United States Online Gambling Laws and Regulations

Published on March 7, 2017 in Casino Tips

United States Online Gambling Laws and RegulationsThe United States is home to one of the most popular casino locations in the world, Las Vegas. Millions of tourists and locals flock to this location each year to try their luck and potentially take home a life-changing sum of money. Movies, TV shows, books, and more have been based on the excitement that surrounds the gambling that takes place on the Las Vegas strip. Due to the popularity and culture surrounding gambling in Las Vegas, it's very surprising that online gambling is still illegal in most states throughout the US.

Online gambling is illegal in most states throughout the US, but this hasn't stopped users from finding loopholes and ways around the legal issues. Every day there are thousands of US citizens that play at online casinos despite the legal ramifications of doing so.

The majority of online casinos that US citizens use (where online gambling is still illegal) are situated overseas and fall outside of the US jurisdiction. Unfortunately this means that players are not in any way protected by the US government and should theft or fraud take place, there's nothing that can be done in the legal sense.

Not all hope is lost! While legal online gambling can be a slow moving industry in the US, changes are being made on a regular basis to change this fact. There are already a few states who host legal online casinos. 

Let's take a closer look at what is legal and illegal regarding online gambling in the United States.

Why is online gambling illegal?

When online casinos first appeared in the US, back in the 1990's, the market was fair game with very little legality surrounding the practice. However, in 2006 the Safe Ports Act was signed into law and this changed the entire future of online gambling in the US.

Before the Safe Ports Act was signed into law, any US citizen could use credit and debit cards to pay for their online gambling needs. Once the law came into affect, this changed as it blocked certain payments from credit or debit cards to gambling sites. Without the use of third party payment options such as e-wallets, moving cash into an online gambling account was practically impossible.

What is the UIGEA?

Another factor that plays a large role in the ending of online gambling was the addition of the Unlawful Internet Gambling Enforcement Act (UIGEA). This Act was also passed in 2006 and while it wasn't enough to stand as its own bill, it was attached to the Safe Ports Act mentioned above.

The UIGEA played the most critical role in prohibiting banks from sending or receiving money to online casino sites. In short, "the UIGEA prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law."

Due to these laws, the act of gambling online itself is not necessarily illegal, but without the ability to send or receive money, gambling online is pointless.

There are certain states that have very strict and specific anti-gambling laws. Ignoring the regulations regarding online gambling in any of these states could have very serious consequences.

Legal online gambling

Not all hope is lost for US players who desperately want to play online at their favourite casino sites. Three states (with more in the pipeline) have already opened their doors to online casino operators.

New Jersey, Delaware, and Nevada are the current legal states which offer casino operators the opportunity to receive a licence.

Each state is able to make its own laws regarding online gambling which has led to the three current open states to reach the decision they did.

It's difficult to say which states will be next in line as there is much discussion, debate, and push back from those who firmly believe that online gambling should not be allowed at all. Depending largely on which party is in power at the time of the laws and regulations being passed, it may be a long time before any other states take the same leap at the abovementioned jurisdictions. 

There have been talks of California, Pennsylvania, New York, and Mississippi being next in line, but as this is merely speculation at this point and only time will tell.

Tax on winnings

In order to remain in legal standing with the United States government, online casinos work with the IRS when dealing with tax. As it is seen as a form of income, all winnings claimed online are treated like casino winnings in a land-based casino and are therefore taxed.

The standard operation when playing at online casinos within the regulated states is that 25% of winnings will be held for the state. Players may also receive an email stating that they will need to reveal their tax information before claiming in any winnings. 

Different casino games are treated differently with some games (such as table games) requiring the player to keep track of losses and winnings. In the case of tournaments, a log of bets and wins is kept automatically. Different bets and winning amounts require different tax reports so always be sure to confirm at any legal online casino you frequent regarding the specific details.

Safe gambling practices

All online casinos and online gambling operations should warn players that gambling can be addictive. While a fun way to pass the time and potentially earn some extra cash, if you ever display any signs of a gambling addiction, be sure to contact a helpline such as NCPG (or National Council on Problem Gambling). This helpline is completely free and confidential in order to offer you or someone you know the help that is required.