A Brief History of US Online Gambling Laws

While online gambling is not expressly prohibited by federal law, two major pieces of legislation have been used to federally regulate it. The first law, the 1961 Federal Wire Act, prohibits interstate communication by wire or phone for sport or contest betting. Federal prosecutors tried to use the Wire Act to prosecute people for online gambling in general. In 2002, the 5th Circuit Court of Appeals held that the Wire Act does not expressly forbid online gambling, but only applies to sports betting. In 2011, the Department of Justice issued an opinion, stating wire transmissions for transactions other than sports bets fall outside of the Act’s scope.

In 2006, legislators passed the Unlawful Internet Gambling Enforcement Act, or UIGEA. This online gambling law prohibits casinos from accepting payments for bets, which are illegal under state or federal laws. Banking institutions are prohibited from processing payments or transfers for illegal online gambling. Most US banks responded by preventing their credit cards from being used at online gambling websites. A number of online gambling sites, including PartyGaming, Cassava Enterprises, Bwin and Sportingbet prohibited US residents from online gambling for real money. As a result, PartyGaming’s stock value plummeted by 60%.

Current US Online Gambling Laws

Gambling in US online casinos is still legal depending on the online gambling laws of the individual states. Some states have passed laws making online gambling strictly illegal, while other states have legalized it. Nevada, New Jersey and Delaware have all passed online gambling laws legalizing online casino games for their residents. California, Mississippi and New York introduced bills in 2014 to legalize online gambling. Mississippi’s legislation died in the committee. Several other states are considering legalization. States that expressly prohibit all online gambling include Louisiana, Indiana, Illinois, Montana, South Dakota and Kentucky, while Washington State makes playing poker online a felony. Online gambling is legal in 85 other countries worldwide, leading to battles between the offshore operators and US casinos for billions of dollars in potential revenues as more states move toward legalization.

What US Gamblers Need to Know about Gambling in US Online Casinos

In order for US Online Casinos to start, they must seek and receive state licenses. Information regarding their licenses, jurisdictions and terms and conditions must be prominently provided to gamblers on their websites. Casinos are prohibited from receiving or processing restricted transactions. Restricted transactions include money for sports bets or from residents who reside in states with express prohibitions against online gambling. Casinos are also required to report large financial transactions.

Because many financial institutions do not allow their customers to transfer money for online gambling purposes and several payment processors do not process payments for US customers, it is important for US online gamblers to check the options available to them for deposits and withdrawals. Many sites will accept payments via American Express, Money Gram, Western Union, MasterCard and Visa. Common withdrawal methods include checks mailed by the casino or wired via Western Union or Money Gram.