Online Gambling Laws in the US
Yesterday, we looked at online gambling laws in Europe, so today let’s look at how the US is treating online gambling.
On the federal level, the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 had a massive impact on US players accessing online sites. Prior to the act, almost every offshore gaming company accepted US players, however, today all major offshore gambling operators have restricted site access to players from the US.
Note, this is the internet we are talking about, so while UIGEA made it more difficult (and technically illegal) for players and much more of a risk for operators, offshore gambling involving US players still happens. As these offshore operations are not regulated, the risk for scams are high, so player beware.
UIGEA made the penalties for payment processing of gambling funds significantly harsher, thus cutting off offshore gambling companies from easily getting or paying out player funds. Credit card processors were already rejecting the industry, due to high chargebacks and questions about the industries legality. Many other MSBs (Money Service Businesses) took heed of the UIGEA rules and exited the sector, but some e-wallets soldiered on until their assets were seized, or some other legal action forced them out of business. Now, the only way to send money to offshore gaming businesses is via Western Union, or a similar money transfer service.
However, the UIGEA did not outlaw online gambling. Jurisdiction over gambling laws is a state issue, thus each state is allowed to create their own regulations. Four states — New Jersey, Nevada, Delaware and Pennsylvania — have legalized internet gaming. Pennsylvania just passed their legislation on October 30, 2017, so the process of licensing is just under way and operations have not yet begun.
Advanced geolocation technology is used to ensure that only players within the state borders are participating. Electronic age verification procedures keep underage players from accessing age restricted sites, helping online gaming operators fulfill their social responsibility obligations.
One gaming option that is poised for a breakout in the US is sportsbook, betting on the outcome of sporting events. Gambling legislation tracking firm Eilers & Krejcik estimates that up to 30 states might present bills in 2018 that legalize sportsbetting and 11 states will likely follow the proposed legislation.
These bills are possible if the Supreme Court rules, as expected, against the 1992 Professional and Amateur Sports Protection Act (PASPA), which currently prevents 46 states from offering sports betting games. The announcement is anticipated by June.
Sportsbook offers a huge opportunity for tax-hungry states; it’s estimated that $100 billion to $400 billion per year is wagered illegally on sports in the US.
When is putting money on sporting events not gambling? When it’s a game of skill, as opposed to a game of chance. Fantasy sports, wherein users select a group of players to act as their team has an exemption under UIGEA:
All winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events.
Fantasy sports is big business in the US, accounting for $320 million in revenue last year. While that’s significant, that is small in comparison to the potential of sportsbook. If sportsbook does actually open up and become widely available in the US, fantasy sports might suffer. On the other hand, the two big players, Fan Duel and Draft Kings, already have established users.
2018 looks to be a massive year for online gambling in the US. Stay tuned for the latest twists and turns in the industry.