Is Betting Online Legal?

The United States has a long history of explicitly banning gambling outside of the several places where it’s explicitly legal, and authorities have typically enforced these laws aggressively.  But then came the internet  which created a grey area with respect to this issue, raising this question: if an online casino exists in a jurisdiction where gambling is permitted (such as in Las Vegas, Atlantic City, or in another country) is it legal for someone living in a place where it is banned to gamble online from a betting site located in a place where gambling online is legal?

For the most part, those wishing to play casino games or place sports bets on the internet in the U.S. were easily able to take advantage of this grey area until the early 2000s. But around that time the Department of Justice began to take the position that the Interstate Wire Act of 1961 could be used to prosecute those involved with all forms of online gambling.

gambling lawsThe legal reasoning behind this stance was seen as far fetched with respect to online casino games. However, there wasn’t much disputing that the Federal Wire Act could apply to online wagering of sports given that the law had always explicitly forbidden the transmission of communication across states or to foreign countries for the purpose of placing wagers on sports or collecting winnings from gambling on sports.

Most American casinos viewed it as too risky to offer online sports betting as a result of the Justice Department’s position on the matter. However, online poker and other casino games continued to operate in the U.S. as appeals went back and forth regarding whether the Wire Act applied to such games.

But some offshore sportsbooks continued to offer their services to Americans, believing that the courts would ultimately take the position that the Wire Act and other federal laws banning bookmaking couldn’t be enforced under such circumstances.  But in 2006, the CEO of an online gambling website based overseas was arrested and charged when he was changing flights inside of the U.S. He was eventually convicted.

Obviously, this put a severe chilling effect on online gambling of all kinds, especially on sports gambling. And because it was clear that the Wire Act probably only applied to sports betting, Congress then passed Unlawful Internet Gambling Enforcement Act of 2006 to essentially make online gambling in all forms illegal in the U.S. by prohibiting transactions between American banks and online casinos.

Many online poker and other gambling websites continued to operate because their operators still believed that the new law wouldn’t be enforced or that the courts would strike it down. Once again, they were wrong. In 2011, the government shut down many popular online poker sites.

Although the DOJ finally reversed its position with respect to the Wire Act stating that it couldn’t be used to prosecute websites offering online casino games, the law can still be used against online sportsbooks and the UIGEA can be used to prevent most financial transactions necessary to engage in any kind of online gambling.

New laws have been passed to allow some online gambling to take place inside the U.S. provided that the websites are run by legal American casinos and that its users live inside jurisdictions within the U.S. that allow gambling. But this provides very little comfort to most Americans who wish to wager on sports online.

However, there are a handful of reputable offshore sportsbooks (like continue to allow Americans to fund accounts, place bets, and receive winnings. Most legal experts assert that this activity is in a grey area at best. However, they note that American bettors are at very little risk when using these websites. For the most part, the federal government has pursued illegal bookmakers and casinos rather than individual gamblers. Furthermore, the federal government seems to be satisfied that existing laws and the enforcement of them have put a stop to such websites operating in the U.S. and have prevented masses of Americans from participating in offshore ones.

It’s important to note, however, that using even the most reputable offshore online sportsbook is complicated and comes with some minimal risk no matter what steps one takes to fund an account or collect winnings. It’s entirely possible that law enforcement could prevent an individual bettor from withdrawing funds after making deposits and winning money.