Online Casino Compliance Guide
Understanding federal and state regulations, licensing requirements, and player obligations for safe, legal online gambling.
Federal Law Overview
Unlawful Internet Gambling Enforcement Act (UIGEA) - 2006
What it does: UIGEA prohibits financial institutions (banks, payment processors) from knowingly processing transactions for illegal online gambling.
What it doesn't do: UIGEA does not make online gambling itself illegal for players. It targets the payment infrastructure, not individuals placing bets.
Key Exemptions:
- Fantasy sports contests (DFS)
- Sweepstakes or prize promotions with free alternative entry
- Intrastate gambling (within a single state that has legalized it)
- Indian gaming within tribal lands
Impact on sweepstakes casinos: Because sweepstakes casinos offer free alternative entry (mail-in, free play coins), they fall under the "sweepstakes exemption" and are not subject to UIGEA.
Federal Wire Act - 1961
Original intent: The Wire Act prohibited using wire communications (phone lines) to facilitate interstate sports betting. It was created to combat organized crime.
2011 DOJ Opinion: The Department of Justice narrowed the Wire Act's scope to sports betting only, not online casinos, poker, or lottery. This opened the door for state-legal online casinos.
2018 Reversal (blocked): A 2018 DOJ memo attempted to reverse the 2011 opinion, claiming the Wire Act applied to all online gambling. This was challenged in court and blocked by a federal judge. The 2011 interpretation remains in effect.
Current Status:
The Wire Act applies to sports betting only. Online casinos and poker are not Wire Act violations. However, legal interpretations can change with new administrations. Always verify current federal guidance.
Professional and Amateur Sports Protection Act (PASPA) - Repealed 2018
History: PASPA (1992) banned states from authorizing sports betting. Only Nevada, Delaware, Oregon, and Montana were grandfathered in.
Supreme Court ruling (Murphy v. NCAA, 2018): The Supreme Court struck down PASPA as unconstitutional, ruling that the federal government cannot prevent states from regulating sports betting.
Result: Since 2018, states can individually legalize and regulate sports betting. As of 2026, 38+ states have legalized some form of sports betting.
State Rights & Jurisdiction
Why States Control Gambling Law
Under the 10th Amendment of the US Constitution, powers not delegated to the federal government are reserved to the states. Gambling regulation is a traditional state power, meaning each state decides its own gambling laws.
What this means for players: Your physical location (state) determines what's legal, not your state of residence. If you're a California resident visiting New Jersey, you must follow New Jersey's gambling laws while there.
Intrastate vs Interstate Gambling
Intrastate: Gambling within a single state. This is legal if the state has authorized it. Example: Playing on DraftKings Casino in New Jersey while physically in New Jersey.
Interstate: Gambling across state lines. This is federally restricted unless explicitly authorized (e.g., multi-state lottery, interstate poker compacts).
Key point: Licensed online casinos use geolocation to ensure players are within state borders. Crossing state lines mid-session will disconnect you.
Tribal Gaming & Compacts
The Indian Gaming Regulatory Act (1988) governs gambling on tribal lands. Tribes negotiate compacts with states to operate casinos, including online platforms.
Examples: Arizona's online sports betting is run by tribal operators under state compacts. Connecticut's online casinos (Mohegan Sun, Foxwoods) operate under tribal-state agreements.
Important: Tribal gaming is complex and varies by state-tribal compact terms. Some states share revenue; others grant exclusive rights.
How Casinos Verify Your Location
Why Geolocation is Required
State gaming commissions mandate geolocation technology to ensure:
- Players are physically located within state borders
- Underage players cannot access sites from neighboring states with lower age limits
- Casinos remain compliant with interstate gambling restrictions
- Tax revenue is attributed to the correct state
GPS Tracking
Your device's GPS pinpoints your exact location. Mobile apps heavily rely on GPS for real-time verification. Disabling GPS will block access.
IP Address Analysis
Your IP address is checked against geographic databases. VPNs are detected by comparing IP location to GPS coordinates.
Wi-Fi Triangulation
Wi-Fi networks are mapped to physical locations. This provides backup verification when GPS is unavailable indoors.
Never Use VPNs for Online Gambling
Using a VPN to bypass geographic restrictions is:
- A violation of every casino's Terms of Service
- Easily detectable through IP/GPS mismatches
- Grounds for immediate account closure and forfeiture of all winnings
- Potentially illegal under state law
Bottom line: Don't risk losing your winnings. Never use a VPN.
State Licensing vs Sweepstakes Model
State-Licensed iGaming
How it works:
- State gaming commission licenses operators
- Background checks on owners, executives, key employees
- Financial reserves required (millions in capital)
- Games tested by independent labs (GLI, eCOGRA)
- Responsible gambling programs mandated
- Tax rates: 15-50% of gross gaming revenue
States with iGaming:
New Jersey, Pennsylvania, Michigan, West Virginia, Connecticut, Rhode Island, Delaware, Maine (pending launch).
Sweepstakes Model
How it works:
- Operates under promotional/sweepstakes law
- No state gambling license required
- Players purchase "Gold Coins" (entertainment only)
- "Sweeps Coins" given as bonuses, redeemable for prizes
- Free alternative entry method required (mail-in, free play)
- Not subject to gambling taxes (taxed as sweepstakes)
Legal in most states except:
Washington, Idaho, Nevada, Hawaii, Utah, New York, New Jersey, Connecticut, California, Montana, Michigan (banned 2026-2026).
Player Compliance Checklist
Before You Play
- ✓ Verify online gambling is legal in your state
- ✓ Confirm you meet minimum age requirement (18 or 21)
- ✓ Research casino licensing and reputation
- ✓ Read Terms of Service and withdrawal policies
- ✓ Set deposit and loss limits before playing
Age & Identity Verification
- ✓ Provide accurate personal information (name, DOB, address)
- ✓ Have government-issued photo ID ready for verification
- ✓ Expect verification before first withdrawal (KYC process)
- ✓ Never share account credentials or verify for others
- ✓ Contact support if verification is delayed (72hr max)
Tax Reporting Obligations
- ✓ Report all gambling winnings on tax return (Form 1040)
- ✓ Save Form W-2G from casinos (issued for winnings $600+)
- ✓ Track gambling losses for deduction (must itemize)
- ✓ Keep records: receipts, statements, win/loss logs
- ✓ Consult tax professional for state tax obligations
Avoid These Violations
- ✗ Using VPN or GPS spoofing to bypass restrictions
- ✗ Creating multiple accounts for bonus abuse
- ✗ Providing false information during registration
- ✗ Allowing others to play on your account
- ✗ Colluding with other players (poker)
Frequently Asked Questions
10 questions answered by our experts
1 What is the UIGEA and how does it affect online gambling?
2 Does the Wire Act apply to online casinos?
3 Why are sweepstakes casinos legal without state licenses?
4 What's the difference between licensed casinos and sweepstakes casinos?
5 How do online casinos verify my age?
6 Can I use a VPN to access online casinos?
7 Do I need to report casino winnings on my taxes?
8 What happens if I gamble in a state where it's illegal?
9 How do states regulate licensed online casinos?
10 Are online casino winnings subject to withholding tax?
Can't find what you're looking for? Contact our support team for personalized help with your questions.
This is Not Legal Advice
This guide provides educational information about online gambling regulations as of January 2026. It is not legal advice and should not be relied upon for legal decisions.
Gambling laws change frequently and vary by jurisdiction. Always consult a licensed attorney in your state for specific legal guidance. Verify current regulations with state gaming commissions before gambling online.