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Legality of Online Gambling in the US
Lately, I've been getting a lot of questions from the folks over in the US asking whether it is legal for them to gamble online. Unfortunately the short answer is Yes. I've done some research and this is what I turned up.
A US FEDERAL LAW PROHIBITING WAGERING AND BETTING ON LINE DOES NOT EXIST.
Some US States such as New York, New Jersey, Nevada, Washington, Indiana, Michigan, South Dakota, Illinois, Louisiana, and Wisconsin do have laws that prohibit online wagering, but have yet to come after anyone. In other words, to the best of my knowledge, no one has ever been persecuted for gambling on line.
The only thing that IS illegal is for financial institutions to facilitate banking transactions with online casinos and other wagering sites. Therefore, there are a number of well known online casinos that do not accept US players. However, there are quite a few that are more than happy to attract American players, and the best and most popular are listed on this site.
The debate in the US over whether online gambling is legal has been going on since about 1995. As of mid-2010 it's still considered illegal, but that doesn't mean that it doesn't happen. It just means that US residents who want to gamble online go to off-shore web casinos and route their money through the channels that will accept money from the US. It is possible that action on the legality of online gambling in the US could be taken by Congress in the summer of 2010.
Congressional hearings in May indicated that while there are still US citizens and Congressional representatives who are opposed to online gambling on moral grounds, overall the tide has shifted toward regulating online gambling in the US and taxing it. And online casinos are more than willing to be taxed in order to open up the potentially huge web casino online market in the US.
Not only that, some of Las Vegas' biggest casinos, such as Harrah's and MGM Mirage, rather than wanting to shut out web casinos, want to get in on the action themselves, seeing the potential for huge profits in offering online versions of some of its biggest branding successes. The fact that online casinos require much less in the way of overhead than bricks and mortar casinos doesn't hurt either.
If internet gambling is legalized, regulated, and taxed in the US, supporters estimate the addition of over 30,000 new jobs in the US manning the server farms necessary for operations. Tax revenues could reach $72 billion over a 10-year period, breaking down to $42 billion for the federal coffers and $30 for state piggy banks.
More than half that $72 billion would come from taxable winnings. Web casinos would have to send 1099 forms to the Internal Revenue Service listing winnings and losses. Online casinos would have to pay corporate income taxes because they would have to locate corporate offices and computer servers in the US, and they would also have to pay a 0.25% tax on wagers, and a 6% tax on the money deposited by gamblers into their online accounts before placing bets.
Much of the business-based opposition to legalizing web casinos in the US comes from the state of Nevada, which has suffered harshly under the recent recession, experiencing record unemployment levels. Nevadans and some of their Congressional representatives say that allowing web casinos would take business away from bricks and mortar casinos. States with casinos located on Indian reservations have also expressed concern over losses to physical casinos.
There is also some consternation among Nevadans over who would do the regulating of a massive new US online gambling sector. Rather than let the Treasury Department investigate and license web casinos, they want the job to go to the Nevada Gaming Control Board, to create jobs in Nevada and take advantage of their experience in regulating gaming.
As of July 2010, the legalization bill in the House of Representatives is stuck in the House Financial Services Committee. It could come to a vote during the summer. Former opponents of legalizing web casinos online have changed their position, realizing that people gamble online regardless, and the US is missing out on big tax revenues by not regulating it. The American Gaming Association went from being officially "neutral" on support of legalization to supporting it under a regulatory system.
The bottom line as of summer 2010 is that web casinos online aren't legal in the US, but the tide definitely seems to be turning in favor of legalizing, regulating, and taxing them.
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