Q&A: land-based gambling in USA

Land-based gambling

What types of land-based gambling are permitted in your jurisdiction, and is gambling regulated at a national or subnational level?

Gambling is regulated at the state or tribal and local levels in the United States. States serve as the primary regulators, enforcing criminal gambling prohibitions and licensing legal gambling operations, whereas the federal government mainly plays a supporting role in prosecuting multi-state enterprises that violate state gambling laws or offer unlawful sports betting.

As at April 2023, non-tribal, land-based casinos are permitted in 21 states: Arkansas, Colorado, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, South Dakota, Virginia and West Virginia.

Six states permit riverboat casinos: Illinois, Indiana, Iowa, Louisiana, Mississippi and Missouri. Certain additional states – such as Florida and South Carolina – while not permitting riverboat casino operation within the state, allow or tolerate casino cruises that sail into international waters for their operations.

Some other states host ‘racinos’, namely racetracks that offer gambling. Native American tribes in several states (including California) operate casinos and card rooms.

Until early 2018, sports betting was prohibited as a matter of federal law by the now-defunct Professional and Amateur Sports Protection Act (PASPA). Only Nevada was fully exempted from the PASPA prohibition and was able to offer intra-state sports betting, while Delaware, Oregon and Montana enjoyed more limited exemptions. See 28 USC section 3701 et seq.

Many states also permit pari-mutuel wagering on horse racing, with a few permitting wagering on greyhound racing and one (Florida) on the game of jai alai.

Every state, except Alabama, Alaska, Hawaii, Nevada and Utah, operates a state lottery. In Alabama, establishment of a lottery continues to be the subject of legislative attention and controversy but remains unapproved as at March 2023. Lotteries are operated by the state directly, or through contractors, and are not offered by commercial operators.

Our focus in response to most of this chapter concerns casino gambling and sports betting, although, where appropriate, we refer to horse race wagering and other gambling activities.

Please describe the licensing criteria and procedures to operate land-based gambling of each type or classification. Does your jurisdiction limit the number of available licences?

States will generally limit the number of available licences, and the licensing criteria will vary from state to state. For example, in New Jersey, licences or registrations are required for casino owners and operations, casino employees, and companies that do business with casinos. See, for example, NJAC 13:69C (Casino Licensees) and NJAC 13:69J (Persons Doing Business with Casino Licensees). Nevada also has a licensing regime for, inter alia, gaming employees and locations, such as taverns, where the gaming is incidental to the main business (known as a ‘restricted’ licence in Nevada). See Nev Gaming Reg 3 (Licencing: Qualifications).

Must individual directors, officers or owners of licensees also be licensed or reviewed for suitability?

In the states where gambling is legalised, regulatory schemes are complex and comprehensive. As a result, state licensing regimes are typically intrusive and require deep scrutiny of the applicant. The purpose of the suitability review is to ensure that licensees are honest and of good character and integrity. For example, in Nevada, casino licences are not granted unless applicants show that they possess adequate business acumen, competence and experience and that they have secured adequate and appropriate financing. See Nev Rev Stat section 463.170(3). In New Jersey, key employees, including, inter alia, pit bosses, casino managers and casino operators, must undergo a rigorous licence application process that shows the financial stability, integrity and responsibility of the person and the good character and reputation of the person for honesty and integrity. See NJAC 19:41A-5.5.

May a gambling location be part of a resort, restaurant or other multi-purpose location? What limitations apply?

Yes, but every state that has permitted gambling will have different limitations. In Nevada, an owner of a tavern can receive a ‘restricted’ licence, which permits the establishment to have 15 or fewer slot machines that are incidental to the main business – the tavern itself. Six states (Illinois, Indiana, Iowa, Louisiana, Mississippi and Missouri) permit riverboat casinos.

Are there provisions for passive or institutional ownership that allow for exemption or modification of licensing requirements?

State laws in this area vary, but it is common for states to exclude from licensing requirements institutional owners of licensees up to certain specified thresholds, so long as those owners are passive (ie, they take no active role in the operation or management of the gambling enterprise). The permitted thresholds vary, with an upper range typically of between 15 and 25 per cent. Importantly, institutional owners able to avail themselves of this exemption remain subject to the oversight of the gambling authorities, which can ‘call them forward’ for review in their sole discretion, should they believe it warranted.

What responsible gambling obligations apply to licensees?

Responsible gambling obligations for licensees will vary from state to state. In Nevada, licensees that engage in the issuance of credit, check cashing or direct mail marketing of gaming opportunities are required to implement a programme that allows patrons to self-limit their access to that marketing by the licensee. The programme devised by the licensee sets forth the standards and procedures that allow a patron to be removed from such marketing.

Licensees are also required to train all employees who directly interact with gaming patrons. The training must consider the nature and symptoms of problem gambling behaviour. See Nev Gaming Reg 5.170.

Many states require licensees to maintain their own self-exclusion lists that allow individuals to self-identify and require the licensee to refuse service to any individual listed. In New Jersey, the Division of Gaming Enforcement provides and maintains a centralised list of persons self-excluded from gaming activities at all licensed casinos and simulcasting facilities. See New Jersey Statutes Ann section 5:12-71.2 and section 5:12-71.3. Missouri established the first state-wide voluntary exclusion programme, which is known for its stringency. In Missouri, a person who places him- or herself on the self-exclusion list but is found at a gaming location will have a criminal complaint filed against him or her for trespassing. See 11 Mo Code of State Regs section 45-17-.010.

What type of tax and what tax rate applies to each form of lawful land-based gambling activity?

Land-based gambling activity is generally taxed based on gross gaming revenue (GGR). The rate varies from jurisdiction to jurisdiction. Although the definition of GGR also varies, at a high level it refers to the gross amount received from wagerers minus winnings and bonuses or promotional credits offered to the wagerer.