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US Online Gambling & Poker Laws And Regulations: What You Need To Know
With the most confusing laws and regulations pertaining to online poker and gambling, players from the US typically have a number of questions regarding the legality, tax implications, and what is in the pipeline, with regards to online poker.
The United States is one of the very few countries who refuses to take a stand on either side of the issue; a horrible decision considering the majority of online gamblers reside within the United States!
In this article we focus on the current laws and regulations as well as what initiatives have been proposed at both the federal and state level.
Legality and Regulations for the US Regarding Online Gambling and Online Poker
There are currently no laws in the United States that prohibit you from gambling online or playing online poker. That said the US government has gone out of its way to make it increasingly difficult for you to deposit and withdraw from poker and casino sites, in addition to driving off a number of online gambling sites with threats –sometimes realized– of prosecution, which has left the US poker community with very few choices in regards to online poker rooms.
So far the US government has prosecuted a few payment processors, Party Poker, and a number of offshore sports-book operators who have been reckless enough to travel inside the United States.
The main piece of legislation that governs the United States is the Unlawful Internet Gambling Enforcement Act of 2006 –which went into full effect in June 2010. The UIGEA makes it a crime for banks and payment processors to process payments to or from online gambling sites. Fortunately, it does nothing to stop individuals from participating in online gambling, including poker.
After four years of UIGEA, about the only thing the legislation has accomplished is to cause online poker players to jump through a few extra hoops in order to transfer their money to and from online poker sites. If you would like to read about playing online blackjack in Canada, check out our Canadian Blackjack section.
Current Climate in the US
The current climate in the United States has a sizeable following at the two extremes, and then a vast majority of Americans who are basically ambivalent to the issue. Fortunately, the current recession the US is mired in has given proponents of legalized gambling yet another soapbox to stand on thanks to an estimate of $42 billion in revenue over the next ten years from the taxation of online poker.
This argument is in addition to the civil liberties, and that poker is a game of skill, point of views that were already being debated.
The largest movement started to legalize online poker is the Poker Players Alliance, which currently has 1.2 million members. The grass-roots organization has done a lot to help in court cases, as well as lobbying on Capitol Hill in Washington DC. The PPA is opposed by Christian rights groups like Focus on the Family –who feel any form of gambling is a sin—as well as the major sports leagues who are concerned over the sports-betting implications of any legislation.
Pending Online Poker Legislation in the US
There are a number of bills both at the federal and state level in regards to legalizing and regulating online poker. With most states expanding land-based gambling to help ease budget deficits a few mavericks have even tried to ban online poker –one measure was successful in Washington State where it’s currently illegal to play online poker, although no person has ever been prosecuted to date.
- At the start of June 2010, the California state legislature voted to regulate online poker.
- Barney Frank (D-MA) has introduced two bills in the House of Representatives: HR 2267 (Internet Gambling Regulation, Consumer Protection and Enforcement Act) which looks to legalize and regulate online gambling and a companion bill that is designed to repeal UIGEA legislation
- Robert Menendez (D-NJ) has introduced S 1597 similar legislation in the Senate. The difference between the Menendez and Frank bills is that Menendez’s bill only applies to game of skill, which would be determined state to state
US Tax Laws Regarding Gambling Winnings and Online Poker
The US uses a heads we win tails you lose mentality when it comes to taxing your gambling winnings. Your winnings are counted as GROSS income, while your loses are only deductible against your winnings!!! By far, the United States has one of the worst tax codes in the world when it comes to gambling.
All winnings, no matter how little or what type of gambling produced them, are taxable income in the US.
And as I said, losses only count against your winnings. For instance, suppose you win $100,000, but lose $80,000 –so you’ve made $20,000. But, the $100,000 is considered gross income; you can still deduct the $80,000 in losses but now you lose many other deductions because as your income increases in the US your possible deductions are diminished, or phased out altogether.
There is an exception for professional gamblers, but they also run into a lot of red tape in the US. Professionals can claim their net winnings, and are eligible for a number of business related deductions. Unfortunately, the IRS will typically scour your records, and if you have other sources of income they may strip you of your professional status. Filing as a self-employed professional poker player also thrusts a 15% employment tax on you, as well as having to pay double the social security taxes.
Obviously the tax laws in the US in regards to gambling are very confusing and convoluted, I highly recommend anyone looking to file online poker winnings –whether as a casual player or professional—seek out the advice of a tax professional.
More USA Gambling Resources
To read more about the legality of online gaming in the USA and the history of legislation, take a look at the links below that will provide further insight to what is provided in our article.