Is Online Gambling Legal? A Review of Current Laws and Government Enforcement

When most of us hear the phrase “Online Gambling” or “Internet Gambling”, we usually picture the average websurfer casually placing a few bets on some rounds of Texas Hold’em.  Indeed, there are countless websites dedicated to online gambling and I’m sure we all know someone who visits them.  Some folks are genuinely addicted to online gambling, much like other forms of “digital afflictions” like video game addiction.

But what are the stakes involved with online internet gambling?  Is it legal?  Can you get in trouble for gambling online?

Here’s the deal: all gambling, including online gambling, is regulated by both state and federal laws.  Federal laws governing online gambling don’t really focus on the persons patronizing the website (i.e., the gamblers). Rather, they tend to provide penalties for the organizations that maintain online gambling websites.  Current statutes usually aim at the community concerns surrounding gambling operators, namely: money laundering, false advertising, and funding criminal enterprises.

The most prominent federal statute governing online gambling is the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA).  The UIGEA basically prohibits financial institutions and banks from handling transactions associated with online gaming accounts.  There are also various provisions regarding advertising for online gambling websites.  Most importantly, the UIGEA defines “unlawful internet gambling” as “placing, receiving, or otherwise knowingly transmitting a bet by means of the internet where such bet is unlawful under any law in the State where the bet is made”.

So the answer?  It basically depends on what state you’re in.  Now, most states have embraced the notion of online gambling.  But a few states have some form of “express internet prohibitions” on gambling, meaning it’s illegal in that state.  These states are:  Illinois, Indiana, Louisiana, Montana, Nevada, Oregon, and Washington.  For example, Washington has recently made online poker betting a felony.  So although prosecution is actually rare, you could get into trouble with state authorities for online gambling, but probably not federal authorities.

Another thing about online gaming law is that there are all kinds of different types of gambling games online.  Besides your normal poker sites, there are also bingo websites, lottery websites, casino-type games like roulette and blackjack, and now even online mobile apps for gambling.  But one type of online gambling that’s definitely illegal is interstate sports betting, which was outlawed by the Federal Wire Act (“Wire Wager Act”).

The recent shut-down of online gaming site Bodog.com is, in my opinion, an excellent example of the way online gaming regulation works.  Last February, the website Bodog.com was ordered to fold and shut down on various counts, including: conducting an illegal online sports gambling operation; money laundering; using banks to cover payout transactions to customers; and violating advertising regulations related to online gambling.  They are currently facing hefty criminal fines and have had their web domain name revoked (on an infringement issue).

So these Bodog guys apparently hit up nearly every violation in the books.  But note that none of the patrons of the website were targeted, only the website founders and operators.   And that’s basically how these laws tend to work in the real world of virtual gambling.  The Bodog.com bust follows on the heels of a major investigation last year in which three of the top U.S. poker sites were charged with fraud and forked up more than $3 billion in seized assets (U.S. v. Sheinberg, 2011).  Again, no real mention of consequences for online gamblers.

To me, these laws don’t really, truly address what I think is the main problem with online gambling- it’s easier to get addicted than your standard casino gambling.  Something called “instant gratification” is a major factor with online gambling, and the online competitor doesn’t need to travel anywhere except the nearest computer for a quick fix. So just like any addiction, online gambling can completely ruin a person’s life, maybe more so than in-person games.

But given the scope of the problem, and how new online gambling is, the current regulation scheme is somewhat understandable.  It’s very similar to the way drug laws are enforced- authorities would rather go after the major dealers (excuse the pun), instead of spending time and resources trying to track down individual users.  And there’s a lot to online gambling that’s still being debated in the legislatures.

So, all that being said, if you have your own online gambling itch, chances are you won’t get into trouble for your online activity, so long as you completely (and I mean completely) avoid online sports betting.  That’s one hand that’s just too risky to bet on.

On the other hand, if you’re currently operating an online gambling website, or are thinking about doing so, that’s where you need to start getting concerned.  After all the investigations within the last year, it looks like the gaming authorities are upping the ante and going after the operators, the online pit bosses, who are the real high rollers here.

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