Bitcoin Gambling Laws

Judge IconLegal bitcoin gambling is actually not considered unlawful in most of the United States despite the popular opinion of online gambling. It’s a fact that there are more states in the US that have legalized and state regulated the operation of online gambling websites than there are states that have condemned their use entirely. That being said, there are only three states that have specifically legalized online gambling and allowed the operation of those websites from within their state lines, and only state that has passed a law specifically demanding that its residents not place bets over the internet.

The legal landscape surround online gambling can be quite complex to navigate for USA players. This makes it essential for us for know what the laws are that impact what we are doing so we are informed and understand where our limits are. In the sections below, you will find detailed descriptions of all the federal laws that impact online gambling.  We also address the legality of using Bitcoin to fund online gambling entertainment.  The concept of cryptocurrency is still fairly new to most people, and a concise understanding of the legal status and functionality of Bitcoin is very beneficial.

What Are The Federal Laws That Impact Online Gambling?

There are three main federal laws that have notable impacts on the industry. The Professional and Amateur Sports Protection Act (PASPA) written in 1992. The Federal Wire Act written in 1961 and updated in 2011, and the Unlawful Internet Gambling Enforcement Act (UIGEA), written in 2006.

What Is PASPA?

As of May 14, 2018, we refer to PASPA as the federal sports betting prohibition that died at the hands of the United States Supreme Court.  SCOTUS issued a ruling that after 26 years as a federal law, PASPA is indeed unconstitutional, something sports betting proponents have been declaring for decades. The Professional and Amateur Sports Protection Act was written into law as a result of heavy lobbying efforts by the major American sports leagues. Otherwise known as the Bradley Act, it was effective as of October 28th, 1992 and initiated a prohibition on sports betting in physical establishments throughout the entire United States with the exception of only a few states.

Sports lotteries that were being conducted in Delaware, Oregon, and Montana were found to be an exemption to the federal law along with Nevada where residents were still legally permitted to place sports bets. Sporting events that were excluded from PASPA are horse and dog track racing and Jai- Alai. With the recent SCOTUS ruling concerning PASPA, individual states will now have a shot at determining their own fate regarding sportsbook gambling.  It is unclear as of yet how the federal government will react to this ruling.  As the implementation of this ruling is clarified, we will be updating the information in this guide.

Is PASPA Unconstitutional?

According to legal experts at Duke Law, yes. Ryan Rodenberg and John Holden believe that sports gambling in the United States has an “equal sovereignty” problem. The term “equal sovereignty” refers to the equal sovereignty doctrine in the US constitution that mandates all states be treated equally and fairly by the federal government.  The United States Supreme Court has now joined the ranks of the legal experts at Duke in officially rendering the Professional and Amateur Sports Protection Act as unconstitutional through their ruling on the matter issued May 14, 2018.

In PASPA, only 4 states had any legal sports gambling which makes for a pretty clear case that they have rights other states do not. They believe that this could either lead to the complete abolition of the sports gambling prohibition in the United States, or prohibit the remaining four states from having it as well. The U.S. Supreme court was recently tasked with taking a closer look at the constitutionality of the law as a result of a bid for sports gambling in New Jersey.  Their ruling was in favor of the Garden State and has opened the flood gates for expanding the US sports betting market.

What Is The Federal Wire Act?

The Federal Wire act was recorded in 1961 as a tactical piece of legislature to fight the way on organized crime. In a time before the internet, organized crime was utilizing wired communications like telephones and telegraphs to operate large scale sports gambling operations to turn profits into criminal resources. The United States federal government responded to this by passing the Federal Wire Act which would make receiving bets through wired communications totally illegal. This was used to hamstring organized crime resources that eventually lead to the downfall of major organized crime families in the United States.

How Does The Federal Wire Act Apply To The Internet?

Legal bitcoin sports betting websites felt the brunt of a law that was created before the invention of the internet in 2011. The Department of Justice got together and issues a formal opinion. From that day on, the ancient law would also apply to the internet even though it could not have possibly included that in the original verbiage. The opinion went even further to condemn sports gambling specifically with no other mention of online gambling industries like legal bitcoin casinos or poker.

How Is Placing Bets Online Legal With The Federal Wire Act Then?

This is where it is important to understand the motivations of the federal government in 1961. They were making gambling illegal over wire communications out of sheer hatred for gambling, it was because they needed to halt the supply lines for organized crime. For this reason, the wire act was worked to place all of the blame solely on the operators of the betting rings and not the people that were participating in them. It was never made illegal to place the bets, it was only made illegal to accept them and organized businesses around them.

What Is The UIGEA?

The Unlawful Internet Gambling Enforcement Act doesn’t make any form of gambling illegal in anyway. It was created to add a layer of punitive oversight on banking regulations dealing specifically with illegal, unregulated internet gambling. It regulates the use of payment processors and financial options from unregulated online gambling operators processing illegal payments. What the UIGEA actually condemns was already illegal before the bill was written. The UIGEA adds a layer of criminal punishment to an act that was already illegal before the bill was signed.

What Was The Intention Of The UIGEA?

Originally for the US government, the goal of the UIGEA bill was to nudge gambling sites outside of the US. A goal that has been accomplished as a result of all of these laws. The intention was to criminally strike down all those who would accept and process payments from illegal and unregulated online gambling operators.

What Actually Happened As A Result Of The UIGEA?

When the law was initially signed, it pushed out about two-thirds of the major online gambling operators in the American markets. 2006 was in the midst of the poker boom and online poker was incredibly popular. As people have actually been able to sit down and study the law in the years to follow, the UIGEA bill provides little more than more punishment for something that was already illegal.

In What States Is Online Gambling Legal?

Online gambling has been made legal in Nevada, New Jersey and Delaware. The laws stipulate that a state can only provide legal online gambling services to people that are physically within their states as proven by the geo tracking software they are required to have.  This significantly limits their consumer scopes and because of this, Nevada and Delaware have signed an interstate online poker agreement that allows them to share each other’s consumer markets.  Nevada only has state sanctioning online poker and no online casinos while NJ and DE have both poker and casinos. It’s also important to note that placing bets and enjoying online gambling entertainment from properly regulated providers outside of the United States is totally legal in all states with the exception of Washington.

In What States Is Online Gambling Totally Illegal?

Washington is the only state in the entire country that has gone out of their way to provide legislature to limit their resident’s online entertainment. The actual act of placing bets and enjoying online gambling entertainment from properly regulated offshore providers is illegal in the state of Washington.  Granted that the state does not seem to have the interest or resources with which to monitor the Internet use of all citizens in order to identify anyone who is accessing licensed offshore gambling sites, but we cannot tell you definitely that it is completely impossible for law enforcement to take measures should they discover someone placing bets online.

Is it legal for US players to use Bitcoin to fund online gambling entertainment?

It is. It is legal for US residents to purchase as much bitcoin as they would like from any reputable exchange and transfer it to any online gambling website that they would like. The online gambling website that they choose to use their bitcoin in must have the proper offshore licenses and regulation as per the games and entertainment that they provide.

Is There Any Pending Legislation For Online Gambling In The US?

The Gaming Accountability and Modernization Enhancement Act (GAME Act) is a fairly recent piece of legislation that would end the prohibition on sports gambling and give the rights back to the states to regulated and legalized sports wagering. The act was released in late May of this year by the House Energy and Commerce Committee which aims to hand the oversight over to the Federal Trade Commission and also provides clarity on consumer protections and policies that the states interested in legalizing would have to adopt. The Game Act would repeal PASPA entirely.

There is also a piece of legislature that would further ban online gambling in America. RAWA, or the Restoration of America’s Wire Act is basically a rewrite of the Federal Wire Act of 1961. In 2011 when the Supreme Court deemed the wire act should only impact sports gambling the writers of RAWA had a problem with that. In RAWA’s rewrite, the Federal Wire Act should include most of the forms of online gambling instead of just sports gambling. If RAWA were to be passed, the online gambling industries that have been developing in New Jersey, Delaware, and Nevada would instantly be outlawed and pushed outside of the US indefinitely.