When we’re vetting an online casino or sportsbook, we frequently talk about their reputation and their licenses. Those things are kind of abstract for people who aren’t familiar with the regulatory process.
In this article, we’ll break down what online gaming licenses are, why they’re important, and which organizations issue these licenses.
Online gambling regulators are becoming more prevalent as the nature of gaming law makes it near impossible to operate without a license. Here’s everything you need to know about online casino licensing and gaming law.
What Is a Gaming License?
A gaming license is a permit issued by the government or a licensing agency to allow an organization or business to offer gambling services within their jurisdictions.
It can take up to a few months to get a gaming license, in which time the licensing authority will conduct a multitude of tests.
They’ll do intense background checks on all the leading figures of the organization, as well as assess the validity of their financials. Casinos must place certain funds in segregated accounts that are dedicated to paying back players, and licensing agencies will communicate with the bank and other financial services to ensure this is the case.
In addition, they’ll assess the fairness of the gaming software the casino plans to use, as well as the security protocols the casino will plan to implement.
Once a licensing agency has done their full rundown of a casino or gambling site, they’ll issue their seal of approval. This lets players know that they’re staking their funds at a reputable place.
But just because the seal is on the casino’s website doesn’t mean that the licensing process is over. The casino will undergo unplanned audits throughout the year as the licensing agency seeks to verify that all requirements are still met.
Why Is a Gaming License Important for Online Casinos?
On the basest level, a gaming license helps the online casino attract players. After all, online casinos with official licenses are more reputable than those without, so it’s a safer experience for players.
But the truth is that it’s practically impossible for online casinos to gain any traction without a license. Gaming software providers won’t give unlicensed casinos a second glance, so unless the casino has developed proprietary gaming software on its own, they won’t have a service to provide.
In a more legal sense, a license helps governments crackdown on crime. Casinos and gambling sites have had a long history of money laundering and other illicit activity, but the license ensures that the casino–and its owners–are operating within the law.
Plus, the licensing agency can sometimes act as an intermediary between the casino and the player. If a user has a complaint about missing winnings or unfair gaming practices, and they didn’t get the desired response from the casino, they can go to the agency and petition action to be taken. The agency is there to protect the player, after all.
How Much Does A Gaming License Cost?
The cost for a gaming license will change depending on what agency you’re petitioning for a license.
For example, in New Jersey, new land-based casinos must apply with a $100,000 processing fee, which if they get approved, will then go toward the $400,000 license fee. Annual renewal of the license costs $250,000!
While $400,000 seems like a lot of money, for a big gambling organization, it’s pocket change. However, most online casinos will try to obtain their license from an offshore regulator because of tax cuts and cheaper fees.
In Curacao, a gaming license costs around €20,000, a fraction of what New Jersey charges. It’s obvious why casino organizers are all fighting over offshore licenses.
But what other benefits are there of using an offshore licensing agency?
Offshore Online Casino Licensing Agencies
An offshore agency is one that’s not based in your home country, but still offers certain benefits for casinos that are looking to operate in the United States.
Because of the high cost of entry in the US gambling market (and the fact that you’ll have to pay over and over and over again to get licensed in all states), many online casinos seek licensing from offshore agencies.
The cost of entry is much lower, and they have relative freedom to market their service across the globe. Some of the most common offshore licensing agencies include:
Panama is another popular country to get a gaming license from. The Republic of Panama entices new casino owners because of the tax exemptions and low cost of entry. Compared to the hundreds of thousands of dollars to get licensed in a single state in the US, a license in Panama costs you only about $40,000, and then $20,000 for renewal.
Panama became licensing jurisdiction in 2002, and has been regulating online casinos and sportsbooks since then. They conduct criminal background checks on the owners of each casino that applies, as well as an in-depth review of their financial obligations and available capital.
BetOnline, a reputable online gambling site, is licensed by the Junta de Control de Juegos, the Gaming Control Board of Panama.
Curacao is another popular go-to place for casinos looking to get licensed. In Curacao, a gaming license will cost you about €20,000 for the initial fee, and then €17,900 every year after that.
The corporate sales tax in Curacao is super low, sitting around 2%, which will light up the eyeballs of any casino executive.
In order to get a license from Curacao, your casino must also keep its servers on the island nation. They don’t charge extra for servers, but the casino will have to invest in property and hardware to keep up with their Curacao license. Still, with that cost added in it beats out the quarter of a million they’d be paying in fees in the US.
If you’re looking for a license that gives you relative freedom to operate, Malta might be the best choice. While they won’t allow online casinos from any country other than their own to host games there, it’s a pretty versatile licensing jurisdiction.
Malta allows its casinos not only to market their services in both EU and non-EU countries but also allows them to host their poker tournaments and sports betting events anywhere in the world. They cleared out some of the top gambling sites like Bet365 to get this right (fun fact: Bet365’s poker room is re-entered through Malta).
Malta gives casinos a ton of freedom – they can open up multiple brands under the same license, and it’s even possible for one casino to have up to three sub-brands under their main licensing body.
Malta is looking to become the new home of online casinos in Europe, so if you’re looking to open up your next online casino try getting licensed there first!
Kahnawake, which is located in Quebec, Canada, has been hosting online casinos and sportsbooks since 1996. They started off with their own license system called “Mohawk Internet Technologies” (MIT) and moved over to licensing all of their services through the Kahnawake Gaming Commission (KGC).
Licenses in Kahnawake are renewed every year for a $10,000 fee. The first-time license is $40,000, plus a $15,000 software inspection fee.
Kahnawake is unique in that they allow their licensees to offer wagers across the entire world – not just Canada.
While this might sound like a really sweet deal for casino owners who want to get into the US market but don’t have money for multiple licenses, there’s a catch. All of the advertising has to be in French or English (Kahnawake is on an Indian reservation in Canada), and any bets that are placed by players physically located in the US will only count as valid if their servers are located within Kahnawake’s jurisdiction or Canada itself.
Understanding Online Gambling Licenses in the USA
The United States has had a tumultuous history with gambling, and in some ways, it still does. For a lot of American history, gambling has been shunned because of its ties to criminal organizations.
And modern laws reflected that. The Interstate Wire Act of 1961 made it illegal on a federal level to transmit information related to gambling across telephones, bank wires, fax machines, etc. The Wire Act was meant to crack down on criminal organizations that were using gambling hubs as fronts for illegal activity. But, as time went on, the language of the Wire Act became more and more difficult to interpret and throw the Internet into the mix, it got all muddled up.
In 2011, the Department of Justice clarified that the Wire Act prohibits the transmission of sports betting-related material, but does not affect casinos or other gambling organizations.
Other legislation, however, has impacted how casinos operate. The Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) is a bill that was created as a means to crack down on US financial institutions and payment processors from knowingly accepting money related to online gambling.
However, one problem with the UIGEA is that it doesn’t prohibit Americans from placing bets on sites outside of the US. There’s no law against crossing international borders with your money to place a bet or play a hand of poker.
In this way, the US shot themselves in the foot. With the advent of offshore gambling sites and secure payment methods like e-Wallets or cryptocurrency, online gambling went on without very much disruption.
Fast forward to 2018, the Professional and Amateur Sports Protection Act (PAPSA), which had previously restricted sports betting in the US, was overturned by the Supreme Court. After this decision, the federal government took a hands-off approach to gambling, leaving much of the decision-making up to individual states.
As such, gambling in most capacities is legal on a federal level, but states have the right to regulate the market within their borders or outlaw it together. This is part of the reason why online gambling sites seek offshore certification. To become a vetted participant in the US market, on US soil, they have to abide by 50 different rulesets, apply for 50 different licenses, and set up shop in 50 different states. It’s just not feasible or economical.
Frequently Asked Questions About Online Gambling Regulation
We realize that there are often times a lot of questions and unknowns surrounding the legality of online gambling in the USA. We hope that this page has been a help in answering some of those questions but we have also taken the time to answer some of our readers’ most commonly asked questions below.
What Is A License?
As mentioned above, a license is something that allows an online gambling site to accept bets in the US. Every state has different requirements for licensing companies to do business within their borders, so it’s impossible for one company to obtain 50 licenses.
Instead, most sites head to Curacao, Panama, or Kahnawake to obtain a license, and operate in the US solely via the Internet.
Can I Be Prosecuted For Using An Offshore Casino or Sportsbook?
While it’s technically illegal to use offshore gambling sites, the US government is much more interested in prosecuting illegal gambling organizations than it is chasing after individual gamblers. To date, no individuals have been arrested or charged for using an offshore gambling site.
Are Offshore Gambling Sites Better Than State-Sanctioned Sites?
In many capacities, yes. They offer better rewards, better game selection, and have a much larger player base. Some state-sanctioned gambling sites are built on such a small base that they don’t attract many players. But, if you’re worried about getting in trouble for using an offshore site, you should stick with the state-sanctioned gambling options.
What Are The Best US-Friendly Gambling Sites?
Do Tribal Casinos Have To Undergo Licensing?
Yes, tribal casinos are bound by gambling law the same as other gambling organizations. Historically, tribal casinos have played a large part in legalizing and expanding the gambling market in their respective states, and stand as pillars of the gambling community.