The National Council of Legislators from Gaming States (NCLGS) has unveiled its draft of the Model Internet Gaming Act, aiming to establish a comprehensive framework for iGaming regulation across the United States. This proposed legislation, designed as a resource for states considering online gambling legalization, includes measures for taxation, responsible gambling, and the outright prohibition of sweepstakes casinos.

The draft (pdf), now open for public comment until December 31, 2024, reflects months of collaboration among lawmakers, gaming experts, and legal advisors. According to NCLGS, the act is designed to “foster public confidence and trust in the integrity of the regulatory process and the fairness of internet gaming operations.”

Comprehensive Framework Targets Uniformity and Oversight

The proposed legislation seeks to address inconsistencies in iGaming laws across the seven states where online gambling is currently legal. By introducing universal standards, the NCLGS hopes to streamline regulation and promote best practices in licensing, advertising, and player protection.

Key provisions include:

  • Licensing Requirements: Operators and suppliers would need to secure five-year licenses, adhering to strict compliance protocols.
    Taxation Guidelines: The act suggests a tax rate of 15% to 25% on adjusted gross revenue, balancing revenue generation with market competitiveness. The proposed range mirrors the U.S. average iGaming tax rate of 19%, excluding outliers like Pennsylvania’s 54% tax on online slots.
  • Responsible Gaming Measures: The legislation mandates robust Know Your Customer (KYC) protocols, anti-money laundering (AML) systems, and responsible advertising practices.
  • Advertising Restrictions: Promotions must avoid targeting individuals under 21, steer clear of college campuses, and include responsible gambling messages.

The model act also emphasizes the importance of protecting state lotteries and tribal gaming operations while ensuring the sustainability of existing retail gaming establishments.

Ban on Sweepstakes Casinos

A defining feature of the draft legislation is its hardline stance on sweepstakes casinos, according to Next.io.  These entities, which often operate in legal gray areas, simulate casino-style games and offer prizes through chance-based mechanisms. The NCLGS proposes categorizing such activities as illegal and imposing strict penalties for violations.

Under the draft law, sweepstakes violations would incur fines ranging from $10,000 to $100,000 per offense, with repeat offenders facing potential imprisonment. The proposed ban aims to eliminate ambiguity and ensure that gaming activities adhere to clear regulatory standards.

The American Gaming Association (AGA) fully supports this ban. A document (pdf) released by the Association underlines that there are gaming machines such as so-called “gray”, “nudge”, “sweepstakes”, “skill”, and “nochance” that take advantage of legal loopholes and operate without the required supervision from local regulators.

Fast-Tracking Licenses for Established Operators

To expedite the rollout of iGaming, the NCLGS recommends an abbreviated application process for operators with existing, valid sports betting licenses in good standing. This approach seeks to leverage established operators’ infrastructure and expertise while maintaining rigorous oversight.

The legislation also endorses participation in the Multi-State Internet Gaming Agreement (MSIGA), enabling online poker operators to link platforms across state lines. Currently, players in states such as Nevada, New Jersey, and Michigan benefit from this agreement, enhancing player pools and overall engagement.

Public Input and Future Steps

The draft legislation reflects extensive input from industry stakeholders, including legislators from states like Michigan, Pennsylvania, and Massachusetts, as well as experts from organizations like Spectrum Gaming Group and the Massachusetts Council on Gaming and Health. NCLGS President Shawn Fluharty emphasized the collaborative nature of the project, noting that the framework is designed to adapt to the unique needs of individual states.

Public comments on the draft will be reviewed until the end of the year, with revisions to follow. Once finalized, the model act is expected to serve as a vital tool for state lawmakers crafting iGaming legislation.