The betting market in the USA is probably one of the most misunderstood things in the gambling industry. There is much confusion, and rightly so, over whether punters in the US can wager in an online sports book. Let’s start with a short background on how this all came about, without getting too technical, before talking you through what you can and cant do in todays marketplace.

Prior to 2005, The US was fully licensed in both the ability serve sports betting customers and to host sports betting outlets. In 2006 the UIGEA (Unlawful Internet Gambling Enforcement Act) that basically pulled the plug on how punters were able to bank with online sports books. Prior to the UIGEA getting involved it was tough, if not impossible for the government to control the amount of funds that passed between punters and bookmakers, making taxing it almost impossible.

Whilst this is pretty much the tip of the iceberg, it saw the removal of US based sports bettors from the industry, which in turn resulted in many US facing bookmakers to close their doors. Now, one key thing to remember here is that at not point was a federal law passed banning online gambling. But, a federal law was passed stating that any transactions between punters and US bookmakers are illegal. Which brings us to where we are today.

Is online betting legal in the USA?

This is where it starts to get a little confusing, but hopefully we can clear things up for you. Online gambling is not illegal in the USA by any federal law. A federal law is where the government decides that something is illegal throughout the country. However, some states have banned via that of state law, which, if no federal law is in place, then this will stand throughout the perimeter of that state.

Next we want to state that there is a federal law against sports books taking money over the Internet for online betting. This law is only in place for sports bets and not necessarily casino or poker (although, as you’ve probably guesses, it gets a little more complicated than that, but for the purpose of this article we will be sticking sports betting). That being said, there is no law against anyone actually placing the bets, just simply bookmakers from taking the bets.

The key point to take from pretty much all of the legal jargon is that it is against federal law for banks to process online gambling transactions. This means they cannot take any deposits or withdrawals via the bank and process them to gambling outlets. As a result of this, a lot of sports books that have got permission to trade in US have taken to using payment methods such as e-wallets, of which we will discuss later in this article.

As a bit of recap to all this, the main problem occurs when it comes to processing the funds into your betting account. It’s legal to place a wager with a registered sports book (which is a common misconception) but it is illegal to process payments through your bank.

The main thing this all boils down to now is if each state is willing to open its doors to allow online gambling. Over the last couple of years there have been significant strides made into once again making online gambling a legal pastime for US punters, which is promising. However, it’s been a long, drawn out process which has seen certain states really struggle to get a licence with many still massively opposed to the idea.

There are three states that are currently allowing online gambling in the US which are Delaware, Nevada and New Jersey. But whilst there is only 3 states out of 50 that have passed the bill almost 10 years after the UIGEA stepped in, the future actually looks a lot brighter for US users. States such as Washington and The District of Columbia are areas in which are trying to push the bill to legalise online gambling.

Whilst the future of online gambling in the US is still relatively uncertain, you would think that over time they would be able to work out a way in which it can suit all parties. The UK for example manage to make money from the bookmakers themselves rather than tax free punters and the US are now in a huge minority when it comes to countries that legalise gambling. Whilst you just never know which way the US market will turn these days, it would be surprising to not see some sort of revival from the USA’s gambling infrastructure over the coming years.

Are winnings taxable?

Gambling winnings for US bettors are fully taxable and must be declared to the IRS within your yearly tax reports. In fact, it doesn’t matter if your winnings from gambling are in the form of a cash prize or physical price (car, holiday etc.) both must be declared and taxable as required.

Payment methods

Payment methods are a really pain in the backside when it comes to US based players. As we have already stated, it is illegal by federal law for any US bank to process any payment to a gambling related site. This basically rules out the possibility of banking with your debit card or bank account (bank transfers).

But there are ways around it, which are perfectly legal. There is no law in place to say the use of e-wallets to bank with bookmakers is prohibited. In fact, e-wallets are the perfect solution to what’s become a tricky area for US punters and it allows them to pre load an account – with cash if they chose – and deposit to a bookmaker without providing any banking details what so ever.

One of the best options for US players is that of Western Union. Both allow punters to either load a pre paid card with cash or simply get a unique payment ID from the bookmaker and literally popping down to the local shop and transferring the money that way. One thing we will say about both these options is that fees are quite high in comparison to other e-wallets, but they are reliable, safe and freely available throughout the US.