How do States Regulate Gambling?
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A state regulates gambling by enacting a law or laws setting forth what type of gambling activity, run by whom, in what locations, subject to what conditions or restrictions is legal, and then also creating an agency or agencies to oversee gambling.
State legal authority
There are three sources of legal authority in a state: the state constitution; state statutes; and the common law (or "judge-made" law based on court rulings going back, in some cases, hundreds of years). Of these three, statutory law is far and away the most important. Common law does not really address gambling, and while state constitutions can prohibit some or even all forms of gambling, they don't get into the details of how gambling is regulated. It is left to the state legislatures, which pass laws which directly specify what gambling is and what kinds are not legal, and which also establish agencies which have the power to promulgate additional regulations and to do the day-to-day oversight.
Starting point for state regulation
The starting point for evaluating how your state regulates gambling is to recognize that 1) there is no constitutional right to gamble, the way there is a constitutional right to free speech; 2) the common law does not recognize any general right to gamble; and 3) every state has laws making gambling illegal except as specifically authorized. How do those general principals play out in a given state?
Example of a state’s gambling laws: New Jersey has allowed and regulated casino gambling for longer than any state other than Nevada and has a strict and well-developed, smart regulatory system to protect consumers. The Casino Control Act is the act authorizing gambling in New Jersey. It's the law which makes gambling legal, since all gambling in New Jersey is illegal except as permitted by the Act. New Jersey criminal law makes gambling in New Jersey illegal except if and to the extent permitted by the Casino Control Act.
The Casino Control Act defines gambling, using the pretty much the common definition, and authorizes the creation of government agencies, the Casino Control Commission (CCC) and the Division of Gaming Enforcement (DGE). Those agencies in turn have put out regulations to define every aspect of legal gambling in New Jersey:
1) where it's legal (e.g., only Atlantic City, for brick-and-mortar casino gambling; statewide, but hosted in Atlantic City, for online casino-style games);
2) what specific games or types of gambling are legal (and often, the rules for them);
3) who can provide gambling services (only those who applied for the right to do so, who meet all the criteria set out in the regulations and who have been approved by the regulatory agencies, and who are not associated with certain forbidden activities, persons, or organizations);
4) who can provide other services associated with gambling venues (who can provide the buffets in a casino is as tightly regulated as who can run the casino itself);
5) what happens if someone violates the rules to offer gambling, or if there is a customer dispute;
6) the gambling operator's authority to exclude or bar certain customers (like card counters);
7) who can loan money to casinos; etc.
The vast majority of gambling regulation is aimed at providers, not individual players. If you are "just" gambling, even though your gambling is blatantly illegally and a crime, the regulation and penalties you face are a fraction of those faced by those who operate online gambling sites, casinos, or otherwise provide gambling.
Impact on gamblers
States have passed a hodgepodge of inconsistent and complicated laws on legalizing betting and its many forms (especially in the area of online gambling and sports betting). There are states, for example, where a casino is legal only if water flows under it, a remnant or residue or the old riverboat gambling.
It would be prudent to check out what types of gambling are legal (and not legal) in your state before you play, so you know what you can safely and legally do. This is especially true if you intend to gamble online, since the low "barrier-to-entry" for offering online gambling (e.g., all you need is a website, not a casino) makes it easy for illegal or unsafe gambling sites to crop up (read our article titled "Searching for a Legitimate and Reputable Online Gambling Site").