online casino gambling

By Jonathan Griffin | Vol . 22, No. 17 / May 2014

NCSL NewsDid you know?

  • Delaware is the only jurisdiction where the state operates online gambling within its borders.
  • The U.S. Virgin Islands is the most recent jurisdiction to permit online gambling.
  • The Restoration of America’s Wire Act, introduced in Congress in March, would ban all forms of Internet gambling.

Online poker as we know it began on Jan. 1, 1998, at a time when most people still didn’t even have email addresses and seven years before the launch of YouTube. On that date, Planet Poker, the Internet’s first poker room, switched from a play-money format to real money. At the time, players were required to mail checks to a location in Costa Rica to credit their accounts, and Internet connections would regularly break up on the emerging Costa Rican network.

Online poker play eventually evolved with the advent of payment processors and improved connectivity. In 2003, PokerStars, one of the largest online poker rooms, held an online tournament in which the winner would receive entry into to the World Series of Poker. The winner of PokerStars’ tournament, Chris Moneymaker, eventually ended up winning the World Series, which gave online poker even greater exposure than it already had.

The federal government also took notice of online poker’s increased visibility and in 2006 passed the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), which prohibited gambling businesses from accepting payments in connection with “a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law.” In 2011, criminal and civil charges were filed against the owners of the three largest poker companies, including PokerStars, resulting in a large number of players’ funds being frozen.

Federal Action

The U.S. Department of Justice (DOJ) provided clarity with respect to intrastate Internet wagering on Dec. 23, 2011, when it issued an opinion clarifying the scope of the Wire Act of 1961, 18 U.S.C. §1084 and determined that the act only forbids sports betting. Since then, there have been a handful of unsuccessful congressional efforts to regulate, limit and prohibit gambling on the Internet. The most far-reaching attempt to date is the Restoration of America’s Wire Act, introduced in March. This measure seeks to amend the Wire Act to ban all forms of gambling over the Internet, thereby preempting state legislatures from approving online gaming within their respective borders, including those where it already exists.

State Action

Nevada initially passed legislation in 2011 that would authorize intrastate online poker if the federal government allowed it—through either a change in law or a Department of Justice notification that online gambling is permissible under current law. When the affirmative DOJ notification came in December of that year, the state began to issue licenses and develop regulations for online poker play. As that occurred, other states began to look into allowing online gambling within their borders.

In 2012, seven states—California, Delaware, Hawaii, Illinois, Iowa, Mississippi and New Jersey—introduced bills that would allow online gambling within their states. Delaware was the only state to enact legislation, becoming the second state in the country to authorize Internet gambling. Instead of issuing licenses, Delaware’s law gave its state lottery control over online gambling and promised to allow a full complement of casino-style games online, going beyond Nevada’s poker-only laws.

New Jersey became the third state to authorize online gambling in early 2013. Taking a cue from both states that preceded it, New Jersey’s law would license private operators to conduct gaming, like Nevada, and would allow for full casino gaming, like Delaware. All seven states that proposed legalizing online gambling in 2012 reintroduced legislation in 2013, as did Massachusetts, Pennsylvania and Texas. In late 2013, the U.S. Virgin Islands’ attorney general readdressed the territory’s dormant online gambling laws and issued an opinion that online gambling was legal there as well.

Not every state has enthusiastically welcomed the increased opportunity for online gaming, however. In 2012, Utah specifically prohibited the practice, and Maine amended its statute, clarifying that online play would not be legal there until the state authorized it, regardless of federal action or actions by other states. Pennsylvania also introduced legislation prohibiting online gambling in 2013 and 2014, although those bills have not passed.

This year has yet to see any new jurisdictions join Delaware, Nevada, New Jersey and the U.S. Virgin Islands, but it did see the governors of Delaware and Nevada sign a historic gaming agreement. The “Multi-State Internet Gaming Agreement” (MSIGA) initially only authorizes the pooling (meaning players could digitally cross state borders) of Internet poker players, but could one day be expanded to include other games as well. The agreement is written so that New Jersey and the U.S. Virgin Islands (the other two jurisdictions that allow online gaming) may also join, if approved by two-thirds of the Multi-State Internet Gaming Board, which was created by the MSIGA to oversee the process. Other states would have the option to join as well, provided they approve online gaming within their borders.

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