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.

Three other federal laws deal with gambling in more general terms but are occasionally referenced in matters related to sports betting and horse racing. These others are the Interstate Horseracing Act of 1978, Indian Gaming Regulatory Act of 1988 and the Illegal Gambling Business Act of 1970.


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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Interstate Horseracing Act of 1978

The Interstate Horse Racing Act of 1978 (IHA) was passed to protect the legality of horse wagers placed across state lines. It is thanks to the IHA that a horse racing fan in Illinois, for example, can walk into an off-track betting shop (OTB) and place wagers on the Kentucky Derby.

Congress explained its reasoning for passing the IHA with three key points written into the introduction of the Act:

  1. the States should have the primary responsibility for determining what forms of gambling may legally take place within their borders;
  2. the Federal Government should prevent interference by one State with the gambling policies of another, and should act to protect identifiable national interests; and
  3. in the limited area of interstate off-track wagering on horseraces, there is a need for Federal action to ensure States will continue to cooperate with one another in the acceptance of legal interstate wagers.

The IHA was amended in 2000 to extend its reach to the internet and provide legal footing for horse racing betting sites by adding the following phrase to the definition of “interstate off-track wager:”

“…and includes pari-mutuel wagers, where lawful in each State involved, placed or transmitted by an individual in one State via telephone or other electronic media and accepted by an off-track betting system in the same or another State, as well as the combination of any pari-mutuel wagering pools…”


Indian Gaming Regulatory Act of 1988

Congress passed the Indian Gaming Regulatory Act (IGRA) in 1988 as a compromise between competing interests following the landmark California v. Cabazon Supreme Court case which affirmed the right of Indian tribes to conduct gaming on sovereign land.

After California v. Cabazon affirmed Indian tribes’ right to conduct gaming, Congress stepped in with the IGRA to establish a framework under which Indian tribes may conduct gaming but still provide some measure of federal oversight.

The IGRA established three classifications of Indian gaming with specific regulations for each:

  • Class I: The IGRA defines Class I gaming as “social games solely for prizes of minimal value or traditional forms of Indian gaming engaged in by individuals as a part of, or in connection with, tribal ceremonies or celebrations”
  • Class II: Includes games such as bingo, pull-tabs, lotto and non-house-banked card games but does not include house-banked card games such as blackjack and baccarat
  • Class III: “all forms of gaming that are not Class I gaming or Class II gaming”

The IGRA leaves Class I gaming solely in the hands of Indian tribes, who may regulate it as they see fit.

An Indian tribe may conduct Class II gaming if that form of gaming is permitted anywhere inside the state in which the tribe is located.

Indian tribes may only conduct Class III gaming if that form of gaming is permitted anywhere inside the state in which the tribe is located and if the tribe forms a gaming compact with the state.

The IGRA also created the National Indian Gaming Commission (NIGC) to oversee Indian gaming at the federal level. Tribes that wish to conduct Class II and Class III gaming must establish “an ordinance or resolution which is approved by the Chairman” of the NIGC prior to launching such games.


Illegal Gambling Business Act of 1970

The Illegal Gambling Business Act (IGBA) was passed in 1970 as a part of the wide-ranging Organized Crime Control Act.

Both were passed during a time in which law enforcement officials were ramping up their efforts to curb illegal activities associated with organized crime. For context, the Racketeer Influenced and Corrupt Organizations (RICO) Act was also passed that same year.

To that end, the IGBA targets organized, structured gambling businesses. A gambling business runs afoul of the IGBA if it meets three requirements:

  • The business is a violation of state law in the state in which it operates
  • The business “involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business”
  • The business “has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day”

Individuals charged under the IGBA face up to five years in prison and a fine of up to $250,000 or twice the gain or loss associated with the offense, whichever is greater.

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