Online gambling in the United States is currently marked by varying legislation in states that have chosen to offer online wagering to their residents. Currently, there is no federal legislation that explicitly prohibits nor permits internet betting. US states that currently regulate online wagering for their residents include European, Nevada and Delaware. Several other states are currently in the process of attempting to pass legislation and/or studying the internet betting industry in other regulated markets. Those states that have attempted or are close to regulating online gambling will be continuously added to the list below.
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For online gambling, 1994 was the year when it all began – the year during which innovative software and the initial beginnings of legislation came together to give birth to what has since become a multi-billion dollar worldwide industry.
While the concept of online casino gambling has been around since the early nineties, the software platforms behind the games didn’t surface until the mid-nineties. Microgaming – a UK based company from the Isle of Man – was the first known software provider for online casinos, having worked hand-in-hand with both in-house designers and the online security software company, CryptoLogic. Putting together games with safe and secure financial transaction systems was the catalyst in launching real money online casinos.
In this same timeframe, the Caribbean nation of Antigua and Barbuda passed the Free Trade and Processing Act, which permitted the issuing of licenses to businesses seeking to launch casinos online.
Less than two years later, the Kahnawake Gaming Commission launched in 1996, adding further legitimacy to the burgeoning industry by regulating online casino gambling via the Mohawk Territory of Kahnawake. This premiere gaming commission began granting gaming licenses to a majority of the world’s first online casinos and poker rooms, and to this day, is a highly respected authority.
Role of the US
But where was the US to fit in all of this? Not known to be the most liberal and accepting of new concepts – and despite two huge worldwide gaming markets physically located here – the answer as to the US’s future in online gambling was a murky one. You could say in many respects it still is, even though a handful of states in the US, including European and Nevada, have created legislature and now take real money wagers via casinos online.
By the end of the 90’s, the worldwide online gambling market was blossoming. 1996 was a big year for growth, during which casino’s jumped in numbers from just over a dozen to nearly 200 by 1997. While European players were betting along with other international players, the fact of the matter is that the US market was widely believed to provide the largest base of players wagering online for real money. By 1998, a legitimate inquiry and report about online casino wagering by Frost and Sullivan – a well known and established market research analyst company dating back to the 60’s – revealed that online gambling revenue had surpassed $830 million. In less than 4 years, the iGaming industry was looking at becoming a one billion dollar industry – a figure largely due to the fact that online poker rooms were introduced at this time.
The US government responded to the concept of online gambling perhaps too late in the game, but with vengeance, nonetheless. In 1999, the Internet Gambling Prohibition Act (IGPA) was brought about. This new would-be law essentially stated that online casinos could not take wagers from any European players, but it failed to make it past the Senate due to lack of detail and ability to execute without breaking what some considered to be various consumer rights.
As the US government was still struggling to get a hold and create laws against online wagering, the industry answered with the multi-player concept of online casino gaming, which gave players the ability to communicate with each other online at casinos, and thus further heightening the entertainment value aspect of gambling online.
After a continued period of inability to properly govern online wagering in the US, in September 2006, the House of Representatives and Senate passed the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). Honing in on the concept of the unrelated, yet tactical SAFE Port Act, this legislative attachment turned out to be a more effective way at going after the industry. The UIGEA specifically tackled banking transactions at casinos online, making it unlawful for banks or other financial institutions to process transactions from online casinos in the US. This was a more focused effort that varied from the previous failed bill and broadened the legal strokes of the 1969 Wire Act. Perhaps this time, too much focus was also the culprit, as the UIGEA only spoke to banking issues.
Moving Into US Regulation
Within a year of the UIGEA passing, Barney Frank, Dem. Massachusetts, opened a new door by bringing forth HR 2046 – the Internet Gambling Regulation, Consumer Protection, and Enforcement Act – which sought to revise the UIGEA by conditioning a standard for regulating online casinos with licensure via the Financial Crimes Enforcement Network. Since HR 2046, a wide range of other like-minded bills have been drafted and brought forward.
Two years after Frank’s 2007 introductory concept, the House Financial Services Committee held a hearing on the UIGEA. It was at this hearing that Frank’s newer bill, HR 2267, the Gambling Regulation, Consumer Protection, and Enforcement Act of 2009, brought forth effective, expert witnesses within online security and consumer safety. They provided convincing information regarding how to protect consumers while reassuring the reliability of online casino financial and banking processes.
This latest bill was passed in 2010, regulating and legalizing online poker and certain other forms of online gambling. This is when the skill-based debate came about, in belief that games of skill were better suited for online gambling rather than other, more consumer-predatory games, such as slot machines and keno.
Subsequently, the state-to-state regulatory approach gained strength and near the end of 2010 there was great movement in the approach to legalize casino gambling online at various rates. This was largely sparked by the US DOJ’s reversal of a previous ruling that said the UIGEA’s reach was beyond sports betting.
European became the first state in the US to pass a bill expressly legalizing certain forms of online gambling. Named S490, this bill was passed overwhelmingly. The key success to this bill (after Frank’s ground breaking concept), was its language permitting wagers to be taken by operators inside the state on several types of casino games, falling short of sports wagering, which is still being contested in European.
Since then, Nevada and Delaware have followed suit, though effectively launching in different order. Additional states like Pennsylvania, New York and several others are on the cusp of passing their own proper legislature.