US Legislation in the Gambling Industry

The rise of online gambling and the innovations that new technology brought to the industry created intense debate across many countries, none more so than in the United States where strict legislature and a general government distaste for gambling created tensions for both industry representatives and players globally.

The history of gambling in the US has been a long and tumultuous journey through morally ambiguous questions into public addiction and the desire to benefit the economy with the mass revenues and taxation thereupon that it delivers. US law surround gambling varies from state to state despite not being a federal offence, online gambling on the other hand is generally prohibited nationwide apart from 4 states.

History of Gambling in the United States

Gambling in America has journeyed through three distinct waves of expansion that have all been met with fierce governmental force. The online industry has spawned the fourth wave which could perhaps see loopholes like bitcoin and other cryptocurrencies exploited as a method to bypass the wire act.

The first wave arrived before the United States was even a country. In the late 1700s and early 1800s national lotteries were a popular way of generating money to fund the growth of the 13 colonies. As the great journey West spawned the Gold Rush of 1848, new territories were discovered and gambling became a popular pass-time for new money colonials and the working-class poor. At this stage, the Government tolerated the industry rather than prohibited it. Perhaps their mind was focused on other things like the sustenance of their infant country and the war of 1812 against the powerful British Empire.

After a century of nationwide growth and the futility of WW1 the third wave began. Amid the great depression of the 1930s and the construction of the Hoover Dam, America was in desperate need of infrastructure and revenue. This revenue could be found in gambling and thus Nevada legalised casinos, spawning the growth of Las Vegas and the Midwest. The passing of casino law in Nevada was initially intended to create a home of gambling in Las Vegas which would see revenues distributed into important projects across the country. The resulting outcome began with a mass wave of crime bosses from all around the states arriving in Vegas to invest in the many hotels and casinos. Following WW2 and the 1950s many investors such as Howard Hughes begin to invest heavily in the Las Vegas hotel scene which slowly reduced the strip’s association with organised crime and it was from this period that gambling began to gain a more positive affiliation in the psyche of the American public.

The popularity of Las Vegas resulted in many states legalising gambling in specific forms as nuances from state to state began to emerge. Many Native Americans and indigenous tribes are protected by their tribal sovereignty to the land meaning that states do not have the authority to impose state law over their reservations. This has resulted in the emergence of a large Native American casino industry where operations are run on a trust agreement between the Governments. This is perhaps the most consistent form of gambling outside Las Vegas in the United States.

Online Gambling and State Law

Despite gambling not being a federal offence, states are free to impose their own jurisdiction on the matter. Nevertheless, online gambling in the United States is prohibited by the Federal Wire Act of 1961 imposed by the then Attorney General, Robert Kennedy. Before his assassination, this law was imposed to prevent the spread of trafficking, money laundering and organised crime syndication in the gambling industry. In essence, the law created a block on all interstate and national wire betting transactions that killed the potential of a thriving online gambling industry in the United States.

As casino gambling remains legal state-wide in only 2 states; Nevada and Louisiana, many other states have stipulated certain cities within their jurisdiction where gambling can be legal. This may be a microcosmic attempt to create a state monopoly in a similar fashion the Las Vegas casinos that came before it.

Although online gambling isn’t prohibited word for word under the wire act the illegality of wire transactions creates problems. There remain only four states where online gambling is legal, the first being Delaware, and the rest being New Jersey, Nevada, and Pennsylvania. The first state to legalise online gambling was Delaware with many of the licences being held by the 3 biggest racetrack owners in the state. US players therefore spend a lot of time trying to find something suitable and to find their best gambling site that is also legal for them.

Scott Manford, CEO of Wizard Slots said: “As an online platform based in the UK the market in the US doesn’t really have much bearing on our business. You’d think that a large portion of the market would become available to market too but unfortunately that’s not how it works. Both interstate and international wire transactions are outlawed meaning that we can’t capitalise on online gambling opportunity in America.”

The Future of online gambling in the United States

The question remains as to why the US has such strict and specific laws surrounding both casino and online gambling and theirs certainly some contradictions to be addressed. How come that a Government who green-lighted the same industry in the 1930s, hold such pessimism towards the online industry to this day. Perhaps it’s a question of morals and principles, after all the gambling industry does have some negative connotations and its crosses to bear. However, the US has never been one to uphold these attributes.

As the online industry continues to boom, the stakeholders and gatekeepers in other countries are only going to garner a more substantial wedge of the market. Thus far we can only speculate as more and more states begin to legalise online gaming in certain forms.

Competition was once reduced to land based casinos within your own state, online gambling would only create a global competitor where margins aren’t based on how many people are sitting at your casino table or walking through your door. It’s all about how much web traffic you can generate.

It’s true that many of the land based casinos, who’ve enjoyed fierce custom over the years, are beginning to become concerned about what the introduction of online gambling in their state could mean for their business, and the stiff competition that this would create, both nationally and globally.

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