What Is Illegal Gambling?
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UPDATED: Dec 14, 2018
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Any gambling not specifically legalized and authorized by the state as it sees fit is illegal. If gambling is legal, only the types of gambling, in the permitted locations, conducted by state-authorized providers or operators, will be authorized and regulated. State law will lay out exactly —what forms of gambling, where, offered by whom– is legal, and anything not pre-approved by the state will be illegal. If gambling is not legal in your state, and you choose not to comply, the type of penalty imposed (monetary fines, jail, etc.) will depend upon the laws of your state.
There are an infinite number of types of gambling (i.e., lotteries, raffles, poker, internet sweepstakes, casino gambling, Fantasy, card and dice games, video line machines, and so forth). Some states regulate all forms of gambling; others ban some forms and allow others; two explicitly ban gambling. (The article – States That Allow Gambling – breakdowns which types of gambling in which state is authorized.)
Greatly oversimplified, we will look at three categories of gambling: social; charitable or fundraising; and “for-profit” gambling (such as commercial casinos, tribal or Indian gambling, lotteries, horseracing, sports betting, online gambling, and pari-mutal wagers).
Social gambling is your neighborhood card game (i.e., playing poker or bridge for money) or your friendly wager with your best friend on which sports team will win Monday Night football or the NCAA brackets. Typically, players must be at least 18 (or 21 in some states) and participate on equal terms (no player has an advantage over the others), and no one is paid to organize or run the game. There are often limits on the size of bet, pot, or winnings.
Social gambling has a mixed bag of acceptance by states: 29 of 50 states either explicitly permit it or at least arguably do. Essentially, you can legally engage in social gambling in less than two-thirds of states, which means social gambling is illegal in over one-third of U.S. states. That said, enforcement of existing laws when there is a genuine social connection is rare. But the point is, if your state doesn’t make it legal, social gambling would be considered illegal gambling.
This would be gambling-themed fundraisers offered by civic, charitable, religious, or fraternal organizations. It must be offered for charitable purposes-
(1) by an eligible organization,
(2) be properly registered or licensed by the state, and
(3) can only consist of approved games–most typically bingo, raffles of various kinds, “casino night” events using play or fake money or nonredeemable chips, or “armchair races” where you bet on the outcome of previously-staged horse races.
A majority of states (46 of 50) allow it, but only if you comply with the state rules and regulations. If you do not, it would be illegal.
This is gambling offered by someone–a casino, a racetrack, an online gambling site, an Indian tribe, a sportsbook–where the provider’s or operator’s goal is to make money, and where either there is some entrance or participation fee and/or the odds favor the “house.”
For-profit gambling is very highly regulated–much more so than even charitable or social gambling–because it is bereft of some altruistic (charitable) purpose or is not a game played between friends and family principally for entertainment (such as, playing “Monopoly” with real money (social gambling)). It is the type of gambling that the moralizers and anti-gambling crusaders find nothing redeeming about except for the fact that the licensing fees and taxes throw off income for the state. It’s also the type of gambling historically associated with organized crime. And even today, with lots of cash being thrown around, it poses risks of money laundering. For all these reasons, the state tightly regulates as to who can offer it, where they can offer it, what kinds of games can be offered, and the rules of those games.
Who can offer it: No state offers unrestricted for-profit gambling. Anyone offering it must be licensed by the state. Licensing generally means passing a battery of criteria meant to ensure that the operator has no connections to organized crime, is financially secure, has good systems in place, is well resourced, and in all other ways is someone the state trusts with bettors’ money.
Furthermore, most states limit the number of licensees (NV is the only one which does not), so even the best-qualified potential operators cannot get a license if there are no licenses available.
If you gamble with an unlicensed operator, including an unlicensed online gambling website or unlicensed bookmaker, it is illegal gambling.
Location: Most states (NV is the exception) limit where gambling can be offered. This is typically due to a concern over the potential negative “social” effects of gambling, which can also be called the “NIMBY,” or “Not in My Back Yard,” effect. Everyone wants the state to have the revenue from legalized gambling, but few people want a casino in their neighborhood, near their schools. Some states offer a handful of licenses in strategic locations, meant to maximize gambling coverage while minimizing exposure to gambling; New Jersey allows it only in one place (Atlantic City); some western states, in an ode to the old riverboat gambling, require casinos to be on real or faux ships located on or adjacent to a river; and tribal (Indian) gambling must be on tribal land (reservation land).
Gambling other than in an approved location is illegal
Types of gambling: Not all types of gambling are typically allowed. For example, most states have lotteries, but not all. Many states allow casino games at commercial (non-Indian) or tribal (Indian) casinos, but a significant fraction do not. Around half the states allow bets at racetracks. As of November 2018, only eight states allow sports betting (though this is expected to increase) and four states allow online gambling (also expected to increase).
The specificity of allowed gambling goes to a finer level than defining broad categories of permitted gambling. Within each category, states will define what games or bets are allowed. For example, not all types of sports bets are allowed–if you’re curious, compare the sports bets you can legally make in New Jersey with the huge variety of bets offered by Ladbrokes in the UK. Or take casino games: there are hundreds of different card, dice, and wheel (e.g., roulette) games out there, but every state lists the specific games and their approved variations which casinos may offer–any game not on the list is not allowed.
Any type of gambling not authorized by a state is illegal
Rules of the game: States don’t just tell you what kinds of games you can play–they specify how they are played. Operators (e.g., casinos) have to play by their state’s official rules, offering the permitted odds, using equipment and supplies from approved vendors, etc. (You can see the effect of a state’s rules about odds very clearly in terms of slot machines, where the state will specify approved payout percentages).
Offering games or using non-approved equipment which do not comply with the state’s rules is illegal. For example, you can’t just get (or make) any old slot machine: a slot machine which was not tested and approved by the state is illegal, even if slot machines are otherwise legal in your state. If you use 8 decks of cards in the dealer’s “shoe” in blackjack in Las Vegas, you are breaking the law–the same way you would be if you used 4 decks in Atlantic City. (Las Vegas uses 4-deck shoes; AC uses 8-deck.) The rules are very particular.
Legal consequences for unsanctioned gambling
Punishment ranges from jail time to fines, depending on how the state looks at illegal gambling operations. In Texas, for example, illegal gambling is a misdemeanor, subjecting you to up to around $1,000 in fines and potentially months (but not more than a year) in jail. Operators–the persons who provide or organize the illegal gambling–can face tens of thousands of dollars of fines in many states, and/or confiscation of all winnings and gambling equipment or supplies.
If you are playing poker with your buddies in your apartment or home in a strictly social context, prosecuting home poker games (where players have a genuine social connection) isn’t of interest to the policing authorities. However, if you decide to turn your poker game into a home-based online business, you will definitely be violating the law unless you manage to get licensed to do so (and your state allows online poker in the first place). Unless you comply with your state laws, you are on the hook for whatever type of penalty your state imposes for your situation.
Collecting on a gambling debt is also problematic. Unlike participants in legalized forms of gambling, persons who wager on online casinos or with telephone sports books have no recourse with any state agency or the courts should they not get paid or have any other complaint. The law does not enforce or help you collect illegal debts.