Federal Betting Laws in the USA

There are three major federal laws in the USA that currently address or formerly addressed sports betting to one degree or another. Those laws are the Federal Wire Act of 1961, the Professional and Amateur Sports Protection Act of 1992 and the Unlawful Internet Gambling Enforcement Act of 2006.

Two of those laws remain in effect to this day, but the Professional and Amateur Sports Protection Act was ruled unconstitutional by a Supreme Court ruling in 2018. Today, we’ll discuss how those laws have impacted sports betting in the USA and provide an overview of each.

PASPA: Professional and Amateur Sports Protection Act of 1992

PASPA was the primary legal hurdle to legal sports betting in the United States for over 25 years. PASPA was passed in 1992, took effect in 1993 and prohibited all but four states from legalizing or regulating sports betting.

When PASPA took effect, active sports betting laws in Nevada, Delaware, Montana and Oregon were grandfathered in. Of those states, only Nevada had true, single-game sports betting. The sports betting games exempted in the other three states were limited in nature.

New Jersey mounted a challenge to PASPA beginning with a law enacted in 2012 seeking to decriminalize sports betting. The NCAA and four major professional sports leagues sued to prevent the law from taking effect. After a protracted legal battle, the Supreme Court finally ruled in favor of New Jersey and struck down PASPA.

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UIGEA: Unlawful Internet Gambling Enforcement Act of 2006

The UIGEA was signed into law by President George W. Bush in October of 2006. As the full name of this law indicates, the UIGEA targeted online gambling. The UIGEA did not criminalize online gambling itself, but rather attempted to hamstring the industry by targeting the finances of illegal gambling operations hosted on overseas servers.

In short, the UIGEA made it illegal for US firms to knowingly process financial transactions for illegal gambling sites. The UIGEA has had limited success in stopping illegal online gambling, but it was effective at disrupting popular deposit methods. This in turn impacted the finances of unauthorized gambling sites and convinced the biggest names in online gambling to exit the US market.

The UIGEA also applies to online sports betting, but it is important to note that the law specifically excludes legal gambling operations. Licensed horse racing sites in the USA as well as legal gambling sites in New Jersey and other states are all exempt. As additional states legalize sports betting, any online sportsbooks licensed in those states will also be exempt from the UIGEA.

One portion of the UIGEA reads as follows:

“No provision of this subchapter shall be construed as altering, limiting or extending any Federal or State law or Tribal-State compact prohibiting, permitting or regulating gambling within the United States.”

Even more importantly, the UIGEA explicitly states it is concerned with unlawful internet gambling:

“No person engaged in the business of betting or wagering may knowingly accept, in connection with the participation of another person in unlawful Internet gambling…”

Online poker sites and gambling sites active in New Jersey, Nevada and Delaware have been in operation for years now and at no point has anyone mounted a serious legal challenge to those sites based on the UIGEA. The UIGEA is reserved specifically for unlawful internet gambling.

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Interstate Wire Act of 1961

The Interstate Wire Act of 1961, also known as the Federal Wire Act or just the Wire Act, is the one law discussed on this page that could potentially complicate things for legal online sports betting – at least in theory. However, we believe the Wire Act will not actually be a major roadblock to state efforts to legalize online sports betting.

The basic gist of the Wire Act is that it criminalizes the use of “wire communications” to assist in placing wagers. It was enacted at a time when organized crime was deeply embedded in sports betting and intended to give authorities additional powers to go after underworld crime figures who used phones and other “wire communications” to run sports betting operations.

We can imagine scenarios in which the Wire Act is used to prevent the spread of online sports betting even in a post-PASPA world, but there are also provisions in the Wire Act that may give states an easy workaround. You can read more about those possible workarounds as well as a general overview of the Wire Act at the link below.

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