Online gambling is a growing industry in the United States. In fact, the online gambling industry is estimated to be worth 9.5 billion dollars in 2021. While most countries in the European Union and Canada allow for legal internet gambling, many states restrict it. This is mainly due to their fears of internet gambling bringing illegal activity into their jurisdictions. There are two main types of gambling: sports betting and casino games. Some states have opted to regulate and tax the activities, while others have gone a different route.
As a matter of fact, there are several federal laws that relate to online gambling. These laws include the Wire Act, which prohibits the use of financial instruments in illegal Internet bets, and the Illegal Gambling Business Act, which is in effect when gambling is conducted in a non-licensed fashion. However, the most effective laws to regulate and tax internet gambling are largely found at the state level. The law allowing sports books to offer horse racing betting markets was only recently legalized at the federal level.
The most common form of gambling in the US is sports betting. In most cases, it is illegal to place a bet on a sporting event without a license from a state or local authority. Even the most legalized of online casinos still require players to have a state license to participate. But, the market is expected to expand as more states consider legalizing the activity.
It should also be noted that the United States Department of Justice has announced that the Wire Act applies to all forms of Internet gambling. Aside from the legality of the law itself, the announcement has been criticized for its lack of legal basis. Moreover, the presence of an interstate element frustrates the enforcement strategies of both state and federal law.
Another important albeit lesser known federal law is the Travel Act, which prohibits the conduct of illegal gambling on an interstate basis. Similarly, the Federal Communications Commission has authority over common carriers. Nonetheless, the FCC may choose to pull the plug on the furnishing and maintenance of such facilities.
Lastly, the United States Department of Justice has been actively pursuing a number of criminal prosecutions against online poker operators. One notable case involved the Seals with Clubs bitcoin poker site, which was the first illegal bitcoin gambling platform to come to US soil. Although the owner argued that cryptocurrencies were social gambling, he was convicted of the crime of the small aforementioned and was sentenced to two years probation and $25,000 in fines.
Among other things, the Travel Act also prohibits gambling in interstate commerce. On that front, there is some confusion, since the statute actually relates to gambling facilities based in other countries. In the end, it remains to be seen whether the law will be applied in a manner that is more likely to be effective and less likely to be unconstitutional.
Finally, the CRS Report RS21984 (abridged version is available here) cites several aforementioned laws and other related statutory and legislative efforts. However, there has been no real success on the part of the administration, which has been accused of being too weak on the issue.