Is Starting an Online Gambling Site from My Home Legal?

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Instead of "All you need is a dollar and a dream"--the slogan of the New York lottery--it could be, "All you need is a server and a dream". Technically, there's nothing overwhelmingly complicated about offering online or internet gambling. So, operating an online gambling site from your home would seem to be an attractive proposition for entrepreneurial would-be gambling moguls. 

So: can you legally launch an online gambling business from your home? Unfortunately, at present, the answer is "no." There are at least two legal impediments and a third legal "risk," making this a "don't try this at home" type of activity. The challenges are: 

(1) Even in a state which allows internet gambling (for example, New Jersey), anyone offering it must be licensed by the state. Quite simply, unlicensed gambling is always illegal, even in a state which otherwise permits it. 

Getting a license to offer internet (or any) gambling is not like registering any other business or getting a permit for construction. It is a long, involved process of demonstrating that you have: 

  1. no criminal or immoral acts in your past;
  2. no connections to anyone even arguably criminal;
  3. the financial resources to pay out winning players (which could be A LOT of money--imagine if you had 1,000 people all bet against the favorite to win the Super Bowl--and their team won);
  4. systems and procedures in place (as well as sufficiently robust, backed-up hardware) to ensure fairness and accountability;
  5. do not employ or do business with anyone unsuitable; and
  6. can afford the frequently very large (tens of thousands of dollars) licensing fees. 

It is not likely that the average wannabe gambling operator can pass or afford the licensing requirements (much less afford the ongoing operational costs). To be very clear, if you are not licensed to offer online gambling, it is definitely a legal no-no to do so. 

(2) Even if your state legalizes intrastate online gambling, your state's authority stops at its own borders. It is not legal for you to offer it in a neighboring state. If anyone in that state played on your website, you'd be violating the other state's laws and be subject to prosecution. 

You would need very good mechanisms for ensuring that no one from outside your state played ("geofencing"), such as means to verify the location of the player's IP address, or GPS or RF (radio frequency) ways of triangulating on the location of their mobile device. This technology is actually more complicated (and potentially expensive) than the online games themselves and has posed more of a challenge for anyone offering online gambling.           

(3) Still up in the air, at the time of this writing, the U.S. Department of Justice has decided that the Wire Act does not ban online gambling for non-sports, but that's only the Justice Department's opinion. The Department has said that it does not intend to prosecute online gambling under the Wire Act--BUT it could change its mind and go back to taking a hardline against online gambling, deciding that it is in fact illegal under the Wire Act.  A position held by the Justice Department for decades. Courts have not struck down the Wire Act and Congress has not changed it. It is still "on the books" the exact same way it was for the many years that it was considered to ban online gambling. Since the application of the Act is murky, anyone offering online gambling has to be prepared to take the risk that federal policy on the subject will change. 

Conclusion 

Even though there are many internet home businesses you can practically start or offer from the comfort of your living room or garage, for the average citizen, operating a home-based online gambling operation is not one of them. Before you spend a lot of time and effort in launching your planned business, your first step should be to retain an attorney to help you understand the codes covering home-based businesses, zoning, business licenses, and gaming operations!

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