Online gambling platforms operating without a license or in ambiguous regulatory zones pose a growing challenge for U.S. states. During the Winter Meeting of the National Council of Legislators from Gaming States in San Juan, Puerto Rico, experts analyzed the available tools to protect tax revenues and consumers this Friday.
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The problem is considerable in scope. According to an August study by the American Gaming Association, unregulated online gambling companies generated $18.6 billion in revenue last year, a 38% increase from 2022.
Outdated Laws in Some States vs. Current Technology
Jay Atkins, director of government affairs at FanDuel and former deputy attorney general of Missouri, points out that state gambling laws need urgent updating. Many current regulations were designed for scenarios where someone was “rolling dice in an alley” and could be physically arrested.
“The law has not kept up with the technology and the modus operandi of modern illicit gambling establishments,” Atkins explained. He proposes that attorneys general use original concurrent jurisdiction, where state and federal courts pursue the same case simultaneously for greater impact.
Follow the Money in the States
Jonathan Blanton, first assistant attorney general of Ohio, describes the difficulty of curbing “conduct that seeks to evade the law.” Illegal operators simply reappear under different names when facing civil proceedings.
His solution: track and confiscate the money. “Until we start eradicating the ways they move money and access our markets, we won’t get to the root of the problem,” he stated. Blanton emphasizes the importance of establishing adequate regulations, effective geolocation, and identifying the operators’ real locations.
The official highlights the futility of sending legal letters to operators in the Philippines or other countries. The key lies in having the ability to seize money, shut down trade mechanisms, and block market access.
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The Need for Federal Cooperation
States have limited resources that rarely extend beyond their borders. Former federal prosecutor Greg Brower emphasizes the importance of leveraging the power of the federal Department of Justice, which can coordinate enforcement activities nationwide.
“A lot of the activity we’re talking about is interstate, so there’s a jurisdictional hook for the FBI and the feds,” Brower explained. He recommends that legislators foster collaboration between state prosecutors and the federal government.
The challenge increases when operators are abroad. Although several states managed to expel Bovada, based in Curaçao, prosecuting international operators is extremely difficult. In August, 50 state attorneys general asked the Department of Justice to take a broader role against foreign sites.
Attorney General Opinions as a Tool
Lawyer Daniel Wallach proposes using attorney general opinions, a “gravely underutilized” power. Although they are not law, they carry significant weight. The example of Louisiana is illustrative: following a formal opinion from Attorney General Liz Murrill, all sweepstakes casino operators left the state within weeks, a process that would have taken months through legislation.
Targeting the Supply Chain
For national sites operating outside the law, such as sweepstakes casinos that present themselves as free promotions, Wallach suggests attacking the “supply chain”: geolocation services, banks, and payment processors.
Several state laws already include provisions holding these secondary actors accountable, particularly in the “dual currency” system of sweepstakes casinos. “Every potential vendor is now subject to criminal prosecution in those states for their involvement in illegal products,” Wallach concluded.
