Online Gambling in the US is currently marked by varying legislation in a multitude of states. Currently, there is no federal legislation that explicitly prohibits nor permits internet gambling in the US. Many states are currently in the process of attempting to pass legislation and/or studying online gambling in the US and other regulated markets. Below, we list the states with active regulatory bills and those with legislation pending.

Currently Regulated
New Jersey | Delaware | Nevada

Pending Legislation
Pennsylvania | California

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Is it Legal to Gamble Online in the US?

This is a common question. The vast majority of states do not prohibit nor regulate online gambling, making this something of a grey area. However, an increasing number of states have introduced online gambling bills, and current industry trend data suggests online gambling in the US will experience a 51% Compound Annual Growth Rate by 2020. Some reports estimate as many as 20 states will have legalized online gambling by 2020.

 

Online Gambling in US: A Brief History

Online gambling in the US first surfaced in 1994, following the initial development of encrypted software platforms and the early beginnings of offshore regulatory bodies. While there are varied claims as to which online casino was the first to transact a real money wager, there is no disputing the contributions of pioneering software companies, Microgaming and Cryptologic (Wagerlogic).

Microgaming became the very first prominent software platform, dominating the early days of online gambling with an army of operator licensees, while Cryptologic was instrumental in developing the transactional and wagering security protocols that gave players the confidence needed to make real money wagers online. Cryptologic's flagship licensee, InterCasino, was one of the most popular US-friendly online casinos when the US online gambling industry was still a grey market.

It was in the same year that the Caribbean island nation, Antigua and Barbuda, became the first "offshore" jurisdiction to embrace online gambling, signing the Free Trade and Processing Act into law, which gave the Antigua & Barbuda Financial Services Regulatory Commission the ability to issue licenses to operate online casinos under a newly formed Directorate of Offshore Gaming.

Just under two years later, the Kahnawake Gaming Commission (KGC) was formed by the Mohawk Indian tribe (Montreal region), in effect becoming the second offshore jurisdiction to issue business licenses to online casino operators. But what gave Kahnawake an initial leg up over Antigua and Barbuda was more regulatory protocols. Going just beyond operator licensing, the KGC was instrumental in mandating industry best practices such as ongoing payout percentage audits and software RNG certification.

In these early days of online gambling, the US market became a primary target for many online casino operators. Within a year of the Kahnawake Gaming Commission being formed, several hundred new online casinos had gone live, with over 200 in operation by 1997. By 1998, gross gaming revenue exceeded $825 Million, with the US accounting for the bulk of the proceedings. The introduction of online poker soon pushed the industry over the one million mark - all in just less than five years since the first casino went on line. During this time, the US was largely viewed as a "grey" market, which in many ways still exists to this day. The current Federal stance under a US DOJ ruling is that online betting prohibitions are limited to sports wagers, thus creating a legal grey area for online casino gambling in individual states - some of which explicitly prohibit while others openly regulate various forms of wagering.

Not only was the US government slow to respond to passing regulations for online gambling revenue, US lawmakers went the other direction altogether by seeking to pass a prohibitory bill known as the Internet Gambling Prohibition Act (IGPA). The bill, however, lacked specifics in protecting consumer rights, and consequently did not make it through the Senate. Un-phased by actions to essentially place a ban on US online gambling, the vast majority of operators continued accepting bets from US players, all the while developing new technologies that enabled multi-player applications at casino games. But a small handful of US lawmakers with ties to land-based gambling lobbyists were not finished with plans to ban online gambling in US markets. Soon after the initial failed attempts to pass the IGPA, lawmakers introduced the notorious Unlawful Internet Gambling Enforcement Act or UIGEA.

Dawning of the UIGEA

The UIGEA centered around clarification of the presiding piece of legislation that regulated remote wagering at the time - the Wire Act of 1961. Touted by many lawmakers as an out-of-date and ineffective bill, the Wire Act, which was obviously passed before the creation of the internet, specifically addressed telephonic sports betting wagers. But in 2006, the UIGEA was passed by the US House of Representatives, and an online gambling prohibition once again faced approval by the Senate. Considered to be a long shot in the Senate, the UIGEA received an unlikely friend in the form of additional legislation, the SAFE Port Act, which addressing post 9-11 terrorism, was considered a must-pass bill. In the last few hours of Senate activity, the UIGEA was approved as an attachment to the SAFE Port Act, due to wording that specifically addressed banking transactions - the concern being that online gambling revenue generated by offshore operators was being used to fun terrorist activities. In fact, the UIGEA did not make the placing of wagers illegal, but rather, the transferring of funds by businesses.

Moving Into US Regulation

Pro-online gambling lawmakers, namely House Financial Services Committee Chairman, Barney Frank, had long been critical of the UIGEA and were quick to call attention to its flaws. Less than a year later, Congressman Frank introduced a bill of his own, called the Internet Gambling Regulation, Consumer Protection and Enforcement Act. Although this bill did not gain the traction needed to become law, Frank's efforts prompted a House Financial Services Committee hearing on the legality of the UIGEA, resulting in several expert testimonials regarding the technology protocols used to regulate online gambling (which at the time had already become legalized in the United Kingdom). The seeds of regulation had been planted, however, the effects of the UIGEA were yet to play out.

As hastily and sloppily put together as the UIGEA was, it took two years before regulations were finalized and practically an additional two years before online gambling operators would be forced to be compliant with the new regulations. Since the UIGEA specifically prohibited the processing of funds used to place online bets, many payment processors and third-party eWallets ceased allowing US account-holders the ability to deposit with online gambling sites. But the UIGEA permitted carveouts for horse racing and fantasy sports wagers, and identifying transactions with the proper payment processing code became a nightmare. Many offshore operators found workarounds, going so far to begin tagging online gambling transactions as online purchases of common goods like flowers and golf balls. Larger operators, like Microgaming Software, began to exit the market, but a few remained - namely those doing the most business at the time: Poker Stars, Full Tilt and Absolute Poker.

Online poker had simply become a giant industry - and the three aforementioned properties were raking in millions. This would all come to a crash on April 15, 2011 - a day Infamously called "Black Friday" for the online poker world. Releasing a 52-page indictment, the US DOJ had unveiled an indictment and civil complaint against Poker Stars, Full Tilt and Absolute Poker - all of whose US-facing domains were shut down sans a large logo of the FBI. Seizures of 75 bank accounts and multiple arrests later, the biggest players in the online gambling industry were to be no more in the US.

However, later that same year, the US DOJ would reverse its initial opposition to online gambling, by clarifying that the 1961 Wire Act could only legally apply to sports betting. As the UIGEA was contingent upon enforcement of the Wire Act, this ruling - in effect - would make the online processing of transactions other than sports wagers fair game. Soon after, several states introduced bills to regulate online gambling. Poker Stars even managed to get a foot in the door of New Jersey, which became the second state in the US (after Delaware) to regulate online gambling in the US...on a state level.

Additional states like Pennsylvania, New York and several others are on the cusp of passing their own proper legislature.

Additional Resources:

US Online Gambling Timeline @ the Free Encyclopedia

 

USA Online Gambling Sites

The following online casinos have been vetted by the Online.Gambling.org editorial team and rated on an ongoing basis by the Online.Gambling.org player community. They have established track records operating in the US and accepting real money player accounts in multiple states.


 

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