Ever since the Supreme Court ruling in 2018 (Murphy v. National Collegiate Athletic Association), which effectively handed legal powers back to individual states, the sports gambling industry in the United States has been revived beyond recognition.
While placing a wager on your favorite team is becoming possible in more and more states, the situation is still legally complex. This is partly because the United States operates as a federal republic, which means state and federal laws can clash. In this article, we’ll disentangle some of the confusion by taking a look at the legislation that currently affects sports betting in the United States.
Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA)
George W. Bush signed UIGEA into law in October 2006. In simple terms, its aim was to disrupt gambling by making it illegal for US financial firms to process debit and credit card payments to and/or from betting websites. There are two notable exemptions: fantasy sports and online horse racing.
The introduction of UIGEA led to many big gambling companies leaving the United States market. Every gambling company listed on the LSE (London Stock Exchange), for example, stopped accepting bets from US-based players. Partypoker saw catastrophic effects, with 60% of its stock value evaporating once UIGEA was announced.
The recent Supreme Court ruling, however, means that as long as online gambling websites do not break state or federal laws, payments can be processed without penalty. There is one grey area, which has to do with bets having to be placed in a single state.
WSN.com displays valuable information about different states that are opening up, and what kind of offers the sportsbooks have. New Jersey for example lifted the ban on sports betting in 2018, and subsequently made player sharing agreements with Delaware and Nevada. This means that, for instance, players from the three states can sit at a single virtual poker table. Does UIGEA technically prevent this? While in practice this will likely not be the case, the jury is still out.
The Professional and Amateur Sports Protection Act (PASPA)
PASPA was passed as federal law in 1992 and effectively outlawed gambling in the United States. It gave Nevada a near-monopoly on sports betting in the country and had a severe negative effect on casino stalwarts such as Atlantic City and New Jersey.
Critics of the law believe that its effects were far-reaching, including encouraging a ‘shadow economy’ of bookies (largely mob-associated), offshore websites, and other illegal gambling associations. Estimates put legal sports bets at just 1-3% between 1992-2018, meaning that most gamblers turned to alternative avenues to get their fix.
In a landmark 2018 case, the Supreme Court ruled in favor of New Jersey, which argued that the Professional and Amateur Sports Protection Act (PASPA) should be struck down. PASPA was declared unconstitutional, and once again allowed states to determine on an individual basis whether their residents should be allowed to place bets on sports. This ruling essentially opened the floodgates, with states quickly passing legislation to enable gambling companies to operate within their borders.
The Interstate Wire Act (Federal Wire Act)
Introduced in 1961, what is colloquially referred to as the Wire Act was designed to prevent organized crime involvement in the betting industry. It was driven by Attorney General Robert Kennedy and formed part of his aggressive pursuit of criminal organizations.
The Wire Act was not very effective in its original aims, with other more effective legislation doing the heavy lifting when it came to the prosecution of the organized criminal element. It was brought out of the dust pile in the 90s, when online gambling started to take off.
Prosecutors used the Wire Act to target offshore gambling companies, arguing that internet transactions constituted ‘wire communications”. This effectively banned gambling throughout the United States.
In 2011, the Department of Justice ruled that the Wire Act only applied to sports betting, excluding poker and other online casino games. New Jersey and Nevada took advantage and passed laws, which regulated and legalized gambling.
Since 2011, there have been several back and forths on the Wire Act. In 2019, the 2011 decision was reversed. To make it more confusing, the reversal was itself reversed later that year. The story is still developing, with lawmakers on both sides still fighting their corner.
States Want Gambling
Despite roadblocks, including the continued legal squabbles regarding the Wire Act, it is clear that, on the whole, individual states want gambling. In some states, it is already possible to gamble online, including on sports, while many others are passing laws to allow gambling in the short term. States such as Utah, where anti-gambling sentiments permeate through the legal fabric of the state, are in the clear minority (this article offers a comprehensive list of current state regulations).
The Future of Betting Laws
It is clear that the Supreme Court ruling will have a permanent effect on betting in the United States. The power to legalize gambling is now in the hands of individual states, and we expect many to overturn existing roadblocks. While conservative states such as Utah will likely not change in the near future, put your money on gambling being legal in most states in the next decade.
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