Understanding How Online Gambling Works In The United States

Jan 25

Breaking down the online gambling industry in the United States; from the states that offer legalized options to the grey market that has hundreds of websites aimed at American players, and everything one should know before placing a wager online.

Online gambling is somewhat of a sensitive subject in the United States and this is mostly due to the bumpy history of the industry in what was once the biggest iGaming market in the world. Nowadays, things are starting to look better for players and operators alike but it is just getting going, with some states taking the needed steps to legalize online gambling.

Overall, the industry is now based on federal law and individual states and this creates problems on various aspects along the way. If you are an American citizen and you want to play casino games online or if you just want to know how it all works, there are several things to keep in mind.

The Flawed Wire Act

The Wire Act was the main piece of law that prevented online gambling in the country. It also represented the basis for the Unlawful Internet Gambling Enforcement Act of 2006 that saw the federal government come down on the major online poker rooms still operating in the US in 2011. After the date of April 15 that year, also known as “Black Friday”, online gambling in the United States was terminated from a legal standpoint and this covered casino games, poker, sports betting and other forms.

The stance of the Department of Justice regarding the Wire Act was changed in December 2011 to only apply to sports betting, making it the only form illegal on the internet between states.

We should point out the fact that the federal regulations didn’t actually make online gambling illegal but just prevented local banks from making any transactions related to the iGambling industry. This meant that players would have no way of funding their accounts or withdrawing their winnings.

When the regulations changed a few years ago, online gambling fell into a somewhat grey market, leaving it up to each state to pursue regulations to legalize and then regulate online gambling within their borders. Some states stated that they were against such a thing due to the stigma attached to gambling and the perceived problems it causes, while other states saw it as a way to increase revenue through taxes. The majority of states however were quite neutral to the idea and this meant that an actual legalization of online poker or online casinos across the nation would be almost impossible.

It is believed that even if the federal government would change its stance on the matter again and make online gambling illegal across the country, the states that have already legalized it and were offering it in a legal form at the time of the incident would remain safe. While banks and credit card issuers were uncertain of the position when states first started legalizing online gambling, they have been coming around to the idea over the last couple of years to provide a secure and safe system for transactions in regulated markets.

Nevada is the First to Launch

Seeing that Nevada is the biggest gambling state, it should come as no surprise that it was the first to look into the online possibilities. In order to make sure that the regulations would become active as quickly as possible and also to avoid a lot of opposition, Nevada only aimed to legalize online poker at first and then look into expanding to a full range of casino games.

The first real money online poker room went live in April 2013 as Ultimate Poker dealt its first virtual hand. However, being first did not mean that it would be the top poker room in the state and WSOP.com from Caesars Entertainment beneficiated from a known brand in the poker world and the backing of a bigger name in the gambling industry to quickly establish itself as the leading website in the new regulatory system in Nevada.

Ultimate Poker eventually shut down after losing most of its clients and now, Real Gaming is the only other poker room available in the state. Several operators have announced that they will launch their own cardrooms and these include 888, bwin.party, MGM and more.

The regulations make sure that players can only play at the licensed poker rooms if they are located within the state borders. Geolocation services are used through mobile devices and users must enter codes in order to verify their location.

Also important to note is that Nevada regulations feature a “bad actors” clause which prevents any operator that accepted real money wagers from American players after the UIGEA was introduced in 2006, preventing several big names from across the ocean to make their way back into the market.

Delaware Follows

In October 2013, Delaware became the second state to legalize online poker. It was also the first to offer an entire suit of casino games on the internet. 888 and Scientific Games are in charge of handling the online gambling system in the state.

However, Delaware’s regulations do not allow for most operators to launch their websites in the state and only names are allowed. Delaware Park, Dover Downs and Harrington Gaming Online are the options available for players from the Diamond State.

Delaware presented reports of millions of dollars being placed in wagers on the online options just months after its launch. For example in November 2013, players placed around $3.8 million in bets. The number of users registered exceeded 2,800 and it showed a lot of promise. The numbers went down a bit since then but continue to show that online gambling can work even in a state with a small population; and there aren’t many smaller than Delaware.

New Jersey Launches Online Gambling

While New Jersey lost the race to both Nevada and Delaware, it has something that the other two states lack – players. The size of the Garden State means that it has more than twice of the population of Nevada and Delaware combined, while having Atlantic City means that a good part of them are already familiar with casino games.

The launch of online poker and online casinos in New Jersey quickly became the biggest headline in the US online gambling industry, showing a lot of potential for the future. The regulations saw that only land-based casino operators that had a venue in Atlantic City could apply for licenses but that they could partner with other operators from other markets, most notably from Europe. Up to five websites are allowed per casino.

Similar to Nevada, New Jersey also features a “bad actors” clause that prevents some of the biggest brands in the world to come to the market. PokerStars is the most notable example in this case as it has been trying to get a foothold back in the market since New Jersey started showing interest in online gambling. With efforts to buy a casino in Atlantic City failing due to restrictions from regulators, the online poker behemoth was bought by a different company and it is now on its way to coming to New Jersey.

Right now, there are five partnerships with online products available in New Jersey. These feature sites from Borgata Hotel Casino & Spa (two casinos and two poker rooms in collaboration with PartyPoker), from Caesars Interactive Entertainment (two poker rooms and two casinos in collaboration with 888), from another casino owned by Caesars (an online casino), from Golden Nugget (three online casinos in collaboration with Betfair) and from Tropicana Casino and Resort (two online casinos in collaboration with Virgin).

The three major poker rooms now available are Party Poker, WSOP.com and 888 Poker as they are getting most of the attention. Borgata Poker is also available and five other poker rooms have announced that they will come soon to the market, including Golden Nugget Poker, PokerStars and Virgin Poker.

Again, only players from within the borders of the state can actually place wagers on the poker rooms and online casinos. Deposits and withdrawals can be made through a variety of methods that include cash at some of the local brick and mortar casinos.

These are the only three states in which online gambling is fully legal in the United States and they do not have any interstate agreements as of now. Meaning that players from one state with legal poker cannot access the poker rooms in another state with similar regulations.

Other States

After seeing the success that New Jersey has, several other states have shown actual interest in pursuing their own regulations. A look at the map below will reveal the fact that that about less than half of the nation doesn’t want anything to do with online poker or online casinos.

The states in dark grey show states which are surely never going to allow online gambling within their borders and this includes Utah, Kansas, Missouri, Tennessee, North Carolina, Columbia and Alabama

In light grey, we have the states that are not likely to legalize online gambling and among them are Idaho, Montana, North Dakota, Nebraska, Wyoming, Virginia, Arizona and more.

However, the interesting part is represented by the states in light green as these are the ones that have shown at least some interest for online poker or for other forms of online gambling. These represent the majority of the nation and while a good part of them will most likely not follow-through on actually passing the regulations, it does show the demand across the country. The most notable state on the list is of course California due to its large population, inclination towards poker tournaments and the fact that being close to Nevada would create convenient interstate connections.

Grey Market

Now that we got all the legalized options out of the way, we should talk about the grey online gambling industry available in the United States. This features hundreds of websites that offer online poker, online casinos, online sports betting and other products to American players.

While these websites are not licensed within the country, the majority of them have licenses issued in offshore jurisdictions and they are not just limited to US customers. One of the things to note is that most of the leading operators do not enter this grey market due to the regulations available so a good part of the best products are actually not available for Americans.

With that being said, the options that are available are quite good and present a wide variety of choices within a reliable environment. Some of the most popular websites have been around for over a decade and they continue to operate at high standards in order to please customers and provide a much needed offer.

Since there is no local regulatory system for these offshore websites, online scams and frauds are more common than in a market with the backing of the government. Players are advised to carefully select the websites they bet on in order to avoid issues with withdrawals or unfair gaming.

The banking methods are generally limited for US players but there are still several reliable ways to get the money in and out of the accounts in a timely fashion.