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United States - online gambling regulations

Published by Niki | July 10, 2020

Online gambling regulations and taxes in the United States

There’s no denying that legalities surrounding online gambling can often be quite confusing. While many states are still against opening their doors to online gambling, there are others that have applied for legalisation. In recent years the industry has seen a rapid growth of interest from players across the globe and legalisation would ensure that each state claims its slice of the pie. The industry is booming and bringing in billions in revenue yearly.

The gambling regulations in the United States are particularly difficult to understand. There is still an ongoing debate on whether or not online gambling is legal in America, but unfortunately, there is no conclusion. The issue around online gambling in the US is quite difficult to explain as it is a multi-faceted industry by nature. There are three major forms of gambling in the online world which can be broken up into sports betting, Poker, and regular online casino gameplay.

In this guide, we take a look at the current laws in the US regarding online gambling in an attempt to set you as a player at ease regarding the legalities.

Online gambling regulations in United States

History of Gambling in the US

Gambling, especially in the USA, is something that can be traced back to the Native Americans who had various games of skill and a chance they used to partake in. Games such as Blackjack, Roulette and Poker have been in the United States since in the 16th Century. During this time period gambling became popular very quickly, and in the late 1800s lotteries started to appear in the US. This was put on hold with gambling being banned in 1910, only to have it legalised in Nevada again in 1930.

Las Vegas then became, and still is to this day, the number one gambling attraction, with New Jersey and Atlantic City following close behind. Native American Gambling sites were allowed in the country in 1998 through the Indian Gaming Regulatory Act (IGRA). Online Casinos first made their appearance in the United States in the 1990s but have since then only been legalized in three states.

Americans are among the most avid of gamblers and love being able to participate in gambling online without having to take on additional expenses such as transport to land-based establishments. The Unlawful Internet Enforcement Act (UIGEA), passed in 2006, resulted in many international online gambling sites removing themselves out of the American online casino market.

In 2012 Nevada, New Jersey and Delaware managed to legalize gambling. However, other states such as California, New York, Washington State and Illinois to name a few, are still waiting for their application for legalization to be approved.

The authorities and current laws regarding online gambling in the US

While there are various Acts in place when it comes to online gambling there are three main Acts that players need to be aware of.

Restoration of America’s Wire Act (RAWA)

This act was reintroduced back in 2015 and its main purpose is to rewrite the Federal Wire Act of 1961. This Act bans only sports betting, but not online gambling as a whole. If it is rewritten and approved, however, most forms of online gambling will be banned. The Act has been put in place, not as a way to target players but more focusing on removing online casinos as a whole.

Unlawful Internet Gambling Enforcement Act (UIGEA)

The purpose of this Act is to render it illegal for gambling sites to accept money. In other words, it is not illegal to gamble or deposit money for gambling pleasure but it is illegal to accept money for it. The Act currently prohibits financial companies from accepting money from online casinos but doesn’t prevent players from depositing money into casinos. Because of the grey areas in this act players can still enjoy superb gambling entertainment at a range of online casinos that have been marked safe for US players.

Indian Gaming Regulatory Act (IGRA)

This Act was put in place to regulate and monitor Native American gambling establishments, but it only applies to land-based Indian Reservations. This means online casinos are currently free from the scrutiny this Act might bring.

Are Winnings at an Online Casino Taxable for US citizens?

There are many who will tell you that winnings made online whether at an online casino in the United States or offshore cannot be taxed. This is false. According to the US Tax Code, you are required to pay tax on any income you’ve earned, whether it is earned in the US or on an offshore online casino. It clearly states in Section 61(a) that all income from all sources is taxable and this includes gambling.

Of course, you can argue that the government won’t know how much you’ve won if you don’t report it, but the reality is that if you get audited and the government finds out you have unreported income (gambling winnings) then you will be forced to pay not just the tax but penalties and interest too. To make matters worse, if the IRS finds that you’ve evaded tax you could face imprisonment. So in this regard, it would be in your best interest to report any winnings made via online gambling.

Is it legal to gamble online in the United States?

Despite all efforts, the conclusion is that the legality regarding online gambling in the US is still a grey area. When you look at it on a federal level online gambling is legal for the player as there is no law prohibiting you as an individual from participating in the act of online gambling. However, each state can criminalize online gambling and many have done so already.

While it is still a grey area you won’t be arrested for online gambling. That being said, the industry is not regulated which in essence makes it illegal, as regulation is required to render gambling legal. There are a few trusted and secure online casinos that have opened their doors for players from the United States. With the law currently prohibiting gambling operators in the US, it is in your best interest to play at secure online casinos that accept deposits and makes withdrawals through a viable payment option. This will ensure a smooth and fair gaming experience for you as an individual.

With online gambling rapidly becoming more and more popular, there is a chance of things changing around and more US states welcoming the act of online gambling, but for now, it is still uncertain.

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