Online Casinos in America

Are online casinos in America legal? Well lets take you through it!

When we think of gambling, many of us will immediately think of America. Specifically, we think of Las Vegas, with its 24-hour spectacle of roulette wheels, slot machines, poker, and just about every form of betting entertainment you can think of.

Atlantic City has, after all, come to be known as America’s playground. Due to Las Vegas, Atlantic City, and Reno– and the world’s perception of America as leaders of western industry and popular culture – we often imagine the USA to be in many ways the epicentre of gambling.

Online Casinos in America are certainly big business.

“The gambling industry makes a total contribution of around 137.5 billion U.S. dollars to the U.S. economy annually and directly employs more than 730 thousand people.” (Statista)

Yet, until fairly recently, sports betting and online gambling were both illegal in most of America.

That is changing, and with more and more individual states applying for gambling licences, it’s important that we understand the intricacies and restrictions that inform gambling laws in America.

History of Gambling in America

According to Encyclopedia Britannica, loaded dice have been found in ancient tombs in North and South America, as far back as 2,000 B.C, just as they have been discovered in India, Egypt, and the Far East.

Native Americas played games of chance, with implements such as fruit stones and bones carved into dice, as part of celebrations and tribal ceremonies for hundreds of years before America was colonised by European settlers. (Library Index)

The 17th Century saw European colonists bring their own forms of gambling over to America, with horse racing, cockfighting, and bull baiting being the most popular.

As early as 1612, lotteries were also being created, with the idea of the profits benefiting the community. The first in America was created by England’s King James I, in order to provide funds for Jamestown, Virginia, the first permanent British settlement in America.

This idea spread throughout the colonies, with lottery funds being used to fund hospitals, schools, roads, public services, and other philanthropic institutions.

At the same time, however, many of the early settlers were pilgrims and puritans who viewed gambling as a sin. This dichotomy of American perspectives has continued to this day.

In October 1774, the Continental Congress of the American colonies stated that gambling, along with other forms of entertainment, including plays, was to be discouraged.

During the 18th and 19th Centuries, gambling was ‘tolerated’ but not encouraged in many states, with New Orleans becoming North America’s leading gambling centre.

As New Orleans gaming declined, the California Gold Rush(1848–1855) sent gamblers to San Francisco.

Following the American Civil War(1861 – 1865), lotteries again became popular as a way to fun reconstruction. However, in the Prohibition Era (1920 – 1933) gambling went hand-in-hand with organised crime, with gangsters making huge profits from underground games of poker, craps, and other gambling pursuits.

Once again, it was necessity that saw forms of gambling being legalised, in order to fund recovering economies. During the Great Depression(1929 – 1933) cities were given permission to allow bingo to raise money for churches and charitable organisations.

The stock market crash of 1929 and the Hoover Dam project then led to the legalisation of other forms of gambling in Nevada.

Investment from high-profile criminals such as Bugsy Siegel in the 1950’s was followed by legitimate businessman such as aviator and business mogul Howard Hughes in the 1960’s, and Las Vegas became a Mecca for gamblers across the globe.

Gambling Laws – Online Casinos in America

Today, gambling laws fall under Federal Law, but are regulated at state level.

In 2015, seven states submitted bills to legalise online gambling. It was thought that if Pennsylvania, the so-called ‘Keystone State’ legalised online gambling, it would open the door for other states to follow. Despite submitting six bills, however, Pennsylvania did not become the next state to legalise online gambling.

It took until the Supreme Court of the United States lifted the federal ban on sports betting on May 14, 2018, to make any headway. It was a victory for New Jersey, but it opened the doors for every US State to pass a bill to legalise sports betting, if they so wished.

In the end, it was Montana which became the first state to legalise sports betting, outside of Nevada. New Jersey and Delaware followed shortly after, with others including Pennsylvania and West Virginia following suit.

Currently, there are 17 states which have legalised sports betting:

Arkansas
Delaware
Illinois
Indiana
Iowa
Michigan
Mississippi
Montana
Nevada

New Hampshire
New Jersey
New York
New Mexico
Oregon
Pennsylvania
Rhode Island
West Virginia

Others have had bills passed but not legalised sports betting, and some have active bills which have not yet been passed.

What of Online Casinos in America?

In comparison to sports betting, at the time of writing, only New Jersey, Pennsylvania, West Virginia, and Delaware can legally operate real-money online casinos. Those in West Virginia are brand new, with the bill having been launched in July 2020. Many more states are expected to follow in the next couple of years.

It’s not surprising that some of the opposition to online casinos in America come from those who make a profit from land-based casinos. After all, online casinos are far more convenient for many US citizens, giving them access to 100’s of casino games literally at their fingertips.

One way in which legislators have found around this, is requiring the state to have a land-based casino before they can legally operate online casinos in America.

This has led to land-based casinos forming lucrative partnerships with established betting firms and online operators.

Pros and Cons of Online Casinos in America

Given that so few states have, as yet, legalised online casinos, it is not surprising that overseas online casinos are still a major attraction for US players.

It is not illegal for US citizens to use overseas casino sites, however, international sites can be prosecuted if real money is at stake.

In United States v. Scheinberg, PokerStars, Full Tilt Poker, and Cereus were forced to settle for more than $731 million, after U.S Attorney Preet Bharara tried to prosecute them, alleging that transferring funds to and from players online was tantamount to bank fraud and money laundering.

Some UK and European online casinos do accept US players, and e-wallets make creating accounts, depositing, and withdrawing easier than ever.

It may, however, take a little longer for US-based players to receive their winnings, although sites are working hard to ensure payouts are delivered as quickly and as securely as possible, in order to improve player retention rates.

In the US, you must declare your gambling winnings on your tax return each year, that includes both sports betting and those won at online casinos.

Neither can you net your winnings and losses from gaming and report that net amount, as there are separate sections on a US IRS tax return for each.

Still, with progress slow in the legalisation of gambling at state level, it is likely US citizens will continue to use overseas casino sites for the foreseeable future.