Gambling, and especially online gaming, in the United States has a long and complicated past. Recently, three states, Nevada, Delaware, and New Jersey, have passed legislation allowing for online gambling within their state borders. This blog post reviews a history of online gaming in the United States, examines recent areas of legalization for online gaming, and speculates as to the potential future of online gaming.
The History of Online Gaming in the United States
While many countries around the world allow and regulate online gambling, the history of online poker and other gaming in the United States has been filled with tumult.1 By the early 2000’s, a variety of Internet gaming sites had sprung up and were available for use by U.S. customers2 Though many were run by American citizens, the ambiguity in the law surrounding Internet gaming led most to run their operations from Caribbean nations with more open and friendly online-gaming laws.3
In 2006, on the last day before Congress adjourned, the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) was tacked onto Title VIII of the SAFE Port Act (31 U.S.C. §§ 5361–5367), which otherwise regulated port security.4 Following the passage of the UIGEA most of the Internet gaming sites shut down for use in the United States.5
For the first five years after the passage of UIGEA, the legislation was largely ignored.6 However, on April 15, 2011, in an event known in the gaming world as “Black Friday,” the Department of Justice filed an indictment against the founders of the three largest Internet poker companies still accepting money from United States residents.7 The DOJ relied on the New York gambling misdemeanor to support the charges, since no federal statute expressly forbade online gambling.8 Using this underlying crime, prosecutors brought felony charges under the UIGEA and a similar enforcement statute.9
After Black Friday, online gaming by U.S. residents rapidly fell.10 Many participants became uncertain about whether they would be able to retrieve funds that they had deposited with online operators who were now leaving the market, and all worried about gaming online again.11
Online Gaming: Recent Legalization
As states try to leave the 2008 recession behind, they are now focusing on tackling questions surrounding how to abate the steady corrosion of their tax bases and are looking at licensing and taxing online gaming as one possible solution.12 Three states—Nevada, Delaware, and New Jersey—have begun to offer legalized, licensed, and taxed Internet gambling within their borders.13 Each state has legalized gaming in varying degrees. Nevada led the country in online gaming with the launch of a Las Vegas-based online poker site, UltimatePoker.com, on April 30, 2013.14 Delaware and New Jersey followed soon after, launching poker and casino games on October 31, 2013, and November 21, 2013, respectively.15
The Future of Online Gaming
It is almost certain that online gaming will spread to more states across the U.S. as more states move to legalize online gaming.16 However, it is likely that other states will look to the success of online gaming in Delaware, Nevada, and New Jersey in creating their own legislation and regulation surrounding online gaming.17. Outside of the U.S., online gaming is a $35 billion industry; it seems inevitable that states will want to come in and get a piece of the pie.18
David Stewart, Online Gambling Five Years After UIGEA, Am. Gaming Ass’n 1, 3-4 (2011) [hereinafter AGA White Paper], available at http://www.americangaming.org/sites/ default/files/uploads/docs/whitepapers/final_online_gambling_white_paper_5-18-11.pdf (“Worldwide, online gambling is increasingly a legal and regulated activity that generates almost $30 billion of revenue a year. In the United States, public policy on the subject has been schizophrenic.”). ↩
Stuyvie Pyne, Online Gambling in America, Berkeley Tech. L.J. Bolt (April 22, 2013), http://btlj.org/?p=2715 (“In 1999, there were over 250 websites accepting money bets from US players on card games, sporting events, and lottery tickets.”). ↩
Offshore Betting: The Feds Are Rolling Snake Eyes, Bloomberg Businessweek, http://www.businessweek.com/stories/2000-08-27/offshore-betting-the-feds-are-rolling-snake-eyes (last visited Sept. 7, 2014). ↩
Pyne, supra note 2. ↩
Id. (“Following the passage of the UIGEA, every publicly owned online gambling provider left the US market. The operators that remained were smaller, less reputable, and less regulated.”). ↩
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Id.; AGA White Paper at 8. ↩
Pyne, supra note 2. ↩
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AGA White Paper at 8-9. ↩
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Michael Cooper, As States Weigh Online Gambling, Profit May Be Small, N.Y. Times (Jan. 17, 2012), http://www.nytimes.com/2012/01/18/us/more-states-look-to-legalize-online-gambling.html. ↩
Pyne, supra note 2. ↩
Bill O’Driscoll, Nevada Opens Door of Online Gambling with Poker Launch, USA Today (Apr. 30, 2013, 1:08 PM), http://www.usatoday.com/story /news/nation/2013/04/30/nevada-poker-online-gambling/2123213/. ↩
Brett Collson, Delaware Becomes First State to Launch Full-Scale Real-Money Online Gambling, Poker News (Nov. 8, 2013), http://www.pokernews.com/news/2013/ 11/delaware-becomes-first-state-to-launch-full-scale-gambling-16741.htm; Kate Zernike, New Jersey Now Allows Gambling via Internet, N.Y. Times (Nov. 26, 2013), http://www.nytimes.com/2013/11/27/nyregion/new-jersey-opens-up-for-online-gambling.html. ↩
Cooper, supra note 12. ↩
Id. ↩
Id. ↩