The legality of online gambling is a topic of debate in the United States and varies by state. However, the Unlawful Internet Gambling Enforcement Act of 2006 limits the ability of banks to transact with illegal gambling sites. While this legislation is helpful, it does not explicitly define what constitutes legal internet gambling. In addition, despite popular belief, the Federal Wire Act does not prohibit all forms of online gambling. This law does not apply to online casinos, lottery websites, or poker sites.
The legality of online gambling has been challenged on constitutional grounds. While attacks based on the Commerce Clause and First Amendment guarantee of freedom of speech have had some success, most of these arguments have failed. Commerce Clause concerns seem to be resolved by the commercial nature of the gambling industry, while free speech objections have been weakened by limited First Amendment protection for crimes that facilitate speech. Further, due process arguments have been weakened by the fact that financial transactions between U.S. and foreign entities are involved.
Another factor driving online gambling’s growth has been cost. While traditional casinos require large deposits and entertainment spaces, online casinos do not need the same structural components. As a result, online casinos can offer lower registration incentives and promotional offers. Those savings can be passed on to the players.