Illegal Sports Betting

4/14/2022

Illegal Sports Betting Rating: 3,2/5 7965 votes

The argument for widespread legal sports betting across the US is predicated upon the American Gaming Association assertion that Americans were betting $150 billion on sports every year when it was illegal everywhere outside Nevada — mostly at unlawful bookies and offshore sports betting operations on the internet.

If states legalize it, they can see that money wagered at regulated sports betting operations instead. Then, state governments can tax it. Plus, sports betting consumers will have more protection than they would in the black market.

The US is heading toward its first year of full-fledged legal sports betting outside of Nevada. And, the number of states embracing the idea is spreading fast. But it’s not obvious if it’s working and if state lawmakers are doing everything they can to make it work.

The spread of legal sports betting

Legal sports betting is live in seven states since the US Supreme Court lifted the federal ban in May 2018. They include Delaware, New Jersey, Mississippi, West Virginia, Rhode Island, Pennsylvania and a single native casino in New Mexico.

It has been over a year-and-a-half since the United States Supreme Court delivered a landmark decision to strike down the federal ban on sports gambling that prohibited betting on sports in most. The Professional and Amateur Sports Protection Act of 1992 halted the spread of legal sports betting beyond states that then allowed it. Nevada, where sportsbooks have been a part of casinos since. Definition of illegal sports betting illegal sports betting means any sports betting activity whose type or operator is not allowed under the applicable law of the jurisdiction where the consumer is located; Sample 1 Sample 2. Nonetheless, while sports betting is illegal in a large portion of the U.S., this doesn’t get you off the hook of paying taxes. Whether or not your state permits betting, you’re still eligible to pay taxes on any income acquired through gambling means. According to Moran, Tennessee launched online sports betting in November 2020, and in its first month garnered over $131 million in bets resulting in $2.3 million in tax revenue for the state. Right now, sports betting is legal at the state’s commercial casinos, but not online.

This year, Montana and Indiana passed sports betting legislation. Plus, TennesseeGov. Bill Lee will allow its sports betting bill to become law without his signature. An Iowa sports betting bill is now sitting on Gov. Kim Reynolds‘ desk awaiting her signature.

Additionally, states including New York, Illinois, Michigan, Colorado, North Carolina and New Hampshire appear closer than ever to passing sports betting legislation.

But is passing sports betting legislation and facilitating the launch of legal sportsbooks enough to eradicate the black market?

Most states don’t have the resources to go after black market operators. As a result, they’re left hoping they’ve done enough to foster the creation of a healthy market to compete with them.

The right kind of sports betting legislation

The AGA’s VP of Strategic CommunicationsCasey Clark said it’s not just about passing legislation; it’s about passing the right kind of legislation.

“Policymakers play an integral role in facilitating consumer transitions from the widespread illegal sports betting market to a safe, legal alternative. The key to enabling a move to above-board sports wagering is creating business environments in which licensed, regulated, responsible operators can offer a competitive product,” Clark said.

“This includes the implementation of sensible tax rates and licensing fees and enabling consumer choice for how they engage in this activity — intrastate mobile wagering. For example, getting this wrong could affect the odds that legal bookmakers can offer and limit the customer experience in a way that might deter American sports bettors from moving away from unprotected, illegal options and continue to perpetuate illicit activity.”

Are US customers making the transition from the illegal sports betting market to the safer, legal alternative?

Illegal offshore online sportsbooks aren’t about to give anyone a look at their books. Therefore, it’s difficult to say whether legal sportsbooks are effectively taking away any of their business.

The New Jersey sports betting example

If it’s working anywhere, it’s working in New Jersey. Most agree that New Jersey is a good example of a state that has done it right from the get-go.

New Jersey charges a reasonable 8.5% tax on retail sportsbook revenue and 13% on mobile sportsbook revenue.

In the first three months of 2019, New Jersey sportsbooks have taken in close to $216 million in bets at retail operations. Plus, a whopping $862 million-plus in bets at online and mobile NJ sportsbooks.

That has generated close to $67 million in sports betting revenue and more than $7.7 million in tax revenue for the state.

FanDuel Group has emerged as the state’s top operator. It runs a retail sportsbook at Meadowlands Racetrack and FanDuel Sportsbook online.

Kevin Hennessy, FanDuel Group’s director, says states that want to re-create New Jersey’s success need to do a couple of things.

“We need two things to create a legal marketplace that competes with offshore operators,” Hennessy said. “Reasonable tax rates so that the bet pricing can be competitive and a robust, competitive market with each legal sportsbook competing with product innovation and marketing to attract players.”

The Pennsylvania problem

Apparently, that’s what’s exactly happening in New Jersey. But not so much in neighboring Pennsylvania.

Pennsylvania has set a 34% rate on sports betting revenue and charges a $10 million licensing fee to interested operators. These added costs might be why it’s difficult for PA sportsbooks to compete with illegal operators.

How To Report Illegal Sports Betting

Pennsylvania’s first legal sportsbook went live in November 2018; there are now eight sportsbooks up and running.

Keep in mind that Pennsylvania is a bigger state than New Jersey. These operations have taken in just a little more than $125 million in bets to date, which has generated just $12.5 million in revenue and only $4.5 million in state tax revenue.

In other words, just a little more than half of what New Jersey has generated in only the first three months this year.

To be fair, around 80% of the New Jersey sports betting market is online.

Regulators in Pennsylvania are just now preparing to approve the launch of the state’s first online and mobile sportsbooks. One can’t truly compare the two markets until the online and mobile side fills out in Pennsylvania.

However, the initial numbers suggest Pennsylvania’s taxes and fees are making it difficult for legal operators to compete.

Can states help legal sportsbooks compete?

DraftKings is also one of the top sportsbook operators in New Jersey. It has yet to finalize plans to enter the Pennsylvania market. It may never go into the state.

DraftKings co-founder and CEO Jason Robins is committed to being part of the US sports betting market. However, DraftKings will need a little help from states that want the same thing first.

“DraftKings is committed to creating the safest mobile betting experience possible for consumers. We know that the majority of illegal sports betting happens online and it is imperative for states to foster mobile innovation and not limit legal operators if they want to eradicate the illegal market,” Robins said.

“In an evenly competitive betting ecosystem, the substantial consumer protections and overall technological prowess of legal providers can help put an end to unregulated services and the endangerment of bettors.”

Unfortunately, that may mean Pennsylvania, and any other states that follow, are out. They may still have legal sports betting; however, they won’t be able to compete with the $150 billion illegal market.

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Finding a clear answer on the legal status of sports betting can be tough. Particularly in the United States, regulations have shifted substantially over the past decade, and new legislation at the state level continues to change local rules on a nearly constant basis.

The good news is that sports betting is in the midst of a rapid and massive increase in legal options.

Ultimately, answering the all-important question of “is sports betting legal? ” depends on where you live.

This guide will tell you what to look for. At the end of the day, using a licensed, properly-regulated sportsbook like those suggested on this site is a good way to ensure you’re within the bounds of the law. These operators only accept customers who can bet with them legally.

For a detailed history of how we got to the surrounding sports betting, read our three-part series, encompassing the Origins of Sports Betting, the Vegas Era, and the Online Era.

To be clear, we are not legal professionals. An attorney in your country or state of residence is always the best authority when it comes any specific questions about sports betting regulations in your region. That said, we are confident in the information contained within this guide and sure that every sportsbook featured on this site presents a legal option for bettors in those countries and states where they operate.

What Laws Should Sports Bettors Know About?

There are several relevant federal laws regarding the operation of online sports betting sites targeting American users. It’s important to note that these regulations relate primarily to the operation of sports betting businesses and related financial transactions.

There is no federal law that prevents individuals from betting on sports, and licensing operators and regulating the industry is handled at the state level.

The Unlawful Internet Gambling Enforcement Act (2006)

Currently, there is no federal law against bettors online, as is often incorrectly reported by those who cite the Unlawful Internet Gambling Enforcement Act of 2006.

The law doesn’t say anything about betting online on sports, but merely stipulates that it is illegal for banks to transfer money gained from illegal betting. The express purpose of the law was to target those who own and operate online sportsbook on US soil, not the bettors who partake in online betting.

The critical legal distinction to draw here is that the UIGEA didn’t move to criminalize the act of betting itself. It moved to criminalize sending money to a sportsbook within US borders. Ergo, as long as you could find a legal loophole to get your money to a sportsbook, you were free and clear.

Sports Betting Sites

As proof of this fact, The UIGEA explicitly states that it has no authority to determine whether online betting is legal or not.

To decode that complicated legal jargon, we’ll rely on the words of US lawyer Nelson Rose: “There is no federal law against being merely a player…you have a better chance of winning the World Poker Tour than of being arrested.”

We’ll take those odds any day!

Note that operators who are licensed by state regulators to legally operate in the United States are not subject to UIGEA. As such, financial institutions are free to do business with these entities.

Murphy vs. NCAA Opens the Door to State-Regulated Betting

The legal landscape surrounding sports betting in the United States changed drastically in May, 2018, when the Supreme Court concluded the Murphy vs. NCAA case by overturning the Professional and Amateur Sports Protection Act, commonly known as PASPA.

This decision immediately lifted the federal ban on sports wagering, and gave rise to an era in which every state is free to regulate sports betting as they see fit. The practical result is that the federal government is no longer widely involved in regulating sports betting.

As a bettor in the US, this means state laws will now determine the legality of sports betting where you live.

Do I Have to Worry About State Laws About Sports Betting?

You should be mindful of the relevant state laws pertaining to sports betting in the state you live in. While an ever-increasing number of states are passing legislation to allow both in-person and online sports betting, there are no nationwide licenses available for sportsbook operators who serve American customers.

Keep an eye out for where sports betting is legal to stay up-to-date with the laws in your state and those nearby. It’s always best to wager with operators who have the blessing of local authorities, even if you’re unlikely to face consequences for wagering with a site that lacks the proper licenses.

Fully-regulated online sportsbooks offer easier banking transactions and a higher level of security. In states that allow online betting, sportsbooks should confirm your location whenever you bet. If a sportsbook is using geo-comply technology, there’s a good chance it is a safe and legal option.

Has Your Credit Card Company Restricted a Transaction?

Sports Betting Lines

There have been numerous recorded incidents of credit card companies placing restrictions on deposits and/or transactions to sportsbooks. This is not unusual in any sense, and can be fixed with a quick call to your credit card provider.

The only reason these transactions are often scrutinized by credit card companies is because they involve a company that isn’t readily recognized. Many sportsbooks often fall into this category, and your credit card company is forced to investigate further. This is to ensure that they’re compliant with both KYC (Know Your Customer) and AML (Anti Money Laundering) regulations.

This doesn’t mean that you’re restricted from making deposits to sportsbooks, or that this process is illegal. A private credit card company blocking a transaction to a source they’re not familiar with (or mildly suspicious of) is not tantamount to breaking the law.

Many credit card companies tend to err on the side of caution, as a failure to comply with KYC and AML laws can quickly land them in legal hot water. While it may be annoying to have to deal with credit card companies and their seemingly endless lists of rules and regulations, these inconvenient parts of the process are ingrained.