Federal Sports Betting Law

Murphy v. NCAA (2018): The Decision That Changed Everything

On May 14, 2018, the U.S. Supreme Court issued its decision in Murphy v. National Collegiate Athletic Association (584 U.S. 453), striking down the Professional and Amateur Sports Protection Act (PASPA) as unconstitutional. The 6-3 decision, authored by Justice Alito, held that PASPA violated the anti-commandeering doctrine of the Tenth Amendment by effectively commanding states to maintain their existing prohibitions on sports betting.

The case originated when New Jersey sought to legalize sports betting at its casinos and racetracks. The NCAA, NFL, NBA, NHL, and MLB sued to block the law under PASPA. After years of litigation, the Supreme Court sided with New Jersey, finding that Congress cannot "issue direct orders to state legislatures" — it can regulate sports betting directly through federal law, or it can leave the decision to the states, but it cannot force states to prohibit it.

The practical effect was immediate: PASPA's prohibition was erased, and every state gained the authority to legalize and regulate sports betting within its borders. There is no federal law that currently prohibits states from authorizing sports betting.

The Wire Act (18 U.S.C. § 1084)

The Federal Wire Act of 1961 prohibits the use of wire communications (telephone, internet) to transmit bets or wagering information across state lines. Originally enacted to combat organized crime's use of telephone networks for bookmaking, the Wire Act has become the most significant remaining federal constraint on sports betting.

The key question has been whether the Wire Act applies only to sports betting or to all forms of online gambling. In 2011, the DOJ's Office of Legal Counsel (OLC) issued an opinion concluding that the Wire Act applies only to sports betting, not to online lottery sales or casino games. This opinion opened the door for states to legalize online casino gambling and lottery sales.

In 2018, the DOJ reversed course with a new OLC opinion concluding that the Wire Act applies to all forms of online gambling, not just sports. However, in January 2019, the First Circuit Court of Appeals upheld the 2011 interpretation in New Hampshire Lottery Commission v. Barr, ruling that the Wire Act applies only to sports betting. The DOJ chose not to appeal to the Supreme Court, and the 2011 interpretation remains the operative legal framework.

For sports betting specifically, the Wire Act means that interstate sports wagering — accepting a bet from a person in one state through a platform licensed in another state — remains federally prohibited unless both states have legalized sports betting and have an interstate compact. As of 2026, only a handful of interstate compacts exist (notably for online poker between Nevada, New Jersey, and Delaware).

UIGEA: The Unlawful Internet Gambling Enforcement Act (2006)

The Unlawful Internet Gambling Enforcement Act (31 U.S.C. §§ 5361-5367) does not make online gambling illegal per se. Instead, it prohibits financial institutions and payment processors from knowingly processing transactions related to unlawful internet gambling. "Unlawful" is defined by reference to other federal and state laws — if the underlying gambling activity is legal under state law, UIGEA does not apply.

This means that for state-licensed sports betting operators, UIGEA is not a barrier. Licensed sportsbooks can process deposits and withdrawals through banks, credit cards, and payment processors without violating UIGEA, because the underlying activity is authorized by state law. However, UIGEA does create compliance obligations for financial institutions, which must have policies to identify and block transactions related to unlawful gambling.

UIGEA also explicitly exempts fantasy sports from its definition of "bet or wager," which is why daily fantasy sports (DFS) platforms like DraftKings and FanDuel were able to operate nationally even before PASPA was struck down. This exemption was the legal foundation that allowed these companies to build the infrastructure that later pivoted to sports betting.

The Indian Gaming Regulatory Act (IGRA)

The Indian Gaming Regulatory Act of 1988 (25 U.S.C. §§ 2701-2721) governs gambling on tribal lands. Under IGRA, tribes have the right to operate gaming facilities on their reservations, subject to compacts negotiated with state governments. Sports betting on tribal lands is governed by these compacts, and several states (including Florida, Connecticut, and Washington) have authorized sports betting exclusively or primarily through tribal compacts.

The tribal sports betting landscape is complex because IGRA requires that the state and tribe negotiate in good faith, and disputes over compact terms have led to litigation in multiple states. In Florida, the Seminole Tribe's sports betting compact was challenged and has been the subject of ongoing legal battles over whether the tribe can offer mobile sports betting to customers located off tribal lands.

What Federal Law Does Not Do

After PASPA's repeal, there is no federal law that:

• Prohibits states from legalizing sports betting — each state has full authority to authorize, regulate, and tax sports wagering
• Sets a national minimum age — states set their own age requirements (typically 21, though some allow 18)
• Requires specific licensing standards — each state designs its own regulatory framework
• Mandates integrity monitoring — though most states require it, there is no federal mandate
• Caps tax rates — states set their own tax rates on operator revenue, ranging from 6.75% to 51%

Proposed Federal Legislation

Several federal bills have been introduced since 2018 to create a national framework for sports betting, though none have passed:

• Sports Wagering Market Integrity Act: Would establish federal minimum standards for licensing, integrity monitoring, and consumer protection while preserving state authority to regulate.
• SAFE Bet Act: Would create a federal regulatory framework with the FTC overseeing sports betting operators, including advertising restrictions and responsible gambling mandates.
• Various integrity fee proposals: Professional sports leagues have lobbied for mandatory "integrity fees" (0.25-1% of handle) paid to leagues. These proposals have been universally rejected by states.

The political reality is that states have invested heavily in building their own regulatory frameworks and are unlikely to cede authority to a federal regulator. The most probable federal action is narrow legislation addressing specific issues like interstate compacts or advertising standards rather than comprehensive regulation.