Gambling is a fun pastime for anyone looking to inject a bit of thrill and excitement into their life. If you’ve been to Vegas before, then you understand this fact all too well.
But, before you dive in headfirst, you need to establish what your state gaming law defines as “legal gambling.” Otherwise, you might just find yourself behind bars for engaging in outlawed activities.
A couple of questions you should ask beforehand are:
- Is gambling illegal in my state?
- What types of betting activities are prohibited in my state?
- What US gambling laws should I be aware of to avoid engaging in illegal activities?
Here’s everything you need to know about this complex topic.
Is Gambling Illegal in the US?
The short answer is – no, gambling is not illegal in this country. If it were, places like Atlantic City and Las Vegas would not exist.
It’s no secret that the US has had a long and complex history with gambling. Specific activities have, at certain points in time, been outlawed, only for more permissive laws around them to be passed later down the line.
The fact that individual states have laws that define the legality of gambling within their borders, further feeds into this observed back-and-forth.
So, where is gambling legal?
The fact that there is no federal gaming law explicitly prohibiting gambling in the US means that it is not illegal. Be that as it may, the country does have specific laws that impose certain restrictions on gambling activities.
The Federal Wire Act of 1961, for instance, outlaws gambling activities that take place across state lines. So, while it may be perfectly fine to place a bet with a bookie within your state, the same action becomes illegal if you do it with bookmakers located in a different state.
Moreover, sports-betting has, up until recently, always been restricted due to the Professional and Amateur Sports Protection Act of 1992 (PAPSA). This federal law didn’t outlaw sports betting per se. What it did do is prevent states that didn’t already allow sports gambling, from legalizing it in the future.
In 2018, the Supreme Court overturned this statute paving the way for states to make legislative decisions on whether or not to legalize sports betting in their jurisdictions.
Is Online Gambling Legal?
Online gambling is yet another can of worms. Until the recent Supreme Court Ruling, “gambling by computer” was prohibited, regardless of the specific type of game an individual engaged in.
As long as there’s some form of real-world money exchange that takes place and some level of risk involved, then the gaming activity falls squarely within the definition of gambling.
The Unlawful Internet Gambling Act of 2006 outlawed the operation of online gambling sites anywhere on US soil.
But, when the US Supreme Court overturned PAPSA in 2018, the ruling opened the floodgates for making online sports betting legal in the country, since each state was now responsible for passing its laws on online sports betting.
It’s important to note that only online sports betting became legal. Any other form of online gambling remains illegal to date.
Online sports betting states
Some of the states where online sports betting is now no longer banned include Colorado, DC, Illinois, Iowa, Mississippi, New Jersey, Pennsylvania, West Virginia, and several others.
Nevada is the only state that was exempted from PAPSA, meaning that online sports-betting has always been legal there. Online fantasy sports leagues were also exempt from the Act.
The only two states in the US that completely ban all forms of gambling, including online sports betting, are Hawaii and Utah.
Local jurisdictions have the power to decide whether or not to allow gambling, even if it is considered legal at the state level. So, individual cities and counties may elect to outlaw gambling and prevent casinos or other types of gaming parlors from setting up shop there.
Is Lottery Gambling?
Technically-speaking, lotteries are a form of gambling since they involve the drawing of random numbers for a random prize. Their legality comes into question when you look at how they are run. So, let’s set the record straight, shall we?
Lotteries are illegal across the country unless the government runs them. State lottery laws have to establish:
- What the official purpose of the lottery is – for instance, raising money for the public education sector
- Define how the revenue generated from the lottery is distributed
- Whether or not to garnish the lottery prizes for child support payments, delinquent taxes, etc.
- Come up with the time constraints for winners to collect prizes
The Texas state lottery, for instance, was established in 1992 and is run by the Texas Lottery Commission. It offers games like Powerball, Mega Millions, scratch-tickets, and several others. The distribution of lottery revenue in the state is as follows:
- 62% of it goes towards the payment of prizes
- 27% goes toward funding the state education system
- 11% of it goes towards running costs and expenses
How Much Money Can You Win Gambling Without Paying Taxes?
Gambling winnings tax is applicable for both cash and non-cash prizes. There are no two ways about it.
Cash winnings include the prize money you get from a lottery payout, slot machine, poker tournament, or any other table game, raffle, Bingo, and even a sweepstake. If the prize is in a non-cash form like a car or vacation, you still have to include its fair market value when reporting your taxable income.
The law requires that you file Form W-2G if you won:
- $600 or more if the prize money is 300 times what your initial bet was
- $1,200 or more in prize money from slot machines or Bingo
- $1,500 or more in prize money from keno
- $5,000 or more in prize money from a Poker tournament
Federal taxes on your winnings are withheld at 25% flat. You’ll also need to itemize your gambling losses tax deductions, but only to the amount that you report as your gambling winnings. These have to be documented by keeping an accurate journal of your winnings and losses. That way, you have verifiable proof of your gambling losses.
Learn About the Gaming Laws in Your State
So, is gambling illegal? The main takeaway is that conventional gambling activities like racetrack betting, casino gaming, sports betting, and lotteries are not illegal. On the other hand, online gambling activities that don’t involve sports betting are.
Keep in mind, though, that Utah and Hawaii are the only two states in the country that ban all forms of online gambling – including sports betting.
If you have an idea for a new gaming business model, or simply want to know more about your gambling rights, find a gaming attorney who is familiar with this regulatory and legal specialty.