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 as part of Attorney General Robert Kennedy's campaign against organised crime, prohibits the use of wire communications facilities 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 changed three times. Through the 2000s it treated the Act as covering all online gambling. In 2011 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 2018 a new opinion reversed that reading, concluding that most of the Act's prohibitions reach all forms of gambling. The New Hampshire Lottery Commission sued, and in 2021 the First Circuit Court of Appeals held that the Act applies only to sports betting. The Department did not appeal, and the 2011 reading is the operative one, though it binds formally 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 exemptions for Nevada and a handful of states with existing lotteries on sport. It froze the market for twenty-six years. New Jersey challenged it, first through a voter referendum and a law in 2012 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. PASPA was struck down in its entirety. Within a month New Jersey and Delaware were taking bets; within a year a dozen states had legalised; by 2026 thirty-eight states plus the District of Columbia and Puerto Rico permit sports betting in some form, thirty of them online. 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 a rider to a port security bill, does not make any gambling illegal. It prohibits 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 cut American players off from offshore poker and casino sites by making banks and card issuers refuse the transactions, and to prompt the 2011 poker enforcement action that closed the largest offshore rooms to Americans.
UIGEA contains carve-outs that shaped the industry: intrastate transactions authorised by state law, intertribal 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 that states could not regulate gaming 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 Department 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. 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; 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) expressly permits interstate pari-mutuel wagering on horse racing with the consent of the relevant parties, which is why online horse racing betting has been lawful nationally for decades while everything else was frozen. Federal tax law taxes gambling winnings as income, imposes excise taxes on sports wagers, 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 derivatives 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 and then on sporting events, 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. 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 since 2011 as covering sports betting only, keeps online 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.