As the landscape of internet gambling in the United States continues to evolve, lawmakers from states where online gambling is already legal have put forth a structured framework to guide new states considering legalization. 

Their proposal includes a recommended tax rate between 15% and 25% and provisions designed to ensure responsible gambling practices and consumer protection. 

Additionally, the framework suggests banning credit card deposits to curb irresponsible spending and gambling-related financial distress.

The National Council of Legislators from Gaming States (NCLGS) recently introduced model legislation to serve as a reference for states contemplating internet gambling. This initiative offers a solid foundation for states struggling with drafting comprehensive regulations. 

The proposal is set to be discussed at the organization’s upcoming winter meeting in New Orleans, where legislators and industry experts will examine its potential impact and feasibility.

The Need for a Standardized Approach

Currently, seven U.S. states have fully legalized online casino gaming: 

• Connecticut, 
• Delaware, 
• Michigan, 
• New Jersey, 
• Pennsylvania, 
• Rhode Island, and 
• West Virginia. 

Nevada, historically known for its robust gambling industry, has taken a more cautious approach by legalizing only online poker. 

Other states, including Ohio, Louisiana, and Maryland, have debated similar measures but have yet to pass legislation. 

The absence of a standardized approach has led to inconsistencies in regulatory frameworks, tax rates, and consumer protections across different states.

According to Shaun Fluharty, a Democratic state delegate from West Virginia and president of NCLGS, the proposed guidelines aim to simplify the legislative process for states looking to enter the online gambling market. 

“Many states have been discussing the potential for online gambling, but they’ve encountered roadblocks in getting laws passed. Our goal is to provide them with a tested and effective framework,” Fluharty stated.

Learning from Established Markets

The proposed legislation draws heavily from the regulatory successes of states like New Jersey, which has been at the forefront of legal online gambling since 2013. David Rebuck, former director of New Jersey’s Division of Gaming Enforcement, played a key advisory role in shaping the model legislation.

“Ninety-five percent of this proposal mirrors what we’re already doing in New Jersey,” Rebuck noted. “It’s a solid starting point that builds on existing best practices.”

According to Jackpot Sounds, the proposed legislation seeks to protect consumers by implementing robust oversight mechanisms while preventing unethical operators from entering the market. 

It also recommends that states establish a dedicated regulatory agency if they do not already have one to oversee internet gambling activities.

Taxation Strategy: Balancing Revenue with Market Accessibility

A key component of the proposal is the suggested tax rate, which falls from 15% to 25%. 

This range is strategically chosen to ensure that taxation is competitive enough to attract reputable gambling operators while still generating substantial revenue for state governments.

Fluharty emphasized that while some states impose significantly higher tax rates, such as Pennsylvania’s 54% rate on online slot games, the proposal aims to prevent excessive taxation that could deter operators from entering the market.

“The national average for online gambling tax rates is around 19%, with West Virginia setting its rate at 15%,” Fluharty explained. “We didn’t want to create a financial barrier that only large corporations could overcome. The goal is to establish a fair and sustainable tax structure.”

Limitations on Deposits and Credit Card Use

To encourage responsible gambling, the model legislation proposes a maximum deposit limit of $20,000 within 24 hours. This measure is designed to mitigate the risks of problem gambling and financial loss.

Additionally, the proposal recommends a complete ban on credit card deposits for online gambling accounts. 

This move aligns with similar restrictions seen in other regulated gambling markets worldwide, including the United Kingdom, where credit card gambling was prohibited in 2020 to reduce the risk of debt accumulation and gambling addiction.

The Economic Potential of Online Gambling

One of the main arguments in favor of legalizing online gambling is the potential revenue boost for state budgets.

In New Jersey, a state with relatively moderate tax rates, online sports betting and casino gaming generated over $414 million in tax revenue last year. With just 10 months into the current fiscal year, the state has already nearly matched that figure.

Rebuck predicts that as budgetary pressures increase, more states will seriously consider legalizing online gambling. “Several states are facing fiscal challenges, and the potential revenue from legalized online gambling is substantial,” he said.

The Broader Legislative Landscape

Despite growing interest in online gambling, efforts to pass nationwide regulations have largely stalled. 

Historically, gambling laws in the United States have been regulated at the state level, and attempts to implement federal gambling laws have been unsuccessful. 

Lawmakers have generally preferred a state-centric approach, allowing each state to tailor its regulations based on its unique economic and social considerations.

New York is an example of a state that has struggled to pass comprehensive online gambling legislation. While state legislators have proposed a 31.5% tax rate on internet casino gaming, they have yet to gain sufficient support to pass a bill. However, New York did approve online sports betting, which has since become one of the nation’s largest markets.

Similarly, Maryland came close to legalizing internet gambling, with legislation passing in the House but stalling in the Senate. 

As more states weigh their options, the adoption of model legislation like the one proposed by NCLGS could streamline the legislative process and facilitate broader legalization efforts.

Looking Ahead: The Future of Internet Gambling in the U.S.

With the upcoming NCLGS winter meeting in New Orleans, discussions surrounding the proposed legislation will play a pivotal role in shaping the future of online gambling in the U.S. 

If states choose to adopt this framework, it could lead to greater uniformity in gambling regulations, benefiting both operators and consumers.

As more states explore legalization, the conversation will likely focus on balancing revenue generation with consumer protection. 

The debate over tax rates, deposit limits, and credit card restrictions will continue to evolve, with lawmakers striving to create policies that foster responsible gambling while maximizing economic benefits.

With internet gambling gaining traction as a significant source of state revenue, the question is no longer whether more states will legalize it, but rather how they will choose to regulate and tax it. The NCLGS proposal represents an essential step toward answering that question, providing a roadmap for future legislative efforts.

Responsible Gambling Measures: Deposit and Credit Card Restrictions

The proposal includes measures to curb problem gambling, such as:

• A maximum deposit limit of $20,000 within 24 hours.
• A ban on credit card deposits for online gambling accounts.

These measures align with international trends, such as the United Kingdom’s ban on credit card gambling in 2020, aimed at reducing debt-related gambling addiction.

Critics argue that such restrictions could push high rollers toward offshore or unregulated gambling sites. However, proponents believe these rules will help mitigate gambling-related harm and encourage responsible gaming practices.

Economic Potential of Online Gambling

Online gambling has proven to be a major revenue driver for states that have legalized it. In New Jersey, online sports betting and casino gaming generated over $414 million in tax revenue last year. With growing budget deficits, many states are likely to view online gambling as a potential revenue source.

David Rebuck predicts that fiscal pressures will push more states to legalize online gambling. Given the economic benefits seen in New Jersey, Pennsylvania, and Michigan, other states may follow suit.

Challenges to Nationwide Legislation

While online gambling is expanding, federal regulation remains unlikely. U.S. gambling laws have historically been managed at the state level, and previous attempts to introduce federal legislation have failed.

New York serves as an example of a state struggling to pass comprehensive online gambling laws. The state has yet to pass legislation despite proposing a 31.5% tax rate on internet casino gaming. Maryland has also faced challenges, with online gambling bills stalling in the state Senate.

Adopting a standardized framework could streamline state-level legalization, but nationwide regulation remains improbable due to political and economic considerations.

Future Trends in Internet Gambling

Several key trends will shape the future of online gambling in the U.S.:

1. More States Legalizing Online Gambling

As more states experience budget shortfalls, they will likely turn to online gambling for additional revenue. The adoption of model legislation could accelerate this trend by simplifying the regulatory process.

2. Expansion of Responsible Gambling Measures

Expect stricter deposit limits, mandatory self-exclusion programs, and increased funding for gambling addiction prevention. Operators will likely face greater scrutiny to ensure compliance with responsible gambling policies.

3. Increased Use of Alternative Payment Methods

With credit card bans being considered, alternative payment methods such as e-wallets and cryptocurrencies could gain traction in regulated markets. Some jurisdictions may introduce their own digital payment solutions for gambling transactions.

4. Interstate Gambling Agreements

Currently, online poker operates under multi-state agreements, allowing shared player pools between states. Similar agreements for online casino gaming could emerge, increasing market liquidity and competition.

5. Greater Focus on Consumer Protection and Fair Play

Regulators may introduce stricter rules to prevent fraudulent operators from entering the market. Measures such as enhanced identity verification, anti-money laundering protocols, and responsible gaming audits will likely become more prevalent.

Impact on Online Sports Betting

The proposed framework for internet gambling could influence the sports betting industry by introducing a more standardized regulatory approach. 

Currently, each state sets its own sports betting tax rates and regulations, leading to inconsistencies across jurisdictions. 

If states adopt similar guidelines for online casinos and sportsbooks, it could create a more predictable and stable regulatory environment for operators.

Taxation Implications

With the proposed tax structure of 15% to 25% for internet gambling, states may reconsider their existing sports betting tax rates. 

Some states, like New York, impose a high 51% tax on mobile sports betting revenue, while others have significantly lower rates. 

The framework’s suggested tax range might encourage states to adjust sports betting taxes to attract more operators and remain competitive.

Responsible Gambling Measures and Player Protection

The credit card deposit ban and deposit limits proposed for online casinos could set a precedent for sports betting regulations. Similar rules might be applied to sports betting if lawmakers perceive these restrictions as effective in reducing problem gambling. 

This could impact high-stakes bettors and alter consumer behavior in online sports wagering.

Potential for Interstate Agreements

Just as the proposal encourages dedicated regulatory agencies and oversight for online gambling, it could also facilitate multi-state agreements for sports betting. 

Several states currently allow shared poker liquidity, and a similar model could be developed for sports betting markets, increasing liquidity and engagement across multiple jurisdictions.

Increased Industry Growth and Market Expansion

A more unified approach to online gambling could give operators greater confidence in entering new markets. 

Sportsbooks operating in select states may be more inclined to expand if they see a consistent regulatory framework emerging nationwide. This could lead to increased competition, better promotions for bettors, and enhanced user experiences.

Conclusion

The proposed framework by the NCLGS represents a significant step toward creating a more uniform and regulated online gambling market in the U.S. 

By addressing tax rates, responsible gambling, and consumer protection, the model legislation provides a roadmap for states considering legalization.

While federal regulation remains unlikely, the push for standardization will likely lead to more states adopting online gambling. 

Future trends suggest a focus on responsible gaming, evolving payment methods, and potential interstate agreements. As internet gambling becomes a critical revenue source, states will need to balance economic benefits with consumer protection to ensure sustainable growth in the industry.