How online casinos are licensed and regulated in the US

online casinos are licensed

It’s no secret how popular sports betting is in the US nowadays, but did you know that online casinos don’t have the same customer base as bookkeepers? Only a few states have online casinos, and no one outside their state can access those games.

Yet, more and more online casino operators pop up for business regularly. Let’s see what kind of hoops these determined casino operators have to go through just to be able to operate in one state.

An overview of online casino regulation in the US

The United States has a complex regulatory landscape for online gambling. Instead of a unified approach, gambling regulations are handled at a state level. This means the laws differ per state, and what’s allowed in one state might not be permitted in another, so online casinos need to adhere to each state’s rules carefully if they want to continue operating.

Existing federal laws, such as the 2006 Unlawful Internet Gambling Act, further complicate the landscape. Exceptions and loopholes make the law very tricky to implement. Due to this, only seven states run online casinos legally.

Despite the complications, online casino companies still try to obtain a license and operate where they can. Here’s some of the hoops they must jump through just to provide games to the masses.

Local gambling legislation

States have the autonomy to establish their own gambling regulatory bodies, which is why some have fully operational online casinos while others don’t. For example, the New Jersey Division of Gaming Enforcement allows sports betting, online casinos and online poker to occur in the state. In contrast, the Indiana Gaming Commission only allows sports betting.

For an online casino to operate within a state, it needs to be licensed by that state’s gaming commission. Additionally, the casino can only accept players physically located within the state, even if the player doesn’t live there. If they want to operate in multiple states, they must acquire a license for each.

Online gambling jurisdictions

Due to the devolved nature of online casino regulations, online gambling jurisdictions are effectively the states that legalize it. These state-based regulatory bodies include:

  • Connecticut Gaming Division
  • Delaware Division of Gaming Enforcement
  • Michigan Gaming Control Board
  • Nevada Gaming Control Board
  • New Jersey Division of Gaming Enforcement
  • Pennsylvania Gaming Control Board
  • West Virginia Lottery

These bodies oversee the operation of online casinos, ensuring that each operator adheres to their specific regulations while maintaining a high standard of fairness and integrity. They also need to make sure that online casinos don’t entertain any business from outside their state borders.

Licensing requirements

Online casino operators must meet several criteria to get a license to operate in a state. Each state has a long and specific list of requirements, but there’s some overlap regarding general requirements. Here are some of them:

Suitability of owners & executives

Regardless of which state an operator is applying to, they must undergo thorough background checks to ensure they are fit to run the business. The reviews confirm that nobody in the company has any criminal ties and that the firm itself has a clean track record of operating casinos.

It also helps if the license applicant already has a proven track record of running a successful online casino elsewhere, internationally or otherwise. If they have foreign licenses, such as from the Malta Gaming Authority or Curacao eGaming, it’s likely to help their application.

Accounting procedures

Casino operators must employ transparent accounting procedures to guarantee that the players’ money is protected and that the company itself is financially solvent. State regulatory bodies want to ensure the casino won’t be used as a front for money laundering activities. States also need to ensure that the players’ funds don’t randomly disappear after making a deposit.

A thorough check of a casino operator’s account procedures can also prevent them from closing the business overnight due to dubious bookkeeping. Such actions jeopardize not only the players but also the financial institutions.

Fairness of games

You know how people claim that games are rigged because they never seem to win? For licensed online casinos, this claim is impossible because states manually review the fairness of each game before allowing its release.

Most casino games use random number generators to ensure the results are random. State regulatory bodies test the RNG software rigorously to confirm the lack of bias. They can also require license holders to employ a third-party testing agency to check the fairness of their games regularly.

In addition, online casino operators are also mandated to outline the rules for each game clearly. Doing so ensures that players understand how a game works, the payout structures and what to expect when it comes to game mechanics. Nothing should be left to the imagination when it comes to a game that involves real money.

As for table games, some operators offer live dealer games as an alternative to RNG-based games. Live dealer games are streamed from a studio with real, human dealers, thus eliminating any doubt with the RNG software. Players can see a human dealer shuffling the cards or spinning the roulette wheel, giving the sense of true randomness you would experience in a physical casino.

Lastly, states conduct regular audits of license holders to ensure that the operator still follows the original guidelines. Those who are found to be violating requirements could lose their license.

Dealing with problem gamblers

Prospective license holders must have measures in place to identify and assist problem gamblers. States want to know that casino operators are willing to bar those with an active gambling addiction from playing to protect them and their funds from further harm. Some of the measures include:

  • Self-exclusion tools where players can voluntarily opt to be banned from the casino for a certain amount of time
  • Providing resources and links to organizations that can help deal with gambling addiction
  • Robust detection methods to determine whether a player is simply a high-roller or is gambling beyond their means

Preventing underage gambling

Since online casinos are more accessible to everyone, including minors, states require that online casino operators must have ways of confirming a player’s age. The general rule is that a person must be over 21 to gamble; otherwise, they must be turned away.

Of course, the internet has ways of allowing underage people to access content beyond their age. That’s why states require online casinos to have comprehensive verification procedures to catch those who try to misrepresent their age. Operators can do this by confirming the player’s age during sign-up and regularly checking  player accounts to ensure everything they say is true.

The specifics of age verification vary by state, but it all points to preventing underaged people from gambling using real money.

Handling complaints

Remember that situation with a player complaining about a rigged game? Sometimes, a player strongly believes  they’ve been cheated out of a win, so they complain to the casino operator. To handle complaints of all natures, state regulators have specific requirements for operators regarding customer complaints.

Firstly, a transparent process must be in place for players to file complaints. In other words, players must be informed of how the process will go and what steps the company will take to address their problem. This could include a detailed step-by-step outline, along with a response timeline.

Secondly, casino operators must commit to responding to and resolving these complaints in a timely manner. Letting a complaint go unanswered is unacceptable and could lead to their license being revoked if a player decides to escalate the issue.

Lastly, the casino operator must allow the player to request the state’s arbitration services to help reach a resolution. This is a last resort for problems where the player and the casino simply disagree, and all other reasonable solutions have been explored and exhausted.

Why do online casinos have to go through so many requirements?

At first glance, a state’s licensing requirement can seem like a significant hassle, with numerous hoops to go through just to operate. You might wonder why a company would be willing to go through such measures.

Companies know that Americans love to have fun, and playing online casino games is one such avenue for them. This is a goldmine for casino operators, so they agree to go through these stringent checks. They know that they can proceed with their business once they obtain their license.

Casino operators also know that by agreeing to go through these checks and ultimately obtaining a license, they appear more trustworthy to the player. The whole process shows that they care about the players and their wellbeing by prioritizing their enjoyment and safety. Fair games and transparent practices ensure everyone can enjoy a game or two without worrying that their money will disappear overnight.

The next time you decide to play an online casino game, take a moment to verify that the operator is licensed in your state. Not only are you protected as a player when an operator is properly licensed, but you also know you’re doing business with a reputable company that isn’t afraid of regulatory checks.

Shashank Sharma
Shashank is a tech expert and writer with over 8 years of experience. His passion for helping people in all aspects of technology shines through his work. He is also the author of the book "iSolution," designed to assist iPhone users. Shashank has completed his master's in business administration, but his heart lies in technology & Gadgets.

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