Federal Sports Betting Laws 2026: Wire Act, UIGEA, Murphy v. NCAA, IRS Reporting

Federal Regulators

Department of Justice (DOJ): The DOJ enforces criminal prohibitions on illegal sports betting through the Wire Act and prosecutes violations of the Unlawful Internet Gambling Enforcement Act (UIGEA). The Criminal Division's Organized Crime and Gang Section historically handles sports wagering cases, particularly those involving interstate or international operations. The DOJ also issues interpretive opinions on the scope of federal gambling statutes, including its controversial 2011 and 2019 memoranda regarding the Wire Act's application to non-sports wagering.

Internal Revenue Service (IRS): The IRS administers tax collection and reporting obligations for sports betting operations and bettors. Sports wagering operators must withhold federal taxes on certain winnings, issue Forms W-2G for reportable gambling winnings, and comply with information reporting requirements under 26 USC §6041 and related provisions. The IRS also enforces the limitations on gambling loss deductions under 26 USC §165(d).

Financial Crimes Enforcement Network (FinCEN): FinCEN, a bureau of the Treasury Department, enforces anti-money laundering (AML) and Bank Secrecy Act (BSA) compliance for sports betting operators. Casinos and card clubs offering sports wagering are "financial institutions" under 31 USC §5312 and must implement AML programs, file Suspicious Activity Reports (SARs), and maintain Currency Transaction Reports (CTRs) for transactions exceeding $10,000. FinCEN's regulations at 31 CFR Chapter X establish these requirements.

National Indian Gaming Commission (NIGC): The NIGC regulates sports betting conducted on Indian lands under the Indian Gaming Regulatory Act (IGRA), 25 USC §2701 et seq. The Commission approves tribal-state compacts for Class III gaming, which includes sports wagering, and ensures tribal gaming operations comply with IGRA's regulatory framework. The NIGC also oversees background investigations for key gaming employees and reviews management contracts for tribal sports betting operations.

Key Federal Statutes & Rules

Murphy v. NCAA, 138 S. Ct. 1461 (2018): This Supreme Court decision struck down the Professional and Amateur Sports Protection Act (PASPA), 28 USC §3702, which had prohibited states from authorizing sports betting. The Court held that PASPA's anti-authorization provision unconstitutionally commandeered state legislatures by dictating what laws states could and could not pass. This ruling opened the door for states to legalize and regulate sports wagering within their borders, fundamentally transforming the American sports betting landscape.

Wire Act, 18 USC §1084: Enacted in 1961, the Wire Act prohibits the use of wire communications facilities to transmit bets or wagers on sporting events or contests in interstate or foreign commerce. The statute targets those in the business of betting or wagering, not casual bettors. The DOJ's position on whether the Wire Act applies only to sports betting or to all forms of gambling has shifted over time, creating regulatory uncertainty for interstate online wagering operations.

Unlawful Internet Gambling Enforcement Act (UIGEA), 31 USC §5361-5367: Passed in 2006, UIGEA does not itself criminalize online gambling but prohibits gambling businesses from knowingly accepting payments in connection with unlawful internet gambling. The Act requires financial institutions and payment processors to identify and block restricted transactions. UIGEA includes a carve-out for intrastate and certain intratribal transactions, and exempts fantasy sports and other skill-based contests meeting specific criteria under 31 USC §5362(1)(E)(ix).

26 USC §165(d) - Gambling Loss Deductibility: The Internal Revenue Code permits taxpayers to deduct gambling losses only to the extent of gambling winnings, and only if the taxpayer itemizes deductions. Casual bettors cannot deduct the cost of wagers as losses; only net losses up to the amount of reported winnings are deductible. Professional gamblers may have different treatment under 26 USC §162 as trade or business expenses, subject to substantiation requirements.

Indian Gaming Regulatory Act (IGRA), 25 USC §2701 et seq.: IGRA establishes the framework for gaming on Indian lands, dividing gaming into three classes. Sports betting is Class III gaming, requiring a tribal-state compact negotiated between the tribe and the state. These compacts must be approved by the Secretary of the Interior and address issues such as revenue sharing, regulatory oversight, and the scope of permitted wagering. Tribes retain significant sovereign authority over gaming operations on their lands, subject to IGRA's requirements.

Federal vs. State: Who Has Authority?

The post-Murphy landscape created a concurrent regulatory environment where federal law establishes certain minimum prohibitions and requirements while leaving most sports betting regulation to the states. Federal law preempts state authority in narrow areas: the Wire Act continues to prohibit interstate wire communications for sports betting that violate state or federal law; UIGEA restricts payment processing for unlawful internet gambling; and the Bank Secrecy Act imposes AML obligations on all gaming operators regardless of state law.

However, states possess broad authority to legalize, regulate, or prohibit sports wagering within their borders. States determine which sports and bet types are permitted, licensing requirements for operators, tax rates, consumer protections, geolocation requirements, and whether to allow online/mobile betting. Federal law does not mandate that states legalize sports betting, nor does it establish operational standards for state-sanctioned markets. The Murphy decision reinforced the anti-commandeering principle, confirming that the federal government cannot compel states to maintain sports betting prohibitions.

The Wire Act creates a complexity: it remains a federal crime to use wire communications to transmit sports bets across state lines. This creates ambiguity for interstate compacts and multi-state betting pools. The DOJ has not aggressively enforced the Wire Act against state-licensed operators, but the statute's existence means operators face theoretical federal prosecution risk for certain interstate transactions, even when both states have legalized sports betting. This tension between state authorization and federal criminal statute remains unresolved.

For tribal gaming, IGRA establishes a unique framework where tribes negotiate compacts with states, subject to federal approval. Neither the state nor the tribe can unilaterally authorize Class III sports betting; both must agree to compact terms. Federal law through IGRA thus creates a mandatory cooperative federalism model for tribal sports wagering, distinct from the state-sovereignty model for non-tribal operators.

Pending Federal Legislation

Congress routinely considers sports betting legislation addressing nationwide standards, though comprehensive federal regulation has not advanced to enactment as of 2026. Typical proposals include bills establishing national responsible gaming requirements, uniform data usage standards requiring licensed operators to use official league data, and federal licensing or registration systems that would overlay state regulation. Some proposals focus on consumer protection mandates such as deposit limits, self-exclusion databases, or advertising restrictions.

Other legislative efforts target federal taxation of sports wagering revenue or attempt to clarify ambiguities in existing statutes like the Wire Act. Certain bills seek to restrict betting on collegiate athletics or establish federal oversight commissions to coordinate multi-state regulatory issues. Additional proposals address integrity monitoring, requiring operators to report suspicious betting activity to sports leagues or law enforcement.

Because specific bill numbers, sponsors, cosponsors, and legislative status change frequently, this guide does not reference particular pending legislation by name or number. Readers should consult updated tracking resources that pull current data from Congress.gov to identify active bills, their committee assignments, text, and procedural status. Congressional interest in sports betting regulation remains high, but federalism concerns and disagreement over the appropriate federal role have prevented major legislative action since Murphy eliminated PASPA.

Frequently Asked Questions

Do I need a federal license to operate a sports betting business?

No federal sports betting license exists. The federal government does not license or directly authorize sports wagering operators. You must obtain authorization under state law (or through a tribal-state compact for operations on Indian lands). However, you must comply with all applicable federal requirements regardless of state licensure, including federal tax obligations, Bank Secrecy Act/AML compliance, and avoiding violations of the Wire Act or UIGEA. State licensing does not provide immunity from federal prosecution if your operations violate federal criminal statutes, though enforcement against state-compliant operators has been rare in the post-Murphy era.

What federal taxes apply to sports betting winnings?

Sports betting winnings are taxable income under 26 USC §61. Operators must withhold 24% federal tax on certain winnings and issue Form W-2G when proceeds exceed specific thresholds (generally $600 and at least 300 times the wager for most bets; different thresholds apply to other bet types). Bettors must report all gambling winnings on their federal tax returns. Under 26 USC §165(d), bettors may deduct gambling losses only up to the amount of gambling winnings and only if they itemize deductions. Professional gamblers may have different treatment. Consult IRS Publication 505 and current withholding requirements, as thresholds and rates may change.

Can my state-licensed sportsbook accept bets from customers in other states?

This is legally uncertain. While Murphy permits states to authorize sports betting, the Wire Act (18 USC §1084) prohibits using wire communications to transmit sports bets in interstate commerce. The DOJ has not consistently enforced the Wire Act against state-licensed operators accepting cross-border wagers, but the statute technically remains in force. Some states have entered interstate compacts to share liquidity for online poker, but multi-state sports betting pools remain rare due to Wire Act concerns. Most operators use geolocation technology to restrict betting to customers physically located within their authorized state(s). Consult legal counsel before accepting interstate wagers, even if both states have legalized sports betting.

What Bank Secrecy Act obligations apply to my sportsbook?

If your sports betting operation is conducted through a casino or card club, you are a "financial institution" under 31 USC §5312 and subject to Bank Secrecy Act requirements administered by FinCEN. You must implement a written anti-money laundering (AML) program compliant with 31 CFR §1021.210, file Currency Transaction Reports (CTRs) for cash transactions exceeding $10,000 in a gaming day, and submit Suspicious Activity Reports (SARs) for transactions involving potential money laundering or violations of law. You must maintain records of reportable transactions and comply with customer identification program (CIP) requirements. Online-only sportsbooks not affiliated with physical casinos may have different classification; consult FinCEN guidance and legal counsel to determine your specific BSA obligations.

How does federal law apply to sports betting on tribal lands?

Sports wagering on Indian lands is governed by the Indian Gaming Regulatory Act (IGRA), 25 USC §2701 et seq. Sports betting is Class III gaming under IGRA, requiring a tribal-state compact negotiated between the tribe and the state where the land is located. The compact must address permitted games, regulatory responsibilities, revenue sharing, and other matters, then be approved by the Secretary of the Interior. Tribes cannot unilaterally offer sports betting without a compact, even if the state has legalized sports wagering elsewhere. Federal law (including the Wire Act, UIGEA, and tax obligations) still applies to tribal sports betting operations. The NIGC regulates compliance with IGRA and approves key employees and management contracts.

State-by-State Guides

Federal law sets the floor — but every state layers its own rules on top. Find your state's specifics:

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

Pending Federal Sports Betting Legislation

Live data from Congress.gov. Updated daily. Pending = introduced and not yet enacted, vetoed, or signed into law.

S 2773 (119th Congress)

What it does: WAGER Act.

Latest status: Read twice and referred to the Committee on Finance. (2025-09-11)

Source: Congress.gov. Data refreshes daily — verify with the linked bill page before relying on it.