the Internet in his state, all illegally.

“That industry is between $300 million and $400 million,” he said. “That’s a huge business that operates without any consumer controls or any benefit to the tax base.”

Even though New York didn't put forth a bill to legalize online gambling, it was reported that the state introduced Bills AB 880 and 6007 that would provide legislation for a statewide study done on the extent of legal and illegal gambling done by New York state residents, including online gambling.

It has been over 20 years since Sen. Jon Kyl (R-Ariz) first introduced the bill known as the Internet Gambling Prohibition Act of 1997. At that time National News reporter David Isaacson had written that online gambling had grown into a 300 million dollar industry and there were about 32 online gambling sites.

Not everyone believed that Kyl's legislation would prevent online gambling in the US. Rep. John Conyers D-Mich thought Kyl's legislation would do little to stop online casinos and in March 2003 introduced a bill that competed with the legislation. The bill was to create a five-member federal gaming commission, appointed by Congress, to study online gambling for one year and recommend the best methods of regulating it.

Doug Abrahms of the Reno Gazette-Journal quoted Conyers as saying, 'You might remember a failed experiment the U.S. government tried in the 1920s called Prohibition. Instead of a prohibition that will drive gambling underground and into the hands of unscrupulous merchants, Congress should examine the feasibility of strictly licensing and regulating the online gaming industry.'

Abrahms also quoted Rep. Ron Paul, R-Texas who said 'This whole idea of the invasion of our house (by online gambling) is incorrect. You do have the brains to turn it off. We're trying to regulate behaviour.'

Conyers said in an editorial that, 'If you want to prevent money laundering, the last thing you would do is eliminate the financial controls and record-keeping that credit cards and U.S. bank accounts provide. ... Children can be kept off of gambling websites, however, by requiring the use of a credit card, PIN numbers, and other screening devices. ...'

The issues involved in the legalities of online gambling were complicated and every year a different twist was added to the Internet mix and nothing ever stayed the same for very long.

When Sen. Jon Kyl (R-Ariz) first introduced his bill in 1997, everyone was heading down under. Why? Because in Australia Internet gambling was legal.

It was seen as the place to be if you wanted to corner the market on online gambling. Just ask those who invested there how fast the industry can change. It's all a gamble, sometimes you win and sometimes you lose, and no body knows this better than Jay Cohen.

Jay Cohen, who was president of the World Sports Exchange (WSE) in Antigua, was one of the first of 22 defendants charged in March 1998 under the Wire Act.

Reporting for Yahoo Internet Life in 1999, Justin Ware described how the then 27 year old Cohen, who had been a trader on the San Francisco Stock Exchange had started one of the first online sports books in 1997 by working out of a small office suite in Antigua. 'After a couple of investors agreed to back him, he persuaded two friends to join him: Steve Schillinger, an options trader with more than 18 years of experience and a head for numbers; and Haden Ware, a student Cohen had met on the trading floor. The World Sports Exchange was born.'

According to Ware (no relation to Justin Ware), nearly three years after the launch of their business, Jay Cohen was in Seattle awaiting trial, and Schillinger and Ware were considered fugitives. Cohen chose to go back to the US and fight the charges; Ware and Schillinger chose to stay and run the business. Fortunately for them, and frustratingly for the FBI, as long as they stayed in Antigua, they couldn't be touched. Since extradition requires both countries to agree on the offense, and Antigua considers online gaming to be perfectly legal, Ware and Schillinger couldn't be extradited, Ware reported.

'Haden Ware was a student on his summer break when he went down to help Cohen and Schillinger, 'When I first came down here, I was going to school… Jay called me up and said, 'I'm going to the Caribbean. Are you in?' And I said, 'Yeah, I'll come down, take a summer off, have a good time.' It's turned out to be a little bit longer than that,' He was reported as saying.

Steve Kanigher quoted Cohen in the Las Vegas Sun in March 2003 as saying that when he decided to go back to the US to fight the charges he had a conversation with Schillinger. 'I said that I would come back to fight this. He said that he was staying there in Antigua. I said one of us is making the right decision.'

Ware reported that the decision to work from Antigua was intended to keep things legal. He quoted Schillinger as saying, 'We were very open about what we did…. If we could have done this in San Francisco, we would have. We came down here because we thought we would be licensed to do what we wanted to do.'

Stephen Nover of The Prescription news reported in October 2003 that Cohen didn't believe he was breaking any laws. He was accepting wagers in Antigua, where bookmaking was legal. He came back to America to fight the charges and was the only defendant of those charged who challenged the system.

Nover reported, 'After losing his case in a controversial manner when the judge instructed the jury how to vote, Cohen appealed. He lost his appeal two years later, and found out in June 2003 that the Supreme Court would not review his case.

U.S. District Judge Thomas Griesa sentenced Cohen to 21 months in federal prison and a $5,000 fine.' Cohen began serving his time on October 15, 2003.

Of the initial group charged in 1998, thirteen pleaded guilty and seven were still fugitives including Steve Schillinger and Justin Ware who were still in Antigua.

In 2003, World Sports Exchange was one of the largest sports books in the world with a customer base estimated to be around 30,000.

Mark Fineman of Business 2.0 wrote an article on the World Sports Exchange and of Schillinger and Ware in October 2000.

'Meanwhile, when they're not holding epic pool parties, they're running WSE and watching the money come in -- and there's a lot of money coming in. In the two and a half hours it took U.S. District Judge Thomas P. Griesa to sentence him, Cohen's website in Antigua took in seven times his $5,000 fine in bets on the New York Yankees-Oakland A's game alone, a fraction of the tens of thousands of dollars' worth of online bets placed with WSE that day,' Fineman reported.

He quoted Schillinger as saying, 'I was a great citizen of the U.S. I coached my kids in the Little League [and the Catholic Youth Organization basketball league]. My assistant coach was an FBI agent. He knew what I was doing. I gave a lot to my community, and for them to say I'm a criminal? Don't tell me the U.S. government thinks gambling is the worst thing in the world.'

'Forty-four states have lotteries, 29 have casinos, and most of these states are to varying degrees dependent on you might say addicted to revenues from wagering.'

Cohen, who was interviewed by Kanigher in the visiting room at the Nellis prison, said, 'I would respect Congress more if they said all gaming is bad and that they want to ban all gaming,' Cohen said. 'I wouldn't agree with it but I would respect it. But their real motivation is nothing more than anti-competition. It's protectionism. They're just trying to protect their home-grown industries.'

In October 2003, Michael Hiestand of USA Today quoted Joe Read, who directed customer service for a Costa Rica-based sports betting site, as saying that Cohen's conviction led 'industry people to protect themselves by getting local people to front their businesses. That's the loophole. An American can run the business but no one can find out,' he said.

Hiestand also interviewed industry consultant John Musch who said bettors would inevitably find their way around any ban, especially as more countries begin to allow online betting. According to Musch, the U.S. needs to regulate online gambling. 'The legitimate operators would welcome that since they'd then seem more legitimate.'

When the authorities first used the Wire Act as the basis for their charges against online gambling sites there were questions as to how well the act would hold up under the law. The Interstate Wire Act of 1961 prohibits sports wagering between states using telephone lines or through other wired devices. Since the Internet had not been in existence in 1961 there were questions as to how that could possibly apply to the Act.

In June 1999, Tim Ito and Sharisa Staples of the Washingtonpost.com news reported, 'despite the Justice Department action, many legal scholars question how well existing laws can be applied to new technologies. The Wire Act, for example, does not explicitly mention the Internet. It is also unclear how well the law would apply to satellite based transmissions, which are not considered wired devices.'

Ito and Staples quoted Nelson Rose, professor of law at Whittier Law School who said, 'Changes in [gambling] law follow changes in society… But our society has been changing so rapidly . . . sometimes the law cannot keep up.'

Kanigher reported that some legal experts believe the Wire Act applies only to sports wagering. Kanigher cited a federal ruling in Louisiana upheld in 2002 by the 5th U.S. Circuit Court of Appeals that had come to the same conclusion. 'The courts ruled against two Internet gamblers who sued credit card companies and banks after accumulating gambling debts from casino-style gaming websites. The gamblers argued that the credit card companies and banks, working in conjunction with the websites, created a worldwide gambling enterprise that facilitated illegal gaming, making their debts unenforceable. But as part of their dismissal of the lawsuit, both courts ruled that the wire act applies only to bets on sporting events or contests.'

Alex Altam of the Times reported in 2013 that proponents of online gambling hoped to tap into a multi-billion dollar industry, of which U.S. residents account for around 15% of the revenues despite laws that force Americans to patronize offshore companies to participate. A recent study by Morgan Stanley estimated that online gambling could become a $9 billion industry by 2020, roughly on par with the revenue generated in the glittering palaces on the Las Vegas strip and the casinos lining the Atlantic City boardwalk.'

Howard Stutz of the Las Vegas Review-Journal reported in 2014 that 'state regulators, lawmakers, casino industry insiders and Wall Street analysts have estimated online gambling wagers could generate as much as $1.2 billion in gaming revenues in the first year — roughly 40 percent of what Atlantic City’s 12 casinos collected in 2012.'

In 2012 gaming companies like MGM Resorts International and Caesars Entertainment Corp were investing their money in social gaming sites suggesting that the legalizing of online gambling for Americans was just around the corner. Stutz reported in May 2012 that numerous social gaming casinos would open in the coming months, 'easily eclipsing all the traditional land-based casinos scheduled to open in U.S. regional gaming markets this year.' Although only virtual money was placed and the winnings included virtual prizes, these companies appeared to be setting themselves up for the legalizing of online gambling.

The Unlawful Internet Gambling Enforcement Act (UIGEA) that was passed in 2006 restricted the use of payment systems for Americans who gambled online, throwing a wrench into the online gambling industry back in 2010. The American Bankers Association had warned all banks in November 2009 that they would have to comply with the 2006 (UIGEA) law by June 1, 2010, and institute policies and procedures to block certain prohibited transactions.

Is Online Casino Legal In Usa

On April 15, 2011, 11 individuals associated with PokerStars, Full Tilt Poker, and Absolute Poker/Ultimate Bet were indicted by the DOJ. The charges focused in part on payment processing activities. The criminal and civil charges accused the defendants of engaging in bank fraud and money laundering, as well as violating UIGEA and operating unlawful gambling businesses. A second round of indictments was handed up on May 23, 2011, shutting down ten more online gambling sites.

In response to the implementation of the Act of June 1, 2010, some online casinos came up with their own payment systems.

Is Online Sports Betting Legal In Usa

In the early years, companies like PayPal predominated the online gambling payment market. But this all changed in June 2003 when New York Attorney General Eliot Spitzer subpoenaed PayPal's records relating to the use of the payment service by gamblers. At that time PayPal agreed to stop online gambling companies from using the service to accept money from gamblers who resided in New York State. In August 2003 Beth Cox of InterneNews.com quoted a spokesperson from PayPal as saying, it was 'taking the action in 'voluntary cooperation with the attorney general and was not admitting to a violation of law.'

Cox reported that under the settlement, PayPal agreed not to process payments to online gambling sites from New York customers as of Sept. 1 2003 and would pay $200,000 to New York State to cover costs of the investigation and penalties.

Joanna Glasner of Wired.com news reported in July 2003 that under the terms of its planned purchase of PayPal (PYPL), eBay decided that it would stop offering the payment service for online gambling transactions. It attributed the decision to an 'uncertain regulatory environment surrounding online gaming.'

Under the USA Patriot Act, it was prohibited to transmit funds known to have come from a criminal offense, or that were intended to promote or support unlawful activities. Attorney for the Eastern District of Missouri told eBay that its online payment service PayPal had violated provisions in the USA Patriot Act between October 2001 and July 2002, Dawn Kawamoto reported for CNET.

It was alleged that PayPal violated laws regarding the processing of online gambling payments, and eBay the parent company of PayPal was asked to hand over nine months of the gambling-related earnings in the settlement.

According to Brian McWilliams of Wired.com, nearly 500 gambling sites signed up to accept PayPal in the first quarter of 2002, almost doubling the company's roster of such merchants, which stood at 1,022 as of March 31, 2002. McWilliams reported in 2002 that 'in exchange for taking such a risk, PayPal was expected to derive more than $16 million from online gaming in 2002. Already that year, its revenues from such merchants -- who pay higher fees to offer the PayPal service -- had more than doubled, accounting for 8 percent of its total income.'

Kawamoto reported that PayPal received 6 percent of its revenue from online gambling, according to its filing with the Securities and Exchange Commission in 2001.

Glasner interviewed Keith Furlong, of the Interactive Gaming Council, who said that with PayPal out of the picture, gamblers would likely turn to competing online payment services such as Neteller and Firepay. Firepay, which shut down in 2007, was governed under the laws of Bermuda. Neteller is based in the Isle of Man and is publicly traded in the United Kingdom.

Is Online Gambling Legal In Usa

By 2005, Neteller was processing over $7.3 billion in financial transactions. According to reports issued by Neteller, 95% of its revenue was derived from money transfers involving online gambling companies. On September 11, 2006, the President and Chief Executive Officer of Neteller described the 'online gaming market' as Neteller's 'main market,' and stated that, in the first half of 2006, Neteller processed $5.1 billion in financial transactions.