United States

The UIGEA and Federal Wire Act limit online gambling activity in the US but individual states have the power to legalize it within their borders.

Breaking Down the States

There is a common misconception that Online Gambling is illegal in the United States, and that misconception is shared by several non-gamblers as well as a few gamblers who frequent land-based casinos. In reality, each individual state has the power to make their own laws as relates to online gambling, but the reason that this misconception is so prevalent is due to the passage of an act called the Unlawful Internet Gambling Enforcement Act (UIGEA) which was nothing more than an add-on to the SAFE Port Act.

The SAFE Port Act, with exception to the provisions of the UIGEA, basically just does what it says on the box. In a nutshell, the SAFE Port Act was drafted with the goal of ensuring that port workers be registered and so that interagency operation centers would be created to ensure greater security. It also includes an identification system that was designed so that port workers would have a photo identification authorizing them certain security clearances giving them the ability to go into secured port areas in an unescorted way.

There are many other provisions in the SAFE Port Act that are relevant to the safety of maritime ports, but there is no reason to get into any additional ones as they are not the purpose of this page. The goal behind pointing out a few of the aspects of what the SAFE Port Act was designed to do is simply to point out that the UIGEA that was tacked onto it near the end was essentially a, ‘Rider,’ which means an almost completely unrelated piece of legislation that passed the House of Representatives and United States Senate without any meaningful discussion taking place over that aspect of the act.

In fact, The Economist, would specifically point out that it was, “Hastily tacked onto the end of unrelated legislation.” In fact, it has been remarked that nobody actually saw the final language of the legislation prior to its passage, and furthermore, it was passed on the day before Congress adjourned for the 2006 elections. We’ll be blunt, someone with a hard-on for online gambling slapped this in there at the very end, knowing that the base legislation (i.e. the actual reason the SAFE Port Act was drafted to begin with) was a necessary piece of legislation, and therefore, this added provision would make it through, as well.

Even with that, many Americans misunderstand the tenets of the UIGEA as being directed at players rather than operators. The UIGEA includes language that states, “No person engaged in the business of betting or wagering may knowingly accept,” any money transfers from a person engaged in unlawful internet gambling.

The first thing that every law-abiding American should take notice of is the fact that the focus is on the operators of the online gambling sites, not on the players in any way whatsoever. The language of the UIGEA makes it illegal to accept money transfers from someone looking to, ‘Illegally,’ gamble online, but it doesn’t do anything to make it illegal for the person gambling to initiate the money transfer.

Furthermore, the definitions also point out, in the UIGEA

That third-party payment processors have a responsibility to ensure that the payments that they are processing do not violate any of the terms of services of the financial institution, but these provisions are not actually specifically governed under any federal law.

Payment Processing

One aspect of transacting with internet casinos that is made more difficult for customers is the specific regulation of actual Debit/Credit Cards, which was touched upon in the UIGEA. In other words, U.S. Based banks cannot knowingly transmit payments to online casinos for the purpose of illegal internet gambling. The theory is that there is adequate information concerning to whom the payment is being made that such transactions are easily blockable by the financial institutions who (technically) own the cards in question.

It is for this reason that the concept of third-party payment processing companies came about. While, ‘Money Laundering,’ is a strong word, the underlying principle is the same: The goal of the third-party payment processors is to accept payments from the United States Debit/Credit cards under the guise that the money is being used for something else, (which is why something bizarre often shows up on the card statements) and then the money is transmitted to the online casino.

Once again, it is perfectly legal for the third-party payment processor to behave in this way provided they can plausibly deny that the purpose of the payment is for illegal online gambling. For anyone who has gambled in the United States with certain casinos, however, the purpose of these third-party payment processors might be one of the, ‘Worst kept secrets,’ out there. To wit, processing payments for online casinos is the only thing that many of these companies even do.

Of course, that process is terribly costly for the online casino itself who often have to pay exorbitant fees to the payment processors. There are several reasons that a particular online casino might choose not to do business in the United States, (in fact, it is sometimes prohibited by an online casino’s licensing within a certain jurisdiction) but one reason that I am sure is relevant to many is the percentages that these third-party payment processors often take out of player deposits.

The Federal Legality of Online Gambling

There is a reason that this bill is called the, Unlawful Internet Gambling Enforcement Act, not only is the focus on operators, but it also focuses on internet gambling that can be described as, ‘Unlawful.’ There is nothing in this act or any other, (with exception to interstate Sports Betting or the transmission of Sports Bets by any remote means...which was Federally unlawful before this act even passed) that does anything whatsoever to actually prohibit Internet Gambling. The only thing this act does is prohibits the acceptance of monies (on the operator’s end) in the event that the gambling that will be taking place is already illegal.

In fact, if one looks at section 2.)2.)B.ii. On Page 5 of the above-linked pdf, then one will see that the provision in that section specifically deals with commercial State online gambling, licensed tribal casino gambling, or a reasoned legal opinion that the gambling does not involve a legally restricted transaction. (Which is simply to say there are no laws against it). In other words, not only does the UIGEA NOT make online gambling illegal, it specifically recognizes that some forms of Online Gambling are or can be legal while other forms may not be patently illegal.

The Role of the States

That leads us to taking a look at the states, now that we have established that there is no Federal mandate that makes Internet gambling illegal. The Tenth Amendment to the Constitution of the United States of America summarizes itself as follows:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

The Tenth Amendment is relevant here because in any case in which the Federal Government has not passed a law either authorizing or prohibiting a certain act, (i.e. online gambling) and in such case that the states are not prohibited from having their own laws regarding a particular matter, the right to enact any laws pertinent to the matter at hand is conferred (automatically) to the States. In other words, the states are free to make their own decisions/laws with respect to Online Gambling until such time as the Federal Government shall enact its own laws (if that ever happens, and, with exceptions) or take the right to do so away from the states.

When it comes to exceptions, generally speaking, a state has a fundamental right (in certain cases) to enact laws that are, ‘More stringent,’ than those that may be mandated Federally. In other words, if the Federal Government were to patently legalize Online Gambling at a National level, and award licensing to certain online casino companies (again, at a national level) then individual states could theoretically still have the right (absent any High Court decisions to the contrary) to prohibit Online Gambling if they so choose.

We can see this as it relates to the legality of the sale of alcohol. As certainly everyone in the United States knows, the sale of alcohol and its consumption are legal at the Federal level. In fact, there is a Constitutional Amendment that deals with precisely that matter. However, individual States (theoretically) and certainly individual Counties or Municipalities within those States are permitted, should they choose, to be, ‘Dry,’ which means that they may prohibit the existence of taverns and/or sale of alcohol within their realm. For example, the State of Ohio certainly allows for the sale of alcohol and licensing of bars and taverns, but the community of New Albany, OH, located near the State’s capital of Columbus, is a dry town.

The primary purpose of this page is to go through the states and determine, to as accurate a degree as possible (though, admittedly, the scoring will be a little bit subjective) how, ‘Liberal,’ individual states are with respect to Online Gambling. The way that we will do that is to attempt to look at the state laws and legislative history, at least to the extent that such can be found, and attempt to come up with a, ‘Score,’ for how restrictive each state may be. Obviously, we will do our best to defend our opinions on these scores and if you have any arguments you would like to make against the scoring, please PM Mission146.

The State of the States

The goal of this piece is to take a look at the various laws and Legislative histories of individual states to determine the extent to which Online Gambling is restricted within a given state.

In many cases, there will be states that have statutory verbiage that tends to point toward the possibility that Online Gambling is illegal, or restricted, without actually mentioning Online Gambling. To wit, many of the laws concerning gambling in several states were enacted before the Internet even existed, and as such, could not possibly directly pertain to Online Gambling.

Finally, there have been very few (if any) cases in which a person has actually been meaningfully prosecuted for gambling online. In that sense, it may as well be legal across all fifty states. It’s kind of like jaywalking, in a sense, there are statutes against jaywalking in countless municipalities, but jaywalking laws are rarely actually enforced...except perhaps in major metropolitan areas where it poses a serious and apparent public safety risk.

Gambling online is not a crime that can pose a legitimate public safety risk, and that’s just in those jurisdictions that even advance (or portend to advance) it as a crime at all. Furthermore, the amount of investigation that would be required to actually secure a conviction is not a worthwhile goal...well, for anyone...and the majority of those states that actually do have criminal penalties for such activity have only minor penalties.

In other words, as long as you can find an Internet Casino willing to take your action, you can pretty much gamble online regardless of what state you live in, at least, as a practical matter.

With that, I will score each state based on their laws as well as case history and other subjective criteria.

The scoring system will be as follows:

     No Restrictions: 0
     Little/No Restrictions: 1-5
     Light Restrictions: 6-10
     Moderate Restrictions: 11-15
     Heavily Restricted: 16-20
     Banned: 21

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