U.S. Gambling Industry Warning: Why the Gambling Industry Needs Stronger Regulation in 2026

The U.S. gambling market has expanded rapidly, from sports betting to online casinos, but inconsistent laws and aggressive offshore operators pose new risks. Stronger, unified regulation is needed to protect consumers and communities. At the federal level, key statutes include the Interstate Wire Act (1961), originally targeting only sports bets, the Unlawful Internet Gambling Enforcement Act (UIGEA, 2006) which bars financial transactions with illegal gambling sites, and the Professional and Amateur Sports Protection Act (PASPA, 1992) that banned sports betting until the Supreme Court struck it down in 2018. (DOJ’s Office of Legal Counsel has oscillated on the Wire Act: a 2011 opinion confined it to sports, a 2018 revision attempted to broaden it to all wagers, but a 2021 First Circuit decision reaffirmed that it covers only sports betting.) Federal law defers to the states on legalized gambling.

At the state level, the landscape is highly fragmented. As of 2025, almost all states allow some form of gambling, but the mix of sports betting, casino gaming and lottery varies widely. States with legal online casino gambling (real-money iGaming) are limited: seven states permit it (New Jersey, Pennsylvania, Michigan, Connecticut, Rhode Island, West Virginia, and Delaware). Eight states regulate online poker (adding Nevada). By contrast, sports betting is now legal in 38 states plus DC and Puerto Rico (30 offer mobile apps). Only a few states still bar all major gambling: Hawaii and Utah prohibit virtually all wagering, while Georgia and South Carolina ban casinos and sports betting. In these “dry” states, residents often flock to unregulated or offshore sites, such as options listed here, increasing risks.

Federal vs. State Regulations

• Wire Act (1961): Prohibits interstate sports wagers. Its scope was limited to sports by a 2011 DOJ opinion, briefly expanded to all gambling in a 2018 memo, then rolled back by courts. As of 2021, DOJ interprets the Wire Act as covering sports betting only.
• UIGEA (2006): Does not ban gambling itself, but forbids banks from processing payments to illegal offshore gambling sites. In practice, U.S. banks must block transactions with any gambling operator not explicitly licensed by U.S. law. Legal state-licensed games (horse racing, lotteries, tribal casinos) are exempt.
• PASPA Repeal (2018): When SCOTUS struck down PASPA, each state gained authority to legalize sports betting. Since then, nearly every legislature has considered sports wagering. Federally, no new law was enacted; regulation remains at the state level.
• DOJ Position (2025): The current Justice Department has signaled it will not appeal the 2021 rulings, effectively returning to the older position that federal law (Wire Act) covers sports only. Industry groups and some states are pushing Congress to modernize or clarify these laws, but no major federal gambling legislation is imminent.

Which States Allow What?

Online gambling legality varies greatly. In broad strokes:

• Online Casinos (iGaming): Seven states allow fully regulated online casino games (slots, table games) for real money: New Jersey, Pennsylvania, Michigan, Connecticut, Rhode Island, West Virginia, Delaware. These states have licensing schemes and tax revenues from operators. All other states either ban online casinos or have only occasional bills under consideration.
• Online Poker: Eight states permit online poker: Nevada, New Jersey, Pennsylvania, Delaware, West Virginia, Connecticut, Michigan and Rhode Island. (Some states allow poker in casino lobbies or on-site apps only.) Note that poker pools may be shared (e.g. MSIGA connects NJ/DE/NV/MI/PA).
• Sports Betting: Legal in 38 states + DC/PR. Of these, 30 states allow mobile/online sports wagering; the others only retail (e.g. New Mexico, Kansas, Mississippi with on-site only).
  • States with no legal sports betting: Alabama, Alaska, California, Georgia, Hawaii, Idaho, Minnesota, Oklahoma, South Carolina, Texas, Utah. (California and Texas have active campaigns to legalize by 2027, but as of 2025 no deal is done.)
• Casinos (Land-based): Commercial casinos operate in about 28 states, usually limited to specific regions. Only Louisiana and Nevada permit casinos statewide; others restrict locations (often Atlantic City-style in NJ, tribal casinos, or riverboat casinos). No state has casinos at all: Hawaii, Utah, Georgia, South Carolina.

These details can be summarized:

Recent Legalization and Pending Bills

Several states have only recently launched online wagering or sports betting, and others are actively debating. For example: North Carolina passed sports betting in 2023 and went live with mobile betting in March 2024. Kentucky legalized sports betting in 2023; retail sportsbooks opened Sept. 2023 and mobile apps launched immediately thereafter. (Neither state currently allows online casinos or poker.)

Other examples: Ohio launched online sports and lottery games in Jan. 2023. Louisiana allows retail and limited mobile sports betting (tribal/riverboat sites), and permits sports bets via lottery kiosks in 2025. Vermont (2023) and Montana have legal sports (retail-only in VT, an app in MT).

By contrast, California voters rejected a ballot measure in 2022 and have agreed not to reappear on the ballot until 2026. Efforts in Texas stalled in 2023-25; some lawmakers predict sports betting might not arrive until 2028. Florida is in legal limbo: a Seminole Tribe compact allows an online Hard Rock Bet app statewide, but courts are weighing if it violates the state constitution.

Pending legislation is also active in Massachusetts (sports only, casinos vetoed in 2023), Minnesota (retail sports only), Missouri, North Carolina (added retail), and Indiana/Kansas/Nebraska (additional casinos). In short, almost every state is reconsidering some form of gaming, but the paths diverge widely.

Compliance and Automation in iGaming

As online gambling expands, operators must meet strict compliance standards. Platforms block underage players using multi-step ID checks, ID scans, biometric or selfie verification, and database matching, and rely on GPS-based geolocation to ensure users are within legal state borders. States like New Jersey require both advanced ID verification and precise geolocation for all players.

Under the Bank Secrecy Act (Title 31), casinos and online sites are treated as financial institutions. They must file CTRs for transactions over $10,000 and SARs for suspicious activity above $5,000. Effective AML systems use automated monitoring to spot structuring, rapid deposits, or fast cash-outs, with SARs submitted to FinCEN when needed. This is why platforms enforce strong due diligence and collect data like SSNs.

Regulators also demand real-time Responsible Gambling tools, including self-exclusion, deposit limits, timeouts, and AI monitoring. Analytics track session length, betting frequency, chase-loss behavior, and spending spikes. Tools like Mindway AI’s GameScanner flag risky patterns and provide heat maps, enabling quick intervention. Proactive RG tech is now becoming industry standard.

Financial Impact of Legal Regulation

1. New Jersey: Strong Revenues From Regulation

• New Jersey is the oldest and largest regulated online casino market in the U.S.
• In FY2024, NJ casinos and sportsbooks handled $6.3 billion in wagers.
• Gaming taxes and fees hit $569 million, more than double pre-pandemic levels.
• Funds support education, senior programs, disability aid, and general state revenue.
• Since 1976, NJ has raised over $13 billion for senior and disability programs.
• Online gaming alone now contributes over $500 million each year.
  

2. Pennsylvania: The Largest U.S. Market

• Pennsylvania became the #1 state for gaming revenue in 2025.
• The PA Gaming Control Board reported $6.4 billion in total wagers in fiscal 2025.
• Online slots and table games were major revenue drivers.
• PA collected a record $2.8 billion in gaming taxes for 2024–25.
• These tax dollars fund:
  • Property tax relief
  • Local government aid
  • Horse racing subsidies
  • Gambling addiction treatment programs
• State officials note iGaming has surpassed retail slots and become a “major fiscal engine.”
  

3. Nevada Comparison

• Nevada, the third-largest U.S. gambling market, collected just over $1 billion in gaming tax revenue in 2022.
• This shows how much states like NJ and PA benefit from online gambling regulation.
  

4. Non-Regulated States: Lost Tax Revenue

• States without legal online gambling collect zero tax revenue from residents who gamble offshore.
• They still face costs related to addiction, crime, and enforcement.
• The Missouri AG coalition estimated over $4 billion in lost tax revenue each year due to illegal offshore wagering.
  

5. Funding for Responsible Gaming

• Regulated markets fund education, awareness programs, and addiction treatment.
• Illegal offshore markets contribute nothing to responsible gaming or public services.

Consumer Risks in Unregulated States

In states with little or no legal gambling, like Utah, Hawaii, and Georgia, players often gamble underground, without regulated safeguards. Underage gambling becomes a major risk: ABC News reports that 60-80% of high schoolers have gambled for money in the past year, and about 6% show signs of addiction. Experts warn that teens face a much higher risk of gambling disorders and can easily access offshore sites or use adults’ accounts on apps like FanDuel or DraftKings, despite age restrictions.

Addiction and Lack of Support: Legally regulated sites are required to include self-exclusion and limit tools, and they fund education programs. Unregulated markets do not. A gambler in an illegal market cannot easily opt in to a state’s problem-gambling program or dispute unfair practices. If addiction strikes, there is usually no helpline or funding tied to offshore dollars (unlike NJ/PA where a portion of revenue underwrites counseling).

Data Security: Regulated gambling sites must follow strict cybersecurity rules, encryption, audited software, and segregated funds, while offshore sites follow none. Because of this gap, unregulated casinos face far more data breaches. A 2023 DOJ-cited report found about $15 billion in U.S. transactions flowed through illegal sites targeted heavily by hackers. The FBI logged 2,700+ complaints and over $112 million in losses from online gambling scams in 2023, mostly tied to offshore platforms. FTC identity-theft complaints linked to online gambling are also rising. In short, unregulated states expose players to far higher fraud and fund-loss risks.

Toward a National Regulatory Framework

The patchwork of 50-state rules invites confusion and exploitation

• Experts argue that fragmented state rules create loopholes and inconsistent enforcement.
• Many propose federal oversight or interstate compacts to unify standards.
• A national framework could establish baseline rules for ID verification, AML/KYC, and responsible-gaming tools.
• States could opt in while still maintaining some autonomy.
• The MSIGA compact demonstrates how shared player pools can operate under uniform rules.
• A broader version could potentially cover sports betting or casino licensing across states.
  

Learning from global best practices can guide U.S. policy

• The UK Gambling Commission is a frequent reference point for strong national regulation.
• It issues nationwide licenses for all gaming activities.
• Enforces strict AML and consumer-protection rules (LCCP).
• Implemented a ban on credit-card gambling to reduce debt.
• The Netherlands requires operators to intervene within one hour when detecting harmful play.
• Brazil is developing a national system that tracks every bet in real time.
• Any U.S. framework should prioritize robust player-protection systems:
  • Mandatory self-exclusion
  • Spending limits
  • AI-driven responsible-gaming analytics
• Data-sharing across states could help identify problem gamblers.
• A federal regulator, or a strengthened FinCEN, could better combat offshore operators.
• Financial institutions could more consistently block illegal gambling transactions, as urged by state AGs.
  

Even without new federal laws, states can tighten standards

• States could jointly launch a certified “play-safe” seal for operators meeting high cybersecurity and RG standards.
• They can expand interstate compacts for cooperation and enforcement.
• Sharing regulatory intelligence can strengthen collective oversight.
• Long-term benefits include improved consumer safety and more stable tax revenue.
• A unified U.S. licensing structure would reduce gaps exploited by offshore sites.
• Canada’s province-level model and Australia’s system with national self-exclusion show viable hybrid approaches.

Conclusion

FAQs

What states allow casinos or iGaming?
Seven U.S. states offer legal online casinos: New Jersey, Pennsylvania, Michigan, Connecticut, Delaware, West Virginia, and Rhode Island..

Where is gambling illegal?
Utah and Hawaii ban almost all gambling; several others block casinos but allow limited lottery/bingo.

What does the Wire Act/UIGEA mean for players?
Only state-licensed gambling is permitted; banks must block illegal gambling payments, but players aren’t federally penalized.

How are age and location checks done?
Sites verify IDs, match photos, and use geolocation to confirm players are within legal state borders.

What are responsible gaming protections?
Licensed sites provide self-exclusion, limits, timeouts, and monitor behavior to flag problem gambling.