WOYALE.
Federal law does not say whether you personally may place a sports bet. Congress has passed laws aimed at the businesses that take bets and move the money, and it once tried to ban state-licensed sports betting, which the Supreme Court undid in 2018. What is left is a patchwork where each state decides what is legal inside its borders.
This is general information, not legal advice. For a specific situation, ask a lawyer licensed in your state.
The Wire Act (1961)
The Wire Act, 18 U.S.C. 1084, makes it a federal crime for someone “engaged in the business of betting or wagering” to knowingly use a wire communication facility to send bets or wagering information across state or national lines. The maximum penalty is two years in prison. The text reaches operators, bookmakers and their agents. It does not mention ordinary bettors.
The long-running dispute is about what it covers. The statute’s first clause mentions “sporting event or contest”, and later clauses read more broadly. Two readings competed:
- Sports only: the Justice Department’s Office of Legal Counsel (OLC) took this view in a 2011 opinion, which cleared the way for state lotteries to sell tickets online.
- All gambling: in November 2018 OLC reversed itself, and in January 2019 the Justice Department announced the broader reading, which would have hit online poker and casino play across state lines.
New Hampshire’s lottery commission sued. A federal district court ruled for the state in 2019. On January 20, 2021 the First Circuit agreed that the Wire Act is limited to wagering on sporting events or contests (New Hampshire Lottery Commission v. Rosen, 986 F.3d 38). For sports betting this changes little, since sports wagering sits inside the Wire Act under every reading.
So the Wire Act is a risk mainly for operators that take interstate sports bets without a federal or state basis. It is not the law that decides whether you can place a bet from your phone.
UIGEA (2006)
The Unlawful Internet Gambling Enforcement Act, 31 U.S.C. 5361-5367, passed in October 2006. It does not make internet gambling illegal on its own. It bans people “in the business of betting or wagering” from knowingly accepting payments in connection with a bet that is already unlawful under federal or state law where it is placed or received.
The practical effect landed on the money side:
- Banks, card networks and payment processors have to keep policies to spot and block restricted transactions, under joint Treasury and Federal Reserve rules.
- Unlicensed sites found US banking harder to use, which is one reason crypto funding became common on them.
- The statute targets payment acceptance by gambling businesses. It does not make a bettor a criminal for sending a payment.
UIGEA also includes exceptions, including one for intrastate transactions that a state’s law and regulatory system permit. This is part of why licensed state sportsbooks can operate.
UIGEA relies on another law to define what is “unlawful”, and that law is usually a state’s. See Are offshore sportsbooks legal?.
PASPA and Murphy v. NCAA (2018)
The Professional and Amateur Sports Protection Act of 1992 barred states from authorizing sports betting, with exceptions for Nevada, Delaware, Montana and Oregon. New Jersey challenged it. On May 14, 2018 the Supreme Court ruled in Murphy v. NCAA that PASPA violated the Constitution’s anticommandeering rule, because Congress cannot order states to keep a law on the books. The whole statute fell.
After that, each state could decide for itself. Many legalized in-person betting, online betting, or both. Others did nothing. That is why your state’s page, such as New York, matters more than any federal statute.
The Illegal Gambling Business Act
Another statute, 18 U.S.C. 1955, makes it a federal crime to run an illegal gambling business that violates state law, involves five or more people, and runs for more than 30 days or takes in $2,000 or more in a day. It is aimed at operators, not bettors.
Federal tax on wagers: 0.25%
Federal law also taxes the wager itself. Under 26 U.S.C. 4401, an excise tax of 0.25% applies to wagers that are authorized under the law of the state where they are accepted. The tax is paid by the business that takes the bet, not by you. Wagers that aren’t authorized fall under a 2% rate in the same section, and again the person accepting the wager is liable.
The wager tax is separate from income tax on your winnings. For that, see Crypto gambling winnings.
Where federal law is still moving
Prediction markets regulated by the Commodity Futures Trading Commission (CFTC) raise a live federal-versus-state fight over sports-style contracts. Courts disagree and the Supreme Court has been asked to step in. That is covered in Prediction markets vs sportsbooks.
What it means for you
- Federal statutes are unlikely to decide your legal position as a bettor.
- Your state’s gambling statute and its regulator decide what is licensed and what is not.
- Unlicensed operators can be targeted under federal and state law. Players are less often the target, though some states do reach players. Check your state page.
Common questions
Is it a federal crime to bet on sports online?
Not under the federal laws covered here. They target businesses that take bets or process the payments. Some states, though, have their own laws that can reach the bettor, so check your state.
Did the Wire Act get rewritten to ban online casinos?
The Justice Department tried in 2018 and 2019. The First Circuit rejected that reading in 2021 and held that the Wire Act is limited to sporting events and contests.
Does crypto change any of this?
No. Paying with crypto does not change whether a bet is legal. It can change the tax paperwork and how easy it is for banks to see the payment.