USA Law and Practice Contributed by: Chao Yu (Charles Yu) and Greg Pilarowski, Pillar Legal
machines. Some states, like Illinois, Mississippi, and Louisiana, allow riverboat casinos. Additionally, state gambling regulators may deny an operator’s licence if they deem the proposed premises to be unsuitable. For example, in Nevada, premises located in close proximity to churches, schools, or public playgrounds, premises that attract a substan- tial number of minors, locations that are difficult for law enforcement to access, premises that violate local zoning ordinances, and other premises restricted by applicable laws, are typically considered unsuitable for conducting gaming operations (Regulation 3: Licensing: Qualifications). In the USA, only a small number of states – including New Jersey, Pennsylvania, Michigan, Delaware, Con- necticut, Rhode Island, and West Virginia – currently permit online gambling, such as online casino games and poker. However, more states permit mobile and online sports betting (see 2.1 Online Gambling ). In these jurisdictions, the licensing process for online gambling operators is largely the same as for land- based casinos. Applicants must obtain a state-issued operator licence, meet suitability and financial stand- ards, and comply with strict technical requirements for geolocation, player verification, data security, and responsible gaming. Many states, such as New Jer- sey and West Virginia, require online gaming operators to partner with a licensed land-based casino or tribal gaming entity to obtain market access and lawfully offer online platforms. Because of these restrictions, many international gaming companies have turned to alternative busi- ness models to reach US players. Two common struc- tures are: 6. Online Gambling 6.1 B2C Licences • sweepstakes casinos, which remove the element of consideration by allowing players to participate without purchasing credits, positioning the games as promotional sweepstakes rather than gambling; and
• skill-based gaming platforms, which remove the element of chance, framing outcomes as depend- ent primarily on the player’s skills. While these models have gained popularity, they also attract regulatory scrutiny, and several states have introduced or proposed laws aimed at restrict- ing sweepstakes casinos that closely resemble real- money gambling (see details in 1.1 Current Outlook and Recent Changes ). 6.2 B2B Licences (Suppliers, Software, Etc) In the USA, suppliers that provide goods or servic- es directly related to online gambling activities are generally required to obtain a licence, while vendors that offer supporting or ancillary services may need to register with state regulators. Because gambling regulation is state-based, licensing requirements and structures vary across jurisdictions. For example, in New Jersey (NJ Admin Code 13:69J- 1.2), licensing of casino service industry enterprises is required for companies “providing Internet gaming software or systems, vendors who manage, control, or administer games and associated wagers conducted through the Internet, and providers of customer lists of persons who have placed wagers through the Inter- net” and “sports pool or online sports pool software or systems, sports wagering kiosks, or that accept wagers from patrons and vendors who manage, con- trol, or administer associated wagers.” An ancillary licensing of casino service industry enter- prises is required for services, including, “payment processing and related money-transmitting services with direct contact with patrons’ casino gaming or online sports pool accounts or the Internet gaming system itself, customer identity, age verification, geo- location verification used in the conduct of Internet and mobile gaming, and entities that determine what wagers to accept or the odds to be offered for a wager for a sports pool manager or operator.” Additionally, certain companies that (i) provide tel- ecommunication or infrastructure services, (ii) offer data, analytics, or proprietary information, or (iii) pro- vide advisory or consulting services related to online
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