Gambling has deep roots in America. Native American tribes played games such as the bowl games “Hubbub” and “Monshimout”, which can be seen as forerunners of today’s lottery. Since then, gambling has gone from being strictly forbidden to being legal, in at least some forms, in most states.
The current framework is complex because gambling is regulated at two levels: each state must follow federal law as well as its own gambling laws. Three federal acts matter most:
- Interstate Wire Act: passed by Congress in 1961 to ban betting via wire communication facilities. It was only in 2011 that a Department of Justice decision clarified that the Act refers to sports bets, not online casino gaming.
- Professional and Amateur Sports Protection Act (PASPA): also called the Bradley Act after the senator who championed it, it stopped every form of sports betting, whatever the method. Only Nevada, Delaware, Oregon and Montana remained outside its reach. In 2018 the US Supreme Court declared PASPA unconstitutional, leaving each state to decide whether to legalize sports betting.
- Unlawful Internet Gambling Enforcement Act (UIGEA): aimed to stop banks from knowingly accepting transactions linked to internet gambling. It did not end online gambling, but it held it back severely.
States such as Pennsylvania, New Jersey, Nevada, Michigan and West Virginia have legalized online casinos and/or sportsbooks, and some, including New Jersey and Pennsylvania, have regulated online poker rooms as well.
Leading States and Their Regulators
New Jersey, Pennsylvania and Michigan have led the way on internet gambling.
New Jersey
New Jersey legalized online casinos and poker rooms through Assembly Bill 2578, and online sportsbooks in 2018. Every company that wants to run an internet gambling business needs a land-based partner casino authorized by the Division of Gaming Enforcement (DGE), the state’s main regulator.
Pennsylvania
The Pennsylvania Gaming Control Board oversees online casinos, sportsbooks and poker rooms, which were legalized under the bill known as HB 271. Each of these licenses is applied for separately, and online casinos and sportsbooks also need a land-based casino partner before they can launch.
Michigan
The Michigan Gaming Control Board issues licenses to land-based and internet casinos and sportsbooks.
Why a State License Matters
- Legal certainty: a state license is the only guarantee that you will not be prosecuted, and the only way into an online gambling market worth more than $50 billion, in which only registered operators can take a share.
- Tax rates: licensed casino and sportsbook operators pay between 8% and over 50%, depending on the state. Given the traffic and profit potential, these rates need not stand in the way of a successful business.
- Player trust: on regulated sites the fairness of games and the safety of players’ funds and data are guaranteed, so players have no reason to turn to illegal operators.
Licensing Requirements
Requirements differ from state to state. New Jersey, Michigan and Pennsylvania, for example, require online operators to sign a commercial agreement with a land-based casino before launching. Regulators then examine financial controls, test the games and run background checks on managers, owners and everyone connected with the operation.
Every applicant completes the regulator’s application form and submits it for review. If all goes well, the applicant then pays the relevant license fee.
License Costs and Taxes by State
Costs and taxes vary by state and by license type. The table compares online tax rates; the costs for each state follow.
| State | Regulator | Online tax rates |
|---|---|---|
| New Jersey | Division of Gaming Enforcement | 15% of total revenue for internet casino games; 8.5% annual tax on sports wagering |
| Pennsylvania | Pennsylvania Gaming Control Board | 54% on slots; 16% on table games and poker; 36% on sportsbooks |
| Michigan | Michigan Gaming Control Board | 20–28% of adjusted gross receipts on online gaming |
New Jersey costs
- Initial deposit for an online casino or sportsbook: $100,000
- First yearly license: an additional $300,000
- Renewal permit: $150,000
- Responsible Internet Gaming fee: $250,000 a year for all online gambling operations
- Sports wagering license: $100,000 initially, $100,000 on renewal
- Tax: 15% of total revenue for internet casino games; an annual 8.5% tax on sports wagering
Pennsylvania costs
- Interactive gaming certificate: $4M–12M for an initial term of five years
- Renewal: $250,000 for a further five years
- Sports wagering certificate: $10 million, with renewal at the same cost as for online casino
- Tax: 54% of online slot revenue; 16% for online table games and online poker; 36% for online sportsbooks
Michigan costs
- Application fee for internet casino and sportsbook licenses: $50,000
- Initial license fee: $100,000
- Renewal: $50,000, yearly for online casino licenses, with a five-year renewal for sportsbooks
- Tax: 20–28% of adjusted gross receipts (AGR)
Application Procedure
The procedure is broadly similar across states: complete the application form and submit it to the authorized regulator. You will need detailed documentation on every part of the business, including the registration certificate, ownership charts, financial reports, a description of games and bonuses, criminal records and tax returns. Some jurisdictions, such as Pennsylvania, also ask for fingerprints.
A detailed background check follows, and if everything is in order, the license is issued.
Renewal
Depending on the state, licenses are renewed every year or every five years. New Jersey, for instance, issues a new license each year, while Michigan issues five-year licenses. Renewal fees range from $50,000 to $250,000.
How We Help With US Licensing
We help operators prepare and file state applications and set up compliant operations:
- State selection: comparing license costs, tax rates and land-based partner requirements across the states you are targeting.
- Documentation: organizing the registration certificate, ownership charts, financial reports, game and bonus descriptions and the other records regulators request.
- Compliance setup: configuring the AML, KYC and responsible gambling tools in our casino platform ahead of regulator testing.
For details on a specific state, contact us or email sales@igamingsoftwaresolutions.com.
