US Online Gambling Laws: The Federal Wire Act Explained

Online gambling is enjoyed responsibly by millions of players around the world, taking advantage of international regulatory frameworks that permit remote gambling. Right across Europe, South America, Asia and elsewhere, players are free to gamble as they choose in the vast majority of locations worldwide.

One of the most notable exceptions to the rule is the United States, which remains unusually conservative towards gambling. In particular, online gambling continues to receive short shrift from US regulators and lawmakers, who instead have created a de facto ban on elements of the online gambling industry operating within US territory, or accepting US players.

The Federal Wire Act is one of the main statutes dealing with online gambling in the US, and one of the main sources of contention as far as regulation within the US is concerned. But what is the act all about, and what is its impact on the would-be online gambling sector in the US?

The Federal Wire Act – What’s It For?

The Federal Wire Act is actually a nickname for the Interstate Wire Act, a legal instrument passed back in 1961 that still has effect today. When it was enacted, few could have predicted or foreseen the rise in online gambling, or the impact this law would have on that potentially massive industry. Yet for all intents and purposes, it is one of the key instruments setting the legal approach to remote gambling in the US.

The act sets out to make it an offense, liable to fines and/or imprisonment, to communicate betting information or transactions, either interstate or across borders, for the purposes of placing bets and wagers. To quote the preamble:

“Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.”

This is quite a far reaching restriction on the face of it, and one that has been clarified in US courts subsequent to the act being released. For practical purposes, today, this only applies to betting on sporting events – non-sporting betting is exempted from the scope of this law.

The Supreme Court has yet to given any formal ruling on whether the law applies to non-sports based online gambling like online casinos etc., although there are some other limitations in place that already related to online casino gambling more specifically. The net effect is to make gambling in the US something of a legal grey area, which is problematic for both players and operators.

Federal Wire Act & The Legal Context In The US

To understand the true effects of the Federal Wire Act, it’s important to look at the wider context of US laws in this area. Basically, no one knows whether the Federal Wire Act applies to traditional online gambling – although we know with certainty it applies to sports betting online. This means that at a general level, there is a fundamental uncertainty around gambling laws in the US.

This has caused Google and Yahoo to be reluctant to run gambling ads in the US, for fear of committing a crime directly, or being party to a crime being committed. Even review websites, like this site,  that compare various providers have found themselves in a grey area in terms of how they can present information pertaining to gaming.

Similarly, there have been some high profile arrests in the US, with executives from BetonSports being detained on arrival in the United States – despite operating a perfectly legal and legitimately. 

This creates a tricky situation for operators, and indeed for players from the US. While players from the US are technically not prohibited from gambling as a rule, they in practice find it extremely difficult to do so. Unlike legitimate UK operators who accept UK based players, The Federal Wire Act remains one of the main barriers to free and fair gambling in the US, and one of the main reasons players, and operators, have to deal with these problems.

Clarifying The Law

At the heart of the issue is a glaring disconnect between lawmakers, academics, government agencies and law enforcement. Depending on who you ask, the Federal Wire Act does or does not apply to online gambling, and some departments behave on assumptions of certainty that aren’t shared by others.

Aside from new regulation superseding the Federal Wire Act, the best bet for clarification now rests with the Supreme Court. If they were to find themselves in a position to rule on this, the clarification would no doubt help firm up the understanding of the law as it relates to online gambling in the US.

Like it? Share it!