The legality of online casino gambling

Are internet live dealer casinos legal in the United States?

Update 2017

The below discussion still serves as a relevant background to the current US online gaming law. While there have been no recent legislative changes at a federal level, developments at the state level have been numerous and significant through 2012 and 2013.

The catalyst for change came in December 2011 when the US Department of Justice issued a memorandum opining a revised stance on their interpretation of the Wire Wager Act. Until this point the DOJ position had been that the Wire Wager Act made all forms of online gambling illegal. The revised position was (and still is) that this Act now only applies to online sports betting and not casino, poker or other games of chance.

In light of this changed stance, a number of US state legislatures, most notably those in Delaware, New Jersey and Nevada, have moved quickly to pass intra-state online gambling laws. In February 2013 gambling bills were signed into law in both Nevada (poker only) and New Jersey that would allow residents of those states to play locally licensed online casino games. Delaware joined soon after.

In November 2013, locally licensed/regulated online casinos in Delaware, and New Jersey began accepting bets from customers resident in their respective states.

The New Jersey and Delaware laws allow bricks and mortar casinos in those states to offer any of the games they provide on their casino floors in online form. New Jersey residents are now able to play live dealer games streamed from an Atlantic City casino from their homes.

Under legislation proposed in New Jersey in 2017, intrastate restrictions on both operators and players may be lifted. This would enable players from around the world to access tables live streamed from within New Jersey casinos, and also allow offshore providers (eg Evolution Gaming) to base their operations in New Jersey.

Background

The current legal position in the US is confusing to say the least.  Prior to 2006, old Federal and State laws like the Wire Wager Act were relied on by authorities as the principle basis supporting the contention that online gambling is illegal and efforts to prosecute operators offering their services to US residents.

Still today these laws are cited, as was the case in Minnesota in April 2009, when their Department of Public Safety relied on the Wire Wager Act as legal authority for a letter sent to 11 national and regional telephone and ISP providers demanding they block Minnesotan’s access to 200 online gambling websites.  The demand has since been challenged as an incorrect interpretation of the Wire Wager Act and as having no legal basis in a lawsuit brought by iMEGA.

Given the Wire Wager Act was drafted in 1961, its inadequacy in applying effectively to services offered over a medium that was not contemplated at the time of its drafting can be understood.

UIGEA

In 2006, the Bush Administration passed the Unlawful Internet Gambling Enforcement Act (UIGEA).  The intent of this legislation was to make it impossible for offshore online gambling operators to offer their product to US residents by rendering it illegal for US financial institutions from facilitating payments between those operators and US based players.  Its practical operation has been problematic for a number of reasons.

While the agencies charged with the enforcement of UIGEA are told to make sure that financial institutions block all ‘unlawful Internet gambling’, nowhere in the legislation is this term defined.  So in what’s turned out to be a slightly farcical situation, those agencies have directed the relevant financial institutions to make the determination as to what is ‘unlawful Internet gambling’.  Of course they are even less qualified to make this determination.

Regardless of US financial institution’s ability to practically comply with the burden of blocking ‘unlawful Internet gambling’ transactions, another reality lawmakers are coming to understand is that there are a multitude of other deposit options offered by offshore financial institutions beyond the jurisdiction of UIGEA’s operation.  And while the passing of UIGEA led to many online gambling operators (typically the larger publically listed corporations) pulling out of the American market for the time being, it has done little to dissuade many operators from continuing to serve US residents.

UIGEA’s days may also me numbered with repealing legislation drafted and intended for presentation to Congress at the time of writing.  Hopefully any new legislation clears up current uncertainties.

For players

From a player’s perspective it should be noted that UIGEA is aimed at financial institutions and online gambling operators and not players.  Professor I. Nelson Rose, Senior Professor at the Whittier Law School and well regard online gambling legal authority states that “no United States federal statute or regulation explicitly prohibits online gambling, either domestically or abroad,”  and that the UIGEA by its own terms it does not apply to individual gamblers.

Specific to live dealer casinos

While not included in the definition of  ‘unlawful Internet gambling’, live casino games are clearly one of the types of gambling activities in contemplation by lawmakers when UIGEA was drafted.  Most of the casinos that offer this format are among the industry’s larger (often owned by publicly traded corporations) operators who have chosen to withdraw from the US market until the legal position is clearer, and do not currently accept US players.

A useful summary of milestones relevant to this discussion is listed at Wikipedia’s online gambling page.

Are internet live dealer casinos legal in the United Kingdom?

On 1 November 2014, the UK introduced a new law governing all aspects of remote gambling – The Gambling (Licensing and Advertising) Act 2014 (‘the new Act’). The new Act supersedes The Gambling Act 2005 (‘the old Act’), which came into effect in 2007.

Under the old Act, which allowed offshore licensed operators to freely advertise and participate in the UK market, it was estimated that the UK Gambling Commission regulated less than 20% of online gambling by British consumers. It was also recognized that substantial gambling  tax revenues were being foregone.

The new Act seeks to address these problems by stipulating:

  1. any operator wishing to participate in the UK remote gambling market must obtain a license from the UK Gambling Commission to do so, irrespective of any other online gambling licenses held; and
  2. operators must pay a gaming tax in the UK on revenues from their UK resident players (point of consumption or ‘POC’ tax).

While these changes have caused plenty of headaches for operators, the reality for most players is that they will barely notice any changes at all.

Regulation
Under the old Act, the UK Gambling Commission was set up as the regulatory authority for commercial gambling across Great Britain (including remote gambling).

Under the new Act, the UK Gambling Commission remains the regulator and licensing authority. Although now they are a lot busier assessing license applications, and regulating licensees.

Legality for players
Nothing in the old Act made it illegal or sought to prevent United Kingdom residents accessing any remote gambling services.

Nothing in the new Act makes it illegal or seeks to prevent United Kingdom residents accessing any remote gambling services. You’re free to play where you wish, but if you want access to a dispute resolution channel, or simply wish to gamble with a lawful operator (peace of mind to be had there surely!) then make sure you select a casino/sportsbook that is UK licensed. There are lots of options.

Offshore operator stipulations
Under the old Act, as long as offshore operators were complying with the licensing requirements in the jurisdiction in which their remote gambling service was located it was not illegal for them to offer their services to UK residents.

Under the new Act, irrespective of any other remote gambling licenses held an operator wishing to offer their services to UK residents must obtain a license from the UK Gambling Commission.

Advertising
Under the old Act…
Any remote gambling service provider licensed in either the UK, Gibraltar, an EEA member (most European countries) or any other jurisdiction designation by the UK Gambling Commission as having ‘White Listing Status’ was permitted to advertise throughout the UK via traditional mainstream media or online.

Under the new Act…
Doesn’t matter where your other license is held, a local license is now required in order to advertise locally. In 2014 many of the operators whose names appeared on EPL team jerseys would not have held a UK remote gambling license. They would now be required to do so.

Tax
Under the old Act, offshore operators were not liable to pay any gaming tax on income generated from the UK market.

Under the new Act, operators must pay a point of consumption tax on all income generated from the UK market. The POC tax was set at 15% of gross gaming revenues at the time the new Act took effect.

Are internet live dealer casinos legal in other European countries?

Both EU Member States (“EU members”) and EEA Member States (“EEA members”) are bound by the laws contained in the European Communities Treaty (“the Treaty”).  The Treaty’s operative provisions are enforced by the EU’s executive arm, the European Commission (“the Commission”) and adjudicated by the European Court of Justice (“ECJ”).

EU members include:

Austria
Cyprus
Estonia
Germany
Ireland
Belgium
Czech republic
Finland
Greece
Lithuania
Bulgaria
Denmark
France
Hungary
Latvia
Slovakia
Sweden
Slovenia
United Kingdom
Spain
Italy
Luxembourg
Poland
Malta
The Netherlands
Portugal
Romania

EEA members include all EU members plus Norway, Iceland, Liechtenstein, Switzerland.

One of key provisions of the Treaty, relevant to the issue of online gambling, is the set out in Article 49 and relates to the freedom of EEA member service providers to offer their services to residents of all EEA member residents.  It is one of the often cited “Four Freedoms Principles” and provides that,

“Within the framework of the provisions set out below, restrictions on freedom to provide services within the Community shall be prohibited…”

This provision of the Treaty was included as a safeguard against any protectionist measures being introduced by EEA members, and to encourage free cross-border trade of services.  In the instance where an EEA member enacts a law prohibiting resident access to a service provided by a foreign service provider (ie one based in another EEA member country) and that same service is able to be provided by local service providers, a clear breach of the Treaty, and specifically Article 49 has occurred.

This situation should be contrasted with the case where an EEA member has passed laws prohibiting resident access to a service whether provided by local or foreign service providers.  Here there is no protectionist element to the law and consequently no breach of the Treaty.  Nothing in the Treaty prevents an EEA member from banning a particular service on whatever grounds, so long as the ban doesn’t prejudice service providers in other EEA member states in favor of local operators.

So what’s the relevance of all this to online gambling and more specifically live dealer casino services?

The Commission and the ECJ have categorically stipulated that the freedom-to-provide-services-provisions of the Treaty apply to online gambling services as they do to all others.  As a consequence, where an EEA member has legally sanctioned local online gambling services it cannot enact laws prohibiting similar online gambling services being provided to its residents from operators based in other EEA member countries.

Where an EEA member law is in breach of the Treaty it is effectively illegal, and therefore easily challenged by effected parties.  As well as being operationally ineffective, the law may become the subject of an infringement proceeding issued by the Commission.  At the time of writing, no less than 10 EEA members were the subject of infringement proceedings related to online gambling laws that breached the Treaty.

A number of EEA members are in the process of changing laws related to online gambling so that they are consistent with the Treaty.

At the end of 2008, regulations with respect to online gambling were summarised conveniently by a European Parliament committee study as follows:

Actively allow Passively allow Actively prohibit Passively prohibit
Austria
Belgium
Denmark
Finland
France
Italy
Latvia
Malta
Slovakia
Sweden
United Kingdom
Ireland
Estonia
Cyprus
Bulgaria
Poland
Luxembourg
Portugal
Spain
Hungary
Greece
Czech republic
Germany
Romania
Lithuania
The Netherlands
Slovenia

Ten years on, despite a lot of political discussion about new laws and regulations, this position hasn’t changed enormously. The major exceptions being Spain and Portugal who are now very much in the ‘Actively allow’ column with maturing regulated markets.

Are internet live dealer casinos legal in Australia?

Australia’s laws with respect to online gambling are set out in the Interactive Gambling Act 2001 (“the Act”) which came into effect June 2001, making Australia one of the first countries to pass legislation drafted specifically to address the issue of online gambling.

The Act takes a prohibitive approach to online gambling and provides that it is illegal for an ‘interactive gambling service provider ‘ (ie online casino, online live dealer casino etc) to provide its services to Australian residents in the absence of an interactive gambling license.

Holders of an interactive gambling license may offer their services to Australian residents and the residents of any other country that doesn’t prohibit online gambling. Restrictions on the nature of the interactive gambling services to be provided to Australian residents apply, like for example the ability to offer in-play bets.

While the intent of the Act was to limit Australian resident access to online gambling services, studies have since found that Australians are gambling online at offshore based websites in increasing numbers and limitations placed on locally licensed operator’s ability to offer competing services is only hampering their competitiveness.

Like UIGEA, the Act targets operators of interactive gambling services and not players.  From a practical standpoint this means Australian residents are not breaking any laws gambling online at live dealer casinos, however they may find some casinos honor the provisions of Act despite being outside its jurisdictional operation, and refuse to accept Australian customers.

In September 2017 a number of amendments to the Act came into effect (read more about the Interactive Gambling Amendment Bill) clarifying the definition of interactive gambling services and prescribing tougher enforcement measures and penalties for offending operators. The position with respect to Australian players (ie it is not an offence to gamble online) remains the same.

Are internet live dealer casinos legal in Asian countries?

At the time of writing, no Asian country had passed legislation specifically addressing the legality of online gambling.  As a general rule however, authorities in most Asian jurisdictions frown upon internet gambling activity and view it as illegal by virtue of general prohibitions on gambling.

In Malaysia for example the Betting Act 1953, which renders the operation of a ‘common betting house’ and the act of gambling in a ‘common betting house’ as both illegal, is the cited authority for the government position that online gambling should also be illegal.  As the legislation has not been amended to include internet websites within the definition of what constitutes a common betting house, or any of the myriad of other issues specific to online gambling, its effective application in this area is difficult to imagine.

Similar situation exists in Singapore, Taiwan, South Korea.  Further complicating the situation is the fact that many of these jurisdictions can no longer claim to impose general bans on casino gambling, with all countries now either close to opening new casino resorts, or legislating to allow for the development of new casinos.

A number of Asian region governments have decided that they want to help stimulate tourism and economic activity generally (and earn some tax revenue at the same time) by building casino industries to compete with Macau.  Singapore is soon to open two massive casino complexes while Taiwan just recently gave the go ahead to casino development on its outlying islands.

In Japan, there is now talk that the government is speaking to online gambling operators with a view to putting a licensing and regulatory regime in place as a means to earn some extra tax revenue.

The gambling landscape in Asia is undergoing some significant changes presently.  For a discussion of internet regulations by country, visit our regional analysis.

General guiding principles for all players regarding the legality of playing live dealer casinos

The legality of online gambling, from a players perspective is a complicated and confusing issue even in jurisdictions where lawmakers have attempted to enact online gambling specific legislation.  Even the so called experts charged with application of those laws are often confused as to the law’s correct interpretation so what chance does the player have?

There are few jurisdictions in the world where unambiguous, definitive legal positions exist in this area.

In most instances where online gambling prohibitions do exist,  they are targeted at operators or payment facilitators and not players, but this is probably of little comfort to players in jurisdictions where this general principle does not hold true.

A useful guiding principle that will provide a level of comfort that you are not doing anything wrong is to play at a live dealer casino that is part of a large (publicly listed) organization that will have the legal resources to make the determination whether yours is a jurisdiction that they can or cannot operate in.

If, for example, a player from Australia or the United States tried to sign up at Ladbrokes they would be advised that the casino is not legally permitted to accept their custom.

Disclaimer: Livedealer.og is not a legal authority and has compiled the above discussion for information purposes only.  It is not intended to be nor should it be interpreted as legal advice.