Why the United States has fifty gambling regimes
The United States does not regulate gambling; its states do. The federal government has never licensed a casino, a sportsbook or a lottery, and the statutes it has passed on gambling exist to police the boundaries between states, to keep organised crime out of an activity the states permit, and to govern the relationship between states and the sovereign tribal nations inside them. Everything an operator does in the American market happens under a state licence, and the federal layer is a set of constraints on what states and operators may do across state lines and over the wires.
Understanding that layer is the foundation for the rest of this course, because it explains the shape of the market: why online sports betting is confined within each state's borders, why online poker liquidity is pooled through interstate compacts, why prediction markets have become a federal-versus-state battleground, and why the whole industry dates its modern era from a Supreme Court decision in 2018.
The Wire Act of 1961
The Interstate Wire Act, passed in 1961 as part of Attorney General Robert Kennedy's programme to curb organised crime and racketeering, prohibits anyone in the business of betting or wagering from knowingly using a wire communication facility to transmit bets or wagers, or information assisting in the placing of bets, on sporting events or contests across state lines. Written for telephone bookmaking, it became the central question of the internet era: does it cover only sports betting, or all gambling?
The Department of Justice's position has shifted twice. From at least 2005 its Criminal Division treated the Act as covering all online gambling, including in-state lottery sales routed across state lines. In 2011, after New York and Illinois asked about selling lottery tickets online, the Office of Legal Counsel issued an opinion that the Act applies only to sports betting, which opened the door to state-licensed online casinos and poker and to the sale of lottery tickets online. In November 2018 a new opinion reversed that reading, concluding that all but one of the Act's prohibitions reach all forms of gambling. The New Hampshire Lottery Commission sued, and in January 2021 the First Circuit Court of Appeals held that the Act applies only to sports betting. The Department let the deadline for Supreme Court review pass in June 2021 and said it would not seek it, and in practice the 2011 reading is the operative one, though as precedent the ruling binds only within the First Circuit. The practical consequence is that state-licensed online casino, poker and lottery operate on the understanding that intrastate transactions routed across state lines incidentally do not violate federal law, and that interstate poker pooling under compacts between states is lawful.
For sports betting the Act still matters. An online sportsbook must accept bets only from customers physically within the licensing state, which is why geolocation is a licensing requirement rather than a convenience, and why a customer in one state cannot bet with an operator licensed in another even if both states have legalised.
The Professional and Amateur Sports Protection Act and its fall
PASPA, passed in 1992, prohibited states from authorising sports betting, with grandfather provisions for Nevada's casino sports betting and for three states that ran sports lotteries or allowed sports pools, and a one-year window for New Jersey that it did not use. It froze the market for twenty-six years. New Jersey challenged it, first through a 2011 voter referendum and a 2012 law that was struck down, then through a 2014 partial repeal of its own prohibitions that the sports leagues sued to block.
In Murphy v NCAA (May 2018) the Supreme Court held that PASPA violated the anti-commandeering doctrine: Congress may regulate sports betting itself but may not order states not to. No provision of PASPA was severable, so the statute was struck down in its entirety. Within a month Delaware, the first state outside Nevada to launch, and New Jersey were taking bets, New Jersey's first legal wagers being placed on 14 June 2018, and other states followed quickly. By May 2026, according to a FOX Sports tracker, thirty-nine states plus the District of Columbia permitted sports betting in some form, thirty of them with online betting through licensed apps, and Puerto Rico has its own regulated sports betting market, online included. Murphy is the event that created the modern American industry, and its logic (Congress may regulate, it may not commandeer) frames every subsequent federal proposal.
The Unlawful Internet Gambling Enforcement Act
UIGEA, passed in 2006 as Title VIII of the SAFE Port Act, a port security bill, does not make any gambling illegal. It prohibits gambling businesses from knowingly accepting payments in connection with unlawful internet gambling, where "unlawful" is defined by reference to state and other federal law, and it requires payment systems to identify and block such transactions. Its effect was to make American banks and card issuers largely unwilling to process payments for offshore gambling sites. The largest offshore poker rooms stayed in the market regardless, and the 2011 poker enforcement action that closed them to Americans charged UIGEA violations alongside bank fraud, money laundering and running an illegal gambling business.
UIGEA contains carve-outs that shaped the industry: intrastate transactions authorised by state law, intratribal transactions under IGRA, and, in the definition of "bet or wager", an exemption for fantasy sports contests that meet specified conditions. That exemption is the statutory basis daily fantasy sports operators relied on for a decade and the origin of the argument, still running, about where fantasy ends and betting begins.
The Indian Gaming Regulatory Act
IGRA, passed in 1988 after the Supreme Court held in California v Cabazon Band (1987) that a state which permits a form of gambling cannot enforce its gaming regulations on tribal land, created the framework for tribal gaming. It divides gaming into three classes: Class I (traditional and social games, tribal jurisdiction), Class II (bingo and non-banked card games, tribal jurisdiction with federal oversight by the National Indian Gaming Commission), and Class III (everything else, including casino games and sports betting), which a tribe may offer only under a compact negotiated with the state and approved by the Secretary of the Interior. Compacts set the games, the regulatory arrangements and, commonly, revenue sharing with the state in exchange for exclusivity.
IGRA is why tribal casinos are the dominant land-based operators in many states, why tribes hold exclusivity that shapes online legislation in California, Florida, Oklahoma and elsewhere, and why the question of whether a bet placed on a phone off tribal land but processed on a server on tribal land "occurs" on Indian lands was litigated to the Supreme Court's doorstep over Florida's compact with the Seminole Tribe. Lesson five covers the tribal framework in detail.
Other federal statutes
The Illegal Gambling Business Act (1970) makes it a federal crime to run a gambling business that violates state law, with thresholds on size and duration: five or more people involved, and more than thirty days of continuous operation or $2,000 of gross revenue in a single day; it is the statute used against offshore operators and bookmaking rings. The Travel Act (1961) covers interstate travel or communication in aid of unlawful activity including gambling. The Interstate Horseracing Act (1978, amended 2000) permits interstate off-track pari-mutuel wagering on horse racing with the consent of the host track, the horsemen's group and the racing commissions, and the 2000 amendment extended it to wagers placed by telephone or other electronic media where lawful in each state involved, which is why online horse racing betting has been offered across state lines, in the states that permit it, since long before anything else was. Federal tax law taxes gambling winnings as income, imposes an excise tax on sports wagers (0.25 per cent of the amount wagered where the bet is authorised by state law), and requires reporting and withholding by operators, covered in lesson four.
The Commodity Exchange Act and the new frontier
The most consequential federal statute of the 2020s was not written for gambling at all. The Commodity Exchange Act gives the Commodity Futures Trading Commission exclusive jurisdiction over futures, options and swaps traded on registered exchanges, and event contracts (binary contracts on whether an event occurs) are derivatives. When exchanges registered with the CFTC began listing contracts on election outcomes, in late 2024, and then on sporting events, from January 2025, they claimed federal preemption of state gambling law: a contract on a designated contract market is a federal instrument, and no state may prohibit it. The Act does give the CFTC a lever of its own: it may bar event contracts involving gaming, or activity unlawful under state law, as contrary to the public interest, and it used that power in 2023 against contracts on control of Congress. States and tribes disagreed, and the resulting litigation, cease-and-desist orders and rulemaking are covered in lesson six. The point for this lesson is that the federal layer, which for sixty years constrained gambling, has become the vehicle through which a form of sports betting reaches states that have not legalised it.
How the layers fit together
An online operator in the United States therefore works within a stack: a state licence that authorises the product within the state's borders; geolocation and payment controls that keep transactions intrastate for Wire Act and UIGEA purposes; a tribal compact where the state's model runs through tribes; federal tax and anti-money-laundering obligations; and, at the edges, federal regimes (horse racing, fantasy sports, event contracts) that cut across the state framework. The rest of this course works through each layer in turn.
What to take from this lesson
Gambling in the United States is state-regulated, with a federal layer that constrains rather than licenses. The Wire Act, read by the Justice Department in 2011 and by the First Circuit in 2021 as covering sports betting only, keeps online sports betting intrastate; PASPA's fall in Murphy v NCAA in 2018 created the modern market; UIGEA polices payments rather than gambling and carved out fantasy sports; IGRA governs tribal gaming through compacts; and the Commodity Exchange Act has become the route by which federally regulated event contracts challenge state authority.