Is it legal to run a gambling website, or advertise for it?by Michael Bluejay, Last Updated: June 2018
I'm not a lawyer. Do not rely on this article as legal advice. I also can't guarantee to have heard of every relevant case.
NOTE: This article has nothing to do with whether
it's legal for players to gamble online.
For that, see my separate article, Is online gambling legal?
Rather than just considering the
law, it's more useful to look at the potential
risk of each activity. That
is, which activities are more likely to result in a fine or maybe
even jail time? Below is my take on how things stack up, from
most risky to least risky. But first, some
- I'll generally consider only federal law, not individual state laws.
- The law and the enforcement are constantly changing, and what's true today could be different tomorrow.
- I don't guarantee to have heard of every relevant case.
- I'm a layperson, not a lawyer, and god help you if you rely on this article instead of seeking appropriate legal counsel for your situation.
With that in mind, here's my analysis of
||Taking sports bets on a server located in the U.S.||Taking
sports bets on a U.S. server is the most clearly illegal
activity, and as a result, probably no one has ever risked
|Taking sports bets over U.S. phone lines.||BetOnSports (2006, prison); Bodog (2012, pending)|
| Taking sports bets on a foreign server.
||• Bodog (2012)
• Sportingbet (2006)
• World Sports Exchange (2000; prison)
(details on above cases)
| Facilitating the transfer of funds to
online casinos (payment processors), and then visiting the
||• Processors serving
FullTilt, PokerStars, Absolute Poker, & UltimateBet
• eWalletXpress (2010)
• Douglas Rennick of Canada (2010)
• Ahmad Khawaja and Allied Wallet (2009)
• Neteller (2007)
(details on above cases)
|Accepting advertising for Internet gambling, in the major media||• Google, Yahoo, Microsoft,
The Sporting News (2003)
• Esquire (2005) (more on these cases)
||Helping people make bets on a website||InternationalNetCasino (2004) (action
by the State of New Jersey, not the feds; more)
|3||Accepting advertising for Internet gambling, smaller media||IntegrityCasinoGuide.com (2006) (state of WA shut it down, not the feds; more)|
||Taking casino/poker bets on a foreign server||In December 2011, after they prosecuted the
cases below, the feds finally agreed that poker bets aren't
covered by the Wire Act, though future prosecution by an
overzealous prosecutor or administration isn't out of the
• FullTilt Poker, PokerStars, Absolute Poker (2011)
• Party Gaming (2008)
|Buying advertising in a U.S. publication as a casino, poker room, or affiliate||No legal troubles that we know of for this activity, but that's partially due to the fact that almost nobody is tempting fate by buying online gambling ads in a U.S. print publication.|
||Placing bets yourself on the Internet||No trouble with the feds that we know of. A
handful of states have anti-online-gambling raws,
but even there prosecution is rare. (See Is
online gambling legal?.)
Taking bets on a server located in the U.S. (Risk Level: 5)
Taking bets (i.e., operating a casino, sportsbook, or racebook) on a website whose servers are located in the U.S. is assumed to be illegal, and nobody does this in the U.S. for that reason. All Internet gaming websites are located in other countries where it's legal for them to operate. (The U.S. government maintains that it's not legal for them to serve U.S. players, but some do anyway.)
Taking sporting bets over the phone lines is clearly illegal thanks to the Wire Act.
BetOnSports took bets over the phone, and were blatant about it, buying big billboards in the U.S. advertising their phone number. They were also really big potatoes, taking in $4.6 billion wagers from 2001 to 2005. In July 2006, their then-CEO, David Carruthers, was arrested while changing planes in Texas on the way to Costa Rica from the U.K. In April 2009 he pleaded guilty to federal racketeering charges, and in January 2010 was sentenced to 33 months in prison. The company's founder, Gary Kaplan, was arrested in the Puerto Rico in March 2007 and in November 2009 was sentenced to four years in prison and ordered to forfeit $44 million in revenue. (He was reportedly released in Oct. 2011, according to Gambling911.) Kaplan's brother and sister pleaded guilty in June 2009 to two felony conspiracy charges and agreed to turn over more than $6 million held in Swiss bank accounts. They were also sentenced to 10 months of house arrest. In December 2009, the company itself was fined $28.2 million. (GPWA, USA Today, The Register)
Most observers agree that the Wire Act applies to online sports betting, not just telephone bets. The feds sure think so.
Bodog (2012). In February 2012, the feds indicted
Calvin Ayre, founder of Bodog, along with three other Canadians,
James Philip, David Ferguson and Derrick Maloney. Ayre et al
were charged with running an online sports gambling business, and
money laundering. The former carries a possible sentence of
five years. The feds also seized the Bodog.com domain, which didn't
matter much, since Bodog had been smart enough to move its business
to other domains (like Bodog.eu) months before the feds'
2012) Update 2017: Ayre plead guilty to a
mere misdemeanor and the feds dropped the felony charges, and gave
the Bodog.com domain back. Ayre never spent a night in jail.
Small operators (2011). In May 2011, the feds issued indictments against some small companies taking sports bets online. It also seized their domain names. (Casino City)
Sportingbet (2006). While federal law is murky, some new state laws are not. In September 2006, the chairman of London-based Sportingbet was arrested in New York by the request of Louisana authorities for violating Louisiana's ban on Internet gambling. One wonders why Peter Dicks thought it would be a good idea for a chairman of a UK-based Internet gambling operation to visit the U.S. right after the CEO of another UK-based Internet gambling operation just got arrested after visiting the U.S. (David Carruthers of BetOnSports, above). Perhaps he thought he'd be safe because unlike BetOnSports, Sportingbet wasn't pushing the envelope on phone-based bets. He also probably had no idea that an individual U.S. state would consider his company to be breaking the law and would have him arrested over it. (iGamingNews)
World Sports Exchange (2000). American Jay Cohen located his sportsbook offshore in Antigua, but when he returned to the U.S. but when he returned to the U.S. he was arrested, and in 2000 he was convicted, fined $5000, and sentenced to 21 months in prison, of which he served 17. (NY Times, Gambling 911) In January 2016, his business partner, Haden Ware, returned to the U.S. from Antigua to surrender (he'd been a fugitive since 2002), pleaded guilty, and was sentenced to only six months probation. (AP, SBR)
Facilitating the transfer of funds to online gambling operators (payment processing) whether in the U.S. or not. (Risk Level: 5)
Gamblers used to get money in and out of casinos with a
service called Neteller, which is kind of like PayPal.
But in January 2007 the founders of Neteller were arrested in the
U.S. and charged with money laundering. (Creator.com)
A few days later Neteller stopped serving U.S. customers. (iGamingNews,
) Neteller eventually
paid a big fine and agreed to stop serving U.S. customers.
(These days, players are mostly using Bitcoin to make deposits and
withdrawals at online casinos.)
Some processors handle only payments to players from the casinos (sending checks to the players), not helping players get money into the casino. These haven't been safe either, as detailed below.
At least in some of these cases, it seems that handling the payments wasn't illegal, it was lying about it. When you lie to your bank about what you're using your account for, that's bank fraud. On the other hand, if you're up front that you're moving online gambling money, the bank won't give you an account. So, payment processors lied about their intent, and that's often what they got busted for.
- In January 2011 the feds seized nearly $8
million from processors serving PokerStars, Full Tilt Poker,
Ultimate Bet and Absolute Poker. (Forbes)
One processor, Ira Rubin, was sentenced to three years. (ESPN)
Another, Bradley Franzen pleaded guilty in May 2011, (Forbes)
though as of Nov. 2015, I can't find any report of whether
he was actually sentenced. Absolute Poker co-founder Brent
Buckley was sentenced to 14 months for defrauding banks. (iGamingBusiness)
The whole case is explained in detail on Wikipedia.
- Douglas Rennick who ran a Canadian-based processor was arrested in 2010, forfeited $17 million, but didn't get any jail time. (Bloomberg, Online-Casinos, Best Poker Sites)
- In November 2010 feds seized money in accounts belonging to payment processor eWalletXpress. The company was forced out of the U.S. market. (Casino City)
- Daniel Tzvetkoff (founder) and Andrew Thornhill of the payment processor Intabill were charged with conspiracy, money laundering, and bank fraud in 2010. Thornhill pleaded guilty in June and in October was sentenced to three months in prison and fined $25,000. (Pepper Hamilton LLP)
- The Feds seized $13 million from Ahmad Khawaja and Allied Wallet in 2009. (Forbes)
- Some smaller actions in 2008-2011 are listed at Pepper Hamilton.
Publishing advertisements for online gambling isn't specifically
illegal, and it would be quite a stretch to make a case under
a different statute (like racketeering or conspiracy). Small
publishers (like me) have never faced fed action running ads for
online gambling. The only publishers to face penalties were
some huge publishers (Google, Yahoo, and Microsoft, in 2007), and a
mid-size publisher in 2006 (The Sporting News). I wish they
had contested the charges, since legal observers say they weren't
breaking any law, but each simply paid a fine to end the matter
quickly. None ever faced any criminal charges. The Sporting
News' fine was equal to the money they'd collected from gambling
ads. Google's penalty was less than half a single day's profit for
Other publishers who took ads (like Esquire, who ran Bodog's poker
ads) were warned by the DoJ not to take them any more, stopped doing
so, and faced no penalties. Below are the details on the
Google, Yahoo, Microsoft, The Sporting News (2003-2007). In 2003 the U.S. Dept. of Justice sent a letter (PDF) to the National Association of Broadcasters and to Google, Yahoo, Microsoft, The Sporting News, warning them that accepting ads for online gambling could be illegal. So they all stopped accepting ads. In reality, it doesn't appear that taking ads for casino & poker is illegal at all, since online casino & poker themselves aren't illegal. Only the ads for online sportsbetting would have been clearly illegal. But all those warned stopped running the gambling ads anyway.
The Sporting News (TSN) took its time in stopping the ads (six months), which pissed off the government, which three years later fined them $7.2 million, in January 2006. The settlement represents TSN's profits on the ads for the three years it accepted them (2000-2003), and was paid with $4.2 million in cash, and $3 million in public service ads in its own publications explaining how online gambling is illegal. (more from the Corporate Crime Reporter)
In December 2007 the three big Internet giants paid a fine for accepting ads for online gaming. Google's fine was only about a third of a single day's profit. (Point-Spreads.com)
The three companies had actually ceased taking online gambling ads about four years before the settlement, when they got the warning, but the feds fined them anyway -- years later.
Esquire, 2005. In April 2005 the feds subpoenaed Esquire magazine for taking ads in its March issue for online poker operator Bodog.
The Dot-Net Workaround. Many online operators found a way around ad restrictions years ago: They advertise the .net version of their website, which is a play-for-free space. Of course, they're hoping that players will click from there over to the .com version and wager for real money, or that players will just type in .com out of habit. (NY Post)
The webmaster of the portal InternationalNetCasino.com was indicted
by New Jersey authorities in Nov. 2004 for facilitating
gambling. The affiliate apparently took money from would-be
players directly in order to help them place bets. It seems
that if he had simply advertised the gambling operations and not
gotten directly involved he probably would have been okay.
Even so, his sentence was light: the eight days he'd already served
in jail, $1330 in fines, and 90 days of community service. (iGamingNews)
It's only the major media players who have gotten heat from the government for accepting gambling ads, and the only penalty has been fines, not criminal charges. All of the minor media has been spared so far. Even Casino City, the largest website on the Internet which carries online gambling ads, hasn't received a cease and desist notice from the government.
Of course, just because publishers haven't faced heat yet
doesn't mean they never will. Publishers run the risk of
being charged wth three separate crimes.:
- Aiding & Abetting. In short, advertising something that's illegal, is also illegal. Since online casinos & poker aren't illegal there should be little problem, but advertising online sports wagering could be a problem, because sports betting violates the Wire Act. I don't run ads for online sports on Vegas Click.
- Being in the Business of Gambling. Most small publishers act as affiliates, getting a percentage of player losses when they refer players to an online gambling site. But the argument could be made that if you share in the gambling profits directly, then you're "in the business" of gambling, and could face the same charges that the gambling operator itself faces. Here again, the gambling operation itself would have to be illegal in order for a publisher to have this liability. Casino and poker aren't specifically illegal, though sports betting definitely is. One way around the "Being in the Business" risk is to sell your adspace for a flat monthly fee, rather than as an affiliate who gets a percentage of sales. That's what I do, and what the Wizard of Odds does, for that very reason. However, very small publishers will often have a hard time getting gambling sites to pay a monthly fee rather than on an affiliate basis. I don't know how CPA (cost-per-acquisition) fits into this, where you get paid for every new player you refer, regardless of how much they win or lose, though I suspect the risk would be somewhere between revenue-share affiliate and monthly-basis sales.
- Conspiracy. Conspiracy is two or more people
planning a crime. So basically, any time a crime is broken
and more than one party is involved, the feds can tack on a
conspiracy charge. As with the others, this requires that
some other law actually be broken first.
Casino City case. In August 2004 Casino City sued the DoJ to establish its right to accept ads for Internet gambling. A judge dismissed the case, saying Casino City didn't have standing because it hadn't received one of the cease & desist letters. Casino City filed an appeal, but before it could be heard, Casino City withdrew from the case in February 2006, apparently because they felt that they'd made their point: If the government ever tells Casino City that it can't accept gambling ads, Casino City will fight. (Lawrence Walters, Esq.)
State Law. Even if one doesn't run afoul of the feds, there's a chance that state government will come calling. In June 2006 the state of Washington advised the owner of the gambling portal IntegrityCasinoGuide.com that advertising online gambling violated Washington law. The site owner took the site down, and it appears that he faced no penalty. (Poker News)
The Future. Again, I don't know of any small publisher who's been hit for running ads, though I can't say that will never happen. My guess is that small publishers would get a warning letter first before any criminal indictments were made. Probably the biggest risk is that the government might seize the domain name, so that even if there were no criminal charges, the publisher might be deprived of their livelihood.
Taking casino/poker bets online (Risk Level: 2)
Offshore companies taking bets from Americans for poker and
casino games isn't against the law. In 2002 the U.S.
5th Circuit Court of Appeals ruled that the 1961 Wire Act applies
only to "sporting events and contests" and not gambling in general.
Law Direct) But that
didn't stop the feds from prosecuting offshore poker rooms anyway,
through 2011. Then in Dec. 2011, the feds finally agreed that
it's only sports bets that are illegal to accept online, not
casino/poker bets. That's got to be cold comfort to the poker
sites the feds busted earlier. But in any event, now that the
feds have supposedly come around, I'm downgrading the risk of taking
casino/poker bets online. I'm not taking it all the way down
to 1 because I think it remains to be seen what an overzealous
prosecutor or administration might do..
Doyles Room (2011, poker). Feds seized the domain DoylesRoom.com. (CasinoCity)
PokerStars, Absolute Poker (2011, poker). Feds seized
the domain names of these three online poker sites on April 15,
2011, and charged 11 individuals with bank fraud, illegal gambling
and laundering billions of dollars. (PokerListings)
this wasn't just about online gamblingFullTilt is alleged to have
not kept players' money in segregated accounts like they were
supposed to, and in fact its operators embezzled millions of dollars
in player funds, and thus was unable to repay players in full when
the government shut them down. Of course, this is why people
such as myself are saying that online gambling should be legalized
and regulated to protect the players.
Another controversial aspect of this
case is that the feds seized the .com domain names of the poker
rooms in question, which they clearly had no right to do, since they
didn't have that kind of jurisdiction -- nobody does, since domain
names are international. As attorney Nelson Rose said, "The
next to step through could be an Islamic country, which outlaws
alcohol, seizing the worldwide domain names of every retailer and
restaurant that advertises beer or wine." (Casino
Note that the feds didn't seize the domains at the registrar level, they went straight to the .com registry, which happens to be located in the U.S. So companies who think they can shield themselves by registering their dot-coms with foreign registrars are quite mistaken.
In July 2012, Full Tilt CEO Ray
Bitar was arrested for the April 2011 indictment. (GPWA)
faces the potential of life in prison. The same month, Brent
Beckley, an owner of Absolute Poker, got a 14-month sentence for
deceiving banks about the nature of his company's transactions. (Reuters)
(Note the technicality they got him on: Not charged with
running an online gambling site, but rather charged with misleading
banks about the transactions. It's the moving the money
through the banks that's illegal.)
Party Gaming (2008, poker). In December 2008 Party Gaming co-founder Anurang Dikshit pleaded guilty to violating the 1961 Wire Act with his poker site (even though the Wire Act doesn't apply to poker) forfeited $300 million, and was sentenced to one year of probation -- avoiding jail time. It's a sad world when you're forced to plead guilty to breaking a law that doesn't exist. (Forbes) In April 2009, Party Gaming itself agreed to $105 million to avoid prosecution. (GPWA)
Buying advertising as a casino, poker room, or affiliate (Risk Level: 2)
The only buyers of advertising who have been targeted have been offshore sportsbooks. Casino and poker operators haven't faced any action. While the DoJ waved a finger at Esquire for taking Bodog's poker ads, their attention was directed at Esquire, not the operator, Bodog. Affiliates and portals have never received attention from the government, so far as I know.
Making bets on the internet (as a player) (Risk Level: 1)
For players, see my article: Is online gambling legal? But in summary:
- There's no federal law against online gambling.
- Some states outlaw online gambling, either through a general anti-gambling statute, or a specific anti-online-gambling statute.
- Even in the states where online gambling is outlawed, prosecutions are rare, and penalties are usually light.
- In almost all states, breaking gambling laws as a player is a simple misdemeanor. In only two places is it a felony (Washington DC and Washington state), and in a few places it's a mere infraction, like a parking ticket.