The Isle of Man has become a model for online gaming countries due to the legislative framework set by the Electronic Transactions Act of 2000 and the On-Line Gambling Regulation Act of 2001, which legalized e-gaming operation in the country. Applications for online gaming licenses were initially accepted on the Isle of Man in June of 2001. By 2002, licenses were distributed to five gaming operators from around the world. The rapid growth of the market, however, was followed by an even more rapid crash. By 2003, no gaming operators held a license from the island. The Isle of Man has restructured its regulations and infrastructure to rebuild the market. Licensing is now overseen by the Department of Trade and Industry, and there is no longer a USD $2 million surety bond requirement. Instead, an insurance bond is required and its price is negotiable, making licenses more available to smaller operators.

In April of 2005, the island announced a zero rate of income tax for the e-gaming sector.

The licensing application fee is £1,000. The annual license fee for a betting site is £35,000. There is a 1.5% tax on gross gaming yield up to £20,000,000. Yields over that amount are taxed at a reduced rate.

The corporation tax is 0%, provided the site does not accept bets from Isle of Man residents. As with land-based gaming, e-gaming regulations are reviewed and enforced by the Gambling Control Commissioners.

As of April 2009, there were approximately 16 operators licensed in the Isle of Man.

In February 2010, the Isle of Man announced changes to its gambling regulations, now making it legal for iGaming firms to base their non-gambling related activities such as marketing, administration, software downloads, customer support and relay servers, without an Online Gambling Regulation Act 2001 license.