It is well known that not all states are created equal when it comes to the legality of online sports betting. Not even close. In fact, most states have outlawed the practice, citing concerns about the integrity of sports and the potential for gambling addiction. But for the states that allow it, legal online sports betting is a profitable industry. And with the passage of the USA’s Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006, it has only grown.
One of the mainstays of UIGEA was Section 551(c)(1)(A), which requires that “a person knowingly provide an unlawful online gambling service or knowingly become a principal in the operation of an unlawful online gambling service.” This effectively made operating an online sportsbook a federal offense. But, as with most federal laws, it is not difficult to find a way around it. Many companies have chosen to partner with states to provide legalized sports betting services to their residents. Some even go as far as hiring former government officials to help navigate the complex legal and regulatory environments governing sports betting in the U.S.
States That Have Legalized Sports Betting
Below is a list of the states that have passed legislation to legalize sports betting:
In January 2020, Alaska became the third state in the nation to legalize sports betting. The Alaska Supreme Court ruled 5–4 that a proposed law that restricted sports betting to established casinos and race tracks was unconstitutional. That means that from now on, anyone can legally operate a sportsbook. The justices also determined that the state constitutional prohibition on “lotteries” does not encompass wagering on sporting events. That makes the state the perfect location for an entrepreneur who wants to give it a try. Especially since 95% of Alaskans live in urban areas and only 5% live in rural areas. That makes it easier for someone to set up shop in a major city like Anchorage.
There are also a number of Native American tribes that operate casinos and reservation-based gambling. So, if you are a Native American and want to get into the business, there are options for you, too. Additionally, since most Native Americans live in the state, there are already a large number of customers for you to serve.
Arizona is another state that has legalized sports betting. Like Alaska, Arizona is a sunshine state and quite a hotbed for sports fans. The problem is that while most of the state welcomes legal sports betting, it does not necessarily embrace it. The state government has tried to put restrictions on where and how gaming operators can operate, mostly surrounding issues of integrity and gambling addiction. But the 2010 UIGEA made that difficult by creating a federal framework for the regulation of online gambling, including sports betting. That has enabled the industry to flourish, as detailed below.
Arkansas is yet another state that has legalized sports betting. Like the other two states mentioned so far, Arkansas also legalized sports betting as a response to the UIGEA. It was approved by the state legislature in 2018 and was signed into law by Governor Hutchinson. That means that, similar to Alaska and Arizona, anyone can now legally operate a sportsbook in the state. Even better, given its proximity to the Mexican border, the state also becomes an excellent location for an entity that wants to provide offshore sports betting services.
Finally, let’s not forget about California. Perhaps the most famous of all the U.S. states, California is the seventh-largest economy in the world. And what is one of the industries that forms the backbone of California’s economy? You guessed it: sports betting. Thanks in large part to the efforts of Senator Richard J. Durbin, who has worked tirelessly for years to pass legislation that would allow sportsbooks to be established in the state. California was actually among the first states to adopt legislation implementing the UIGEA, and it has done so much that it can be considered the federal government of eSports.
In November 2019, Governor Gavin Newsom signed a law that will legalize and regulate esports betting in California. The law will go into effect on January 1, 2023.
Like many other states, Florida has also tried to regulate or outright ban legal sports betting. Unlike most states, though, the ban in Florida is quite a bit more complicated, mainly due to the influential role that the sports betting industry plays in the state. It isn’t just that they want to get in on the action – it’s that this is one of the largest industries in the state, employing thousands and generating billions of dollars in annual revenue. As a result, many people in positions of power within the state, from lawmakers to judges, have a direct financial interest in maintaining the status quo, if you will.
Fortunately for the companies operating within the Florida sports betting industry, the state is also a popular location for people who want to visit and play. That means there is plenty of traffic and interest in sports, making it a potentially lucrative market. Especially since as noted above, Florida is one of the largest economies in the country. And with the opening of a new NFL franchise with an ownership group led by John Elway in 2021, there will be even more interest in sports.
Indiana is yet another state that has legalized sports betting. Like the others, it became a state after federal legislation was passed to require states to implement some form of legal sports betting. Back in October 2019, Governor Eric Holcomb signed legislation that will allow for the cultivation and sale of recreational marijuana. That will no doubt lead to an influx of potential customers for legal sportsbooks in the state. As a result, this is one of the most lucrative industries in Indiana, and that is certainly reflected in the state’s gross gaming revenue.
Louisiana is yet another state that has legalized sports betting. Like the others, the path to legal sports betting in Louisiana was paved by UIGEA. But despite the similarities, things are a little bit different in Louisiana. The state actually embraces the concept of legal sports betting, despite being one of the few original ratifies of UIGEA. That is because of an amendment to Proposition 71, which was approved by voters in 2016. It allows for sportsbooks to be established in the state, as long as they adhere to a few regulations. Namely, they must be licensed and regulated by the Louisiana Gaming Control Board (LGCB). Additionally, pari-mutuel betting is prohibited on all professional sports events within the state. And last but not least, they must pay off winners within three business days.
Minnesota is yet another state that has legalized sports betting. Like the others, it was a direct result of the UIGEA. One of the primary locations of the now-defunct Twin Coin Casino, which was established in 2012 before being acquired by Borgata in 2017, is Minnesota. That casino was one of the first to be established after UIGEA was passed and served as a blueprint for other sportsbooks to follow. As a result of the legislation, the industry in Minnesota has grown rapidly, with over 100 new operators registering with the state as of January 2021, according to the Minnesota Gaming Association.
Finally, let’s not forget about Nevada. Like the others, Nevada has chosen to embrace sports betting, even though it is arguably one of the most corrupt industries in the country. That is mainly due to the fact that it is tax-free, and the state collects over $400 million in annual revenue from sportsbooks alone. And that is likely to grow, with the opening of the $500 million Golden State Sportsbook and the Raiders announcing that they will play a preseason game in the state next year. If you are looking for a corrupt industry that still manages to bring in a lot of money, Nevada is the place to be.
New York is yet another state that has legalized sports betting, albeit with some restrictions (mostly surrounding residency). The legislation, which was primarily driven by the New York Racing Association, allows for the operation of a pari-mutuel betting market on football and other professional sports, as long as the games take place in New York. That means that, technically speaking, someone can set up shop in New York City and provide offshore sports betting services to anywhere in the state. Even better, given the size of the city and its population of sports enthusiasts, it is likely to be a lucrative market for an entrepreneur looking to make their fortune. But as with the other states, there are regulations that operators have to follow, mainly surrounding issues of integrity and gambling addiction.