How Do Online Sportsbooks Work in the US?

It’s been just over two years since the Supreme Court struck down the Professional and Amateur Sports Protection Act of 1992 (PASPA), a law that banned sports betting in the US for states that hadn’t already established legal betting operations. Since then, state legislatures across the country have been quick to readdress their own sports betting laws so they can get in on the action, especially since the novel coronavirus has limited many forms of state revenue.

The United States has a complicated history with sports betting, even more so with the advent of the internet and online sportsbook. Off-shore operators have been the leading providers of online sports betting for Americans since the late 1990s. On occasion, they would draw the attention of federal enforcement resulting in a few notable crackdowns. But now that gambling laws in the US are adapting to modern times, there are at least 12 states that have legalized sports betting–specifically online.

Laws, New and Old

To understand the legality of online sports betting presently in the US, we have to look at a couple of laws from the past still in effect today. The Interstate Wire Act of 1961 and the Unlawful Internet Gambling Enforcement Act of 2006 were employed to restrict gambling and prosecute online operators. Somewhat controversial now, they continue to shape the sportsbook market.

The Wire Act

In the 1960s, the Wire Act prohibited using wire communications to transmit interstate wagers “on any sporting event or contest”–essentially keeping sports betting local and promoting state-run lotteries at a time when mob involvement in sportsbooks was booming. The Bush administration doubled down on this in 2001, widening the act’s reach to include online gambling. Since then, the application of the Wire Act has been reapplied, appealed, and argued several times and is currently under debate in a lawsuit between New Hampshire, associated states, and the Trump DOJ.

Under the most recent interpretation, all forms of interstate online gambling–not just sports betting–are considered illegal. So what does this mean for online sports betting today? Individuals placing sports bets most likely don’t have to worry but operators cannot accept wagers from bettors located in other states and those that do may face fines or other consequences.

The UIGEA

The Unlawful Internet Gambling Enforcement Act was meant to help enforce the Wire Act, which, at the time, did not encompass all forms of online gambling. It passed while piggybacking on the SAFE Port Act, an unrelated act regulating port security, just before Congress hastily adjourned for the 2006 elections. The Act itself prohibits operators from “knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law.”

When it was first passed, the UIGEA caused many operators to pull out of the American market. Nearly 15 years later, how are online bettors going to have to deal with the UIGEA? Well, the repeal of PASPA has made US operators mostly exempt; only off-shore operators will continue to really be affected. To bypass this issue, those off-shore operators still invested in the US gambling market have started to provide alternative payment methods, like Bitcoin and other cryptocurrencies.

Join the Club

Since the repeal of PASPA, states are joining the list of places where sports betting is legalized at rapid-fire rates, with 26 states having passed sportsbook legislation in the past two years. Delaware was the first to join Nevada in June of 2018 and most recently Maryland, South Dakota, and Louisiana all moved to set the groundwork for sportsbook systems in the same month. By the time this is published, it may be out of date because the laws and legalization surrounding sportsbooks in the US are changing so quickly!

Place Your Bets

Defining the legality behind sports betting in the US is a confusing state of affairs and the actual act of placing a bet can be just as murky because of the ever-changing legal landscape. As far as online sports betting, only 12 states allow mobile wager options, and several still require in-person registration. At bestbettingsites.com and other aggregate sites, you can find the best betting sites in the USA all in one place which can help narrow things down.

Next Available Operator

Most US-based online sportsbooks will ask that bettors verify their identity, so you’ll want to choose an operator within the state where you’re located. In some states, the sportsbook system hasn’t been established yet despite legalization, so bettors will have to wait to place their bets.

Many states have third-party sportsbook operators available. Operators like these will usually have mobile apps that streamline and standardize the bet making process. FanDuel and DraftKings are two of the biggest names in American sports betting, having been able to shift from daily fantasy sports to the sportsbook market early on and capitalize on the demand for online entertainment created by the coronavirus pandemic.