Understanding Today’s US Online Gambling Laws

Online gambling has been a popular pastime since its inception, but it soared to substantial new heights during the pandemic.

As a result, US online gambling laws—which have long been subjected to frequent changes—are evolving faster, with additional states legalizing the activity. At the same time, advocates argue for a more uniform approach to online gambling regulation across the board.

Whether you’re an avid online poker player or you operate an online casino, staying apprised of the most current online gambling laws is fundamental to avoiding the risk of criminal liability. 

Federal vs state gambling laws

Online gambling in the US is regulated on both the federal and state levels:

  • Federal gambling laws: According to the Wire Act of 1961—yes, before the advent of the internet—online betting and interstate gambling are deemed illegal at the federal level. However, states have the power to allow or prohibit online gambling within their borders, while intrastate gambling is poised to change.
  • State gambling laws: Except for Hawaii and Utah, all 48 states and the District of Columbia (DC) allow some form of gambling. That said, online gambling laws vary state by state and according to the type of gambling involved.
    • For example, as of 2023, only six states authorize residents to gamble on poker in online casinos, but 35 states allow (or will soon allow) residents to participate in sports betting. Meanwhile, online gambling is banned, period, in several states (including California and Texas) and may result in a misdemeanor.

The diversity and complexity of online gambling laws reinforce the importance of performing due diligence—particularly for gaming operators who must remain compliant.

The Wire Act of 1961 may have paved the way for the Department of Justice’s (DOJ) assertion that online gambling is federally prohibited. Still, several court decisions influenced vital legislative changes and the current state of online gambling regulation.

The Unlawful Internet Gambling Reinforcement Act of 2006 bars betting entities from accepting payments from illegal gambling outfits. Further, it bans financial institutions—such as banks and credit cards—from facilitating payment processes from unregulated online gambling sites. Importantly, though, the act doesn’t disallow online gambling in and of itself.

A crackdown of the law in 2011 resulted in what’s widely known in the gaming world as “Black Friday” and effectively crushed the online poker boom that defined the early aughts.

In 2011, the DOJ reversed its opinion on the Wire Act and stated that it applies only to sports betting. But this opinion was reversed again in 2019 to insist that the Wire Act applies to any form of gambling that employs wire communication across state lines.

Today, US online gambling laws remain in flux. However, one thing holds true: online gambling is expected to continue to surge in popularity, with some estimates suggesting it’ll hit the $33.15 billion mark by 2028

Operators of online gambling operations are subjected to the laws and regulations specific to their jurisdiction. That said, there are several universal commonalities, such as:

  • Age verification (typically between 18 and 21 years old, depending on the state and form of gambling)
  • Identity verification
  • Location verification
  • Gambling license requirements
  • Financial regulations (i.e., payment processing and revenue reporting)
  • Responsible gambling measures to deter unhealthy gambling behaviors, like deposit limits and self-exclusion

To remain compliant, online gambling operators must adhere to often stringent know your customer (KYC) and anti-money laundering (AML) regulations. Not only does this shield players and operators from online gambling fraud, but it also helps gambling entities preserve their reputations. 

Both KYC and AML are critical, as the explosion in online gambling has also led to an uptick in money laundering and other financial crimes. 

Recent legal developments in the online gambling industry have underscored the industry’s dynamic nature. 

For instance, in 2018, the US Supreme Court repealed the Professional and Amateur Sports Protection Act (PASPA), which banned sports betting outside Nevada. The strike-down led to a huge boom in this niche of the industry.

Further, the rise in online gambling during the pandemic altered—and split—public opinion. Advocates indicate it’s central to economic growth, while others have expressed concern about online gambling’s mental health implications. Many insist on stronger collaboration between regulatory bodies to standardize what characterizes online betting legality. 

All are fueling ongoing changes in the legal landscape. To that end, we may see an increase in legal online casinos, and as more states adopt revised sports betting laws, we may see other states follow suit. 

In other words? It’s a thrilling time to be part of this world. 

Staying compliant in the US online gambling market

Pandemic or not, online gambling is one of the biggest and most exhilarating industries on the planet—and US online gambling laws will surely shift in parallel to its growing popularity. This places the onus on gambling operators to comply with ever-changing federal and state regulations.

The best way to do this is by leveraging technology. Automated KYC stays on top of regulatory changes and streamlines the process. 

Meanwhile, AI-fueled identity verification and age verification can rapidly and accurately confirm that players are who they say they are, guaranteeing the security of your enterprise and your players.

Ultimately, Microblink’s ID scanning and document verification products are a go-to solution for gambling operators. Try our demo today to see the possibilities for yourself.

April 26, 2024

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