By David B. Hoppe, Managing Partner, Gamma Law, San Francisco, United States of America
Following a temporary decline in popularity in the early 2000s, the iGaming industry - all forms of online gambling and betting on the outcome of events, games, or sporting competitions on the internet, including video games, poker, slot machines, fantasy sports, and more - has experienced a remarkable resurgence, largely due to the COVID-19 pandemic.
With renewed interest in betting and the advent of innovative technologies that have enhanced the excitement and convenience of online gambling, the sector is expected to continue to grow. However, whilst these technological advancements have brought about numerous benefits, they have also given rise to social and legal challenges that businesses and jurisdictions around the world must address.
In response to the proliferation of online gambling, several US states have recently passed or proposed new laws related to internet betting, triggering a ripple effect throughout the industry.
This Post will review these regulatory updates, particularly those that pertain to iGaming in the metaverse, and assess the effectiveness of the current regulatory framework. As the industry continues to evolve rapidly, businesses operating in this space should stay informed about the latest developments and work closely with legal experts to navigate this complex landscape.
Gambling vs. Gaming vs. iGaming
To comprehend the legal and regulatory ramifications of iGaming, it is critical to differentiate it from traditional online sports and esports. Although these terms are often used interchangeably, gaming commonly denotes physical activities involving games like board games, card games, and video games. In contrast, iGaming involves virtual activities, such as playing online casino games or slots on a mobile device or computer. It is a subset of online sports that provides poker, slot machines, and other such games to smartphones and other devices.
Despite similarities between gaming and iGaming, various distinctions highlight the need for iGame developers and platforms to ensure that their applications to address specific legal contexts and conditions:
- Gaming usually takes place in physical spaces such as homes, stores, or dedicated gaming centers. In contrast, iGaming is solely enjoyed online, with players accessing games from anywhere with an internet connection.
- Gaming is typically a social activity, with players interacting in person, while the social aspect of iGaming is limited. Game platforms must monitor players' physical locations to prevent collusion between players who are in the same room.
- Gaming is generally legal or at least accepted in most societies, with few restrictions on the availability or accessibility of these games. In contrast, iGaming is not always legal, often restricted by geography, and limited to specific jurisdictions in which these activities are permitted and regulated.
States Ante Up with iGaming Schemes
In recent years, there has been a noticeable trend amongst various states towards legalizing online gambling and iGaming, a shift that can be attributed, at least in part, to Nevada, New Jersey, Delaware, and Pennsylvania's decisions to legalize online gambling. Other states that have expressed interest include California, Hawaii, Iowa, and Massachusetts. Whilst the status of bills introduced in these states are subject to change, here is an overview of current bills and their status.
- California—The Golden State has faced a challenging journey in legalizing sports betting. In November 2022, two propositions aimed at legalizing sports betting failed. The legalization process is complex as it would likely require a constitutional amendment and a vote from residents. Additionally, some local tribes and lobby groups have opposed legalizing sports betting in California. As a result, it is unlikely that sports betting will be legalized in California before 2024.
- Indiana—One of the reddest of the red states, Indiana has made significant strides in legalizing online sports betting, which has been allowed since 2019. However, non-sport iGaming, such as online casinos and lotteries, has yet to receive lawmakers' approval. A bill to legalize online casino gambling was introduced in the state legislature in March 2023, marking the third consecutive year such a bill has been proposed. However, the previous two bills failed to gain traction, and the 2022 version, which would have allowed Hoosiers to play lottery and online casino games on their devices, failed in the House Public Policy Committee. It is expected that a more comprehensive bill to legalize iGaming in Indiana might be introduced by the end of 2023.
- New York—One of the latest states to join the online gambling bandwagon, New York introduced a bill in February 2023 aimed at legalizing online casinos. Senator Joseph Addabbo Jr. introduced Senate Bill S4856, which seeks to amend New York's racing, pari-mutuel wagering, and horse breeding law by inserting a new section known as Article 15, which is an iGaming regulation for the state. If adopted, this bill will legalize online slots, table games, and live dealer games. However, as of the time of writing, this bill had not been adopted in a one-house budget, making its passage in 2023 unlikely.
Conclusion
Navigating the intricate regulatory framework of iGaming can be an overwhelming and complicated task. Due to the fragmented nature of the regulations, it is crucial to have a clear understanding of the rules and guidelines to ensure compliance and avoid potential penalties or fines. Seeking the advice of a lawyer, who specializes in this area, can provide invaluable insights and guidance on how to comply with the regulations.
Furthermore, the legal landscape of iGaming is continuously evolving, making it even more essential to stay up to date with the latest developments. Operators who fail to comply with these changes can face severe consequences, including license revocation and reputational damage. Therefore, engaging with experts, who can help navigate the ever-changing regulatory landscape is critical to ensure that operations remain compliant with the law.
In conclusion, the iGaming industry is subject to rigorous regulation, and careful attention to detail is required to ensure compliance with various laws and regulations. Engaging a specialized lawyer can provide businesses with the necessary support and guidance to operate successfully whilst avoiding legal issues. As the trend towards legalizing online gambling and iGaming gains momentum across several states, it is worth providing a comprehensive overview of the various bills and their current status. As the industry continues to grow, it will be interesting to see which states join the movement and how their regulatory frameworks evolve.
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