Online Gambling Laws in the US

Enacted as part of the Kennedy administration’s crackdown on organized crime, the Interstate Wire Act of 1961 (18 U.S.C. § 1084) was designed to cut off the “wire” communication channels that mob-run betting operations relied on. 

It prohibits anyone engaged in the business of wagering from using interstate or foreign telecommunications (like telephone lines, and by extension the internet) to transmit bets or betting information on “any sporting event or contest.” Violations can lead to fines or up to two years in prison. The law’s wording specifically mentions sports betting, reflecting its original intent to target interstate sports bookmakers. However, other portions of the text lack an explicit sports reference, which for decades fueled the debate over whether the Wire Act’s scope extends to non-sports gambling, like casino games and lotteries, that are conducted across state lines.

In 2011, the U.S. Department of Justice’s Office of Legal Counsel issued a formal opinion clarifying that the Wire Act applies only to sports betting, not to other forms of online gambling. This paved the way for states to launch online lotteries and poker within their borders. A contrasting DOJ opinion in 2018 briefly argued that the Wire Act’s prohibitions “sweep beyond sports gambling,” but this interpretation was challenged in court. 

In New Hampshire Lottery Commission v. Barr (2021), the First Circuit Court of Appeals affirmed that the Wire Act’s reference to bets or wagers “on any sporting event or contest” means the law is limited to sports gambling. This decision (which the DOJ did not appeal) essentially cements the 2011 interpretation as the law of the land.

Today, the Wire Act is understood to prohibit interstate sports betting transmissions, including bets and betting tips across state lines. Practically, this means that states that legalize online gambling ( sports wagering, poker, or casino games) must guarantee that all play and data remain intrastate (within state borders) to avoid Wire Act violations. 

If a state-authorized internet gambling platform employs geolocation and other measures so that only in-state customers can place bets, they are in compliance with the Wire Act’s interstate ban. The Act also contains a safe-harbor clause allowing the transmission of information assisting in sports betting between states where the betting is legal, but not the bets themselves, underscoring that actual wagers cannot cross state lines.

The Unlawful Internet Gambling Enforcement Act of 2006, or UIGEA, was enacted to address the rise of online gambling by targeting the flow of money to illegal internet betting operations. Rather than outlawing internet gambling outright, UIGEA prohibits gambling businesses from knowingly accepting payments related to unlawful online bets. 

In practice, this law puts the onus on banks, credit card companies, and payment processors to block or refuse transactions connected to illegal internet gambling. The act made it a federal offense for such businesses to process payments (credit card charges, electronic fund transfers, checks, etc.) for wagers over the internet that are “unlawful under any federal or state law.” Importantly, UIGEA did not newly define what gambling is illegal; it largely relies on underlying state or federal laws. An online casino bet placed from a state where that form of gambling is illegal would be an “unlawful internet gambling” transaction that financial institutions must prevent. By contrast, a bet placed legally under state law (say, a wager on a state-licensed betting site) would not be “unlawful” under UIGEA.

UIGEA contains notable exceptions and definitions that have shaped its impact on the online gambling landscape. The law explicitly carved out certain activities, stating that it does not apply to online fantasy sports contests (under specific conditions), online skill games, and legal intrastate or intratribal gambling transactions. 

It also left ambiguous the status of interstate horse racing wagers, which were the subject of separate federal law (the Interstate Horseracing Act), and the omission created some confusion, though regulators generally did not target horse betting as aggressively. UIGEA’s passage led many major online poker and casino companies (which had been accepting U.S. players) to withdraw from the U.S. market in late 2006. 

Payment processors and banks, fearing penalties, implemented strict codes to decline gambling-related credit card charges and transfers. This drove a number of offshore gambling sites underground or out of business. UIGEA enforcement ramped up in subsequent years: a prominent example was the April 15, 2011, “Black Friday” crackdown, when the DOJ unsealed indictments against operators of major online poker sites for, among other charges, processing payments in violation of UIGEA.

It’s important to note what UIGEA does not do: it doesn’t criminalize simple play by individual bettors, nor does it declare all online gambling illegal. Instead, it reinforces other laws by choking off the payment pipelines for gambling that is illegal in the place where the bet is made or received. Since UIGEA’s enactment, states that legalize online gambling or sports betting have worked within its framework. 

As more states have legalized online wagering, payment processors have become more adept at differentiating legal vs. illegal gambling transactions.

The Professional and Amateur Sports Protection Act of 1992, commonly known as PASPA or the “Bradley Act,” was a federal law that banned most forms of sports betting nationwide (with a few grandfathered exceptions) for 26 years. 

PASPA made it unlawful for states to “sponsor, operate, advertise, promote, license, or authorize” sports gambling, effectively preventing any new state from legalizing sports betting after 1992. At the time of its enactment, only four states were permitted limited exemptions because they already had sports betting or sports lotteries in some form: Nevada (which had long-standing legal sports wagering), plus Delaware, Oregon, and Montana (which had minor sports lottery or pool betting products). 

PASPA also gave New Jersey a one-time opportunity to legalize sports betting within a year, but New Jersey didn’t act in time. Thus, from 1992 onward, Nevada held a monopoly on legal single-game sports betting, while every other state was federally barred from authorizing gambling on sports, professional or collegiate. The law’s intent was to uphold the integrity of sports and prevent the spread of sports gambling, which Congress viewed as a problem of national concern (invoking the Commerce Clause).

2018 Repeal – Murphy v. NCAA

The landscape changed dramatically in May 2018, when the U.S. Supreme Court struck down PASPA as unconstitutional. In the case of Murphy v. National Collegiate Athletic Association, the Court, by a 7-2 vote, held that PASPA violated the Tenth Amendment’s “anti-commandeering” principle, meaning the federal government cannot commandeer state legislatures or prevent them from changing their own laws. 

PASPA had essentially dictated to states that they must keep sports betting prohibitions in place, which the Court found impermissible. By nullifying PASPA, the Supreme Court removed the federal ban and opened the door for each state to decide for itself whether to allow sports wagering. This was a watershed moment in U.S. gambling law. Immediately after the ruling, many states moved quickly to legalize and regulate sports betting. Within just five years, the majority of states had authorized sports wagering. 

As of 2023, sports betting was legal in 37 states and the District of Columbia (with others considering legislation). States have implemented sports betting through various models; some with in-person sportsbooks at casinos or racetracks, many with statewide mobile betting apps, and each state setting its own rules on licensing, tax rates, and whether to allow wagering on in-state college teams, etc.

The repeal of PASPA fundamentally shifted the federal-state balance for gambling. It did not mean that sports betting automatically became legal everywhere; rather, it removed the federal prohibition and left the matter to state law. In the post-PASPA world, federal law does not directly regulate the availability of sports betting (aside from general laws like the Wire Act for interstate activity). 

Every state can choose whether to legalize sports gambling and how to regulate it. Some states have embraced it for the tax revenue and to eliminate black markets, and a handful of states still forbid it due to moral or public health concerns. Federally, there is still oversight in terms of enforcement against illicit operators (e.g., the DOJ can go after offshore bookies taking U.S. bets), but the decision to permit sports wagering is squarely in state hands after 2018!

The Indian Gaming Regulatory Act of 1988 (IGRA) is a pivotal federal law that governs gambling operations on Native American tribal lands. IGRA was enacted in response to U.S. Supreme Court decisions in the 1980s (notably California v. Cabazon Band of Mission Indians), which affirmed the right of sovereign tribes to conduct gaming on their reservations, independent of state bans. Through IGRA, Congress sought to provide a framework for tribes to engage in gambling as a means of promoting tribal economic development and self-sufficiency, while also ensuring that gambling would be conducted fairly and free from organized crime. The Act accomplishes the following things:

Affirmation of Tribal Rights

IGRA affirmed that tribes have the right to operate gaming on Indian lands, so long as the gaming is not prohibited by federal law and the state within those lands permits such gaming for any purpose (i.e,. there’s no blanket state criminal prohibition). This essentially acknowledged gambling as a lawful enterprise for tribes, under certain conditions, as part of tribes’ sovereignty.

Three Classes of Gaming: IGRA establishes three categories of gaming with different regulatory schemes. Class I covers traditional tribal ceremonies and social games for minimal prizes; these are under exclusive tribal jurisdiction (states and feds have no role). Class II includes games like bingo, pull-tabs, and certain non-banked card games; tribes can operate Class II games if the state allows those games generally (e.g. bingo or poker is not criminally outlawed in the state), and Class II is regulated by the tribe with oversight from the federal National Indian Gaming Commission (NIGC). Class III is essentially all other forms of gambling, like  the “Vegas-style” casino games such as slot machines, blackjack and roulette, craps, as well as sports betting and pari-mutuel racing, etc. Class III games are the most lucrative and are therefore subject to the most regulation.

Tribal-State Compacts for Class III

IGRA requires that Class III gaming on tribal lands can occur only under a negotiated Tribal-State Compact (an agreement between the tribe and the state). In other words, to run a full-fledged casino with Class III games, a tribe must come to terms with the state government on matters such as what types of games are allowed, regulatory standards, revenue sharing if any, and other operational details. IGRA compels states to negotiate such compacts in “good faith” once a tribe requests it, though enforcement of this good-faith requirement was hindered by a 1996 Supreme Court decision (Seminole Tribe v. Florida) that said tribes can’t sue states under IGRA due to state sovereign immunity. Nonetheless, in practice, most gaming tribes and states do enter compacts. The U.S. Department of the Interior must approve these compacts, and if a state absolutely refuses to negotiate, IGRA provides some alternative procedures via the Interior Department to get gaming up and running. The Tribal-State compact system is a cornerstone of IGRA: it balances tribal sovereignty (tribes’ right to game) with legitimate state interests (like enforcing public policy and some regulatory control over high-stakes gambling within their borders).

Federal Regulatory Structure

IGRA created the National Indian Gaming Commission (NIGC), a federal agency to oversee Indian gaming nationwide. The NIGC, along with the U.S. Department of the Interior, plays an oversight role: approving tribal gaming ordinances, reviewing and approving management contracts, conducting audits and inspections of gaming operations, and enforcing compliance with IGRA’s requirements. Tribes running gaming operations must adhere to IGRA’s standards, such as allocating net gaming revenues only to approved uses (tribal government services, economic development, charitable donations, and per-capita payments to tribal members only if approved by the Interior Department). Criminal provisions in federal law (18 U.S.C. §§ 1166-1168) also back up IGRA by making unapproved or off-compact gambling on Indian lands subject to federal enforcement.

Gambling is not explicitly mentioned in the U.S. Constitution, which means it falls under the states’ general police powers to legislate for the welfare of their residents. As a result, states have long decided whether to allow lotteries, casinos, bingo, racetracks, or other betting, and they oversee those operations through state gaming commissions or lottery boards. The legal gambling offerings, therefore, vary by state; Nevada has ubiquitous casinos and sports books, Utah bans all gambling, many states operate lotteries and allow casinos or card rooms, and so on. Even within states, local jurisdictions can sometimes vote on whether to permit a casino in their community. In short, states are the chief architects of gambling legality and regulation within their borders.

Historically, the federal government mostly deferred to states on gambling matters, intervening chiefly to combat organized crime and unlawful interstate gambling. Starting in the 1950s and 60s, as organized crime syndicates ran illegal betting across state lines, Congress enacted laws like the Wire Act, the Travel Act (which prohibits using interstate facilities to carry on gambling businesses), and other anti-racketeering laws to assist states in enforcement. The laws didn’t establish a federal gambling regulatory scheme; rather, they were aimed at bolstering law enforcement by targeting gambling operations that transcend state boundaries or involve other federal concerns like money laundering.

One contemporary challenge is online gambling, which by nature can cross state and national borders. Here, the federal-state interplay is critical. Federal law (the Wire Act and UIGEA) does not stop a state from legalizing online casino games, poker, or sports betting for its residents, but it does require those operations to be intrastate. States that offer internet gambling typically use technology to ensure compliance, like New Jersey’s regulated online casinos, which verify that each player is physically located in New Jersey at the time of play. If states want to collaborate, they must do so within federal constraints. 

There is a Multi-State Internet Gaming Agreement under which a few states (New Jersey, Nevada, Delaware, Michigan) share online poker traffic, which was made possible after the 2011 DOJ opinion narrowing the Wire Act to sports, and this gave confidence that non-sports interstate gaming compacts would be lawful. Still, the uncertainty prior to the 2021 court ruling caused some hesitation. 

Now, with the Wire Act clearly only about sports, states have more leeway to cooperate on lotteries and poker, as long as those are legal within each state. 

On the sports side, interstate online sports betting remains essentially prohibited absent new federal law, meaning that even if two states legalize sports betting, a sportsbook cannot accept bets from a person in State A on a server in State B (except potentially in very narrow circumstances under the Wire Act’s information transmission exception or via carefully structured interstate compacts, none of which exist yet for sports betting). Thus, interstate commerce limits are a key federal overlay on the state-by-state gambling expansion.

As we discussed under IGRA, another dimension of U.S. gambling regulation is the division of authority between tribal governments and states. Tribal casinos operate under federal law and tribal sovereignty, but often interface with state regulations through compacts. This means a state that outlaws commercial casinos might still end up having tribal casinos if a tribe within the state invokes its rights under IGRA (provided the state allows some form of gaming). 

Conversely, a state that has commercial casinos will work with tribes so that all gaming in the state, tribal and non-tribal, can coexist. In any case, tribal gaming regulation is a parallel regime: tribal regulators and the NIGC handle much of the oversight, and states have limited regulatory input per the compacts (often involving licensing of casino employees or inspection rights agreed upon in the compact). Federal courts occasionally adjudicate disputes in this arena, such as whether a new type of game is Class III (requiring a compact) or Class II (which a tribe can offer without state permission).

Both federal and state authorities actively enforce laws against illegal gambling. If an illegal gambling operation is purely intrastate, state law enforcement (and state prosecutors) typically take the lead. If the activity crosses state lines or involves the internet or organized criminal elements, federal agencies like the FBI and DOJ may get involved, often partnering with state authorities. 

Likewise, illegal sports-betting rings or unlicensed casinos can face charges under state anti-gambling statutes, and possibly federal laws if interstate aspects exist (the use of phones for betting, Wire Act, or money laundering of gambling proceeds). There is substantial cooperation in this realm; federal law (18 U.S.C. § 1955) makes it a crime to run an illegal gambling business that violates state law, giving federal agents jurisdiction to help shut down larger gambling operations that states want to stop.

Recent years have seen calls by some for new federal gambling legislation, such as proposals for federal oversight of sports betting integrity or a national online poker law, but so far? The trend remains federal deference to state-by-state policy, with the existing patchwork of federal laws acting as a framework.