Why is iGaming Handled on a State-by-State Basis in the USA?

If you are used to dealing with iGaming regulations in the UK and Europe, you might think that the situation in the USA is exactly the same. However, things actually could not be more different.

Rather than controlling regulations at a federal level, things are actually turned over to the state governments. This means that you will find that launching a brand in the U.S. is not as straightforward as it might seem. An iGaming brand might have to launch in each state separately, rather than going forward across the whole country as they might elsewhere. Let’s take a closer look at how this situation has arisen, and the state of legality for gambling in the USA.

A Short History of U.S. Gambling

Gambling arrived in the USA with the first settlers. Sports betting proved to be popular with the upper class of Virginia in the 1680s, and many lotteries were held throughout the 13 colonies to raise revenue for various projects.

Games of chance and card games also grew in popularity during the California Gold Rush and the Western Expansion. In 1895 in San Francisco, a modified version of an automatic slot machine first appeared, paying out coins instead of tokens, and the following model in 1898 is credited as being the first slot machine. Giving these close ties with gambling, one would expect the attitudes to gambling in the USA to be slightly different compared to what they are today.

Prohibition was a major influence here. It made many gambling illegal in many states. Illegal gambling flourished, and states gradually began to legalise other forms of gambling throughout the 20th century. One of the most famous of these is Nevada, which allowed the world-famous Las Vegas to flourish from the 1940s onwards. New Jersey also legalised gambling in 1977, allowing for the development of Atlantic City. Riverboat casinos were also introduced throughout the 1990s, offering Americans more places they could gamble legally.

The Impact of PASPA

One law that threw a spanner in the works was the 1992 Professional and Amateur Sports Protection Act (PASPA). This was a federal law that outlawed sports betting except in states that already had something set up. The only state that allowed licensed sports betting at the time was Nevada, while Oregon, Delaware, and Montana had sports lotteries.

This was challenged several times throughout its lifetime, but was eventually formally challenged by the State of New Jersey. The case was taken to the Supreme Court, who ruled in 2018 that the act was unconstitutional. It was deemed that this act took power from the states themselves and so was overruled. New Jersey, and many other states, were free to set up sports betting and other forms of gambling as they saw fit.

Recent Efforts

Since 2018, we have seen a flurry of bills to introduce sports betting, fantasy sports games, and iGaming. Not all of these have been successful. Some states like Hawaii simply don’t want to support betting of any sort, whether it is a lottery or a casino game, and so we are unlikely to see any progress here. Others, like Florida, have tight compacts with their Native American tribes, and they won’t be able to progress with any legalisation unless they have an agreement from these tribes.

To put it quite simply, you can’t launch a gambling brand across the United States because gambling has not been legalised in all the states. Currently, you can only apply for licenses from states like New Jersey and Delaware that have legalised gambling.

Other Factors to Consider

So, are the attitudes across the various states responsible for the slow spread of gambling? Not quite – there is also another piece of legislation that brands need to be aware about; the Unlawful Internet Gambling Enforcement Act of 2006.

While this might seem like a long and scary piece of legislation, it is protection against the use of payment transfers for unlawful Internet gambling. If a brand has legally obtained a license from a state, they are able to collect the payments wagerers make. Where they run into issues is that this act prohibits these transfers across state borders. If a brand has operations in New Hampshire and they wish to expand into Indiana, they need to apply for a new license as this is a new state with a completely different set of laws.

The licenses might be for different lengths of time and the brands could be taxed differently. They might also be restricted in the games that they can offer. No two states are the same, even if they share a border.

What This Means for iGaming Brands

Launching an iGaming brand in the USA needs to be done on a state-by-state basis – there is no other way around it. Whether it is sports betting, online casinos, or some other aspect of the iGaming world entirely, the right licenses have to be applied for. State law is absolute in this regard. Any brand that wants to launch operations in the USA will need to know which states can offer them a license! For the near future, it seems very unlikely that we will see iGaming across all 50 states.

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