Traditionally, gambling regulation in the U.S. has been reserved for the state governments. As is the case with the Wire Act, however, sometimes federal law supercedes state law. The Department of Justice has on many occasions expressed its belief that the Wire Act prohibits all forms of online gambling in all the U.S. states. The Wire Act was enacted in 1961 to prevent bookmakers from accepting sports bets over the telephone. Accusations of Wire Act violations are usually accompanied by other charges, including conspiracy, money laundering, and violations of the RICO Act, Travel Act and Illegal Gambling Business Act. Enforcement of the Wire Act is directed at the gambling operator, and there is no language that makes it illegal for a consumer to place a wager.

Because the Act was written in 1961 its language is limited to communication systems that use "wires," and the types of betting it describes are limited to fixed odds propositions such as are offered on sporting and other events. It simply was not possible to have foreseen remote casino and poker games as far back as 1961, so taken literally, the language of the Wire Act is not adequate to apply to casino gaming and poker over the Internet. In a case involving online gamblers who tried to get their credit card debts ruled unenforceable because their online casino gambling had been illegal, the U.S. Court of Appeals for the Fifth Circuit (Louisiana) declared in 2002 that the gambling losses were indeed enforceable because "the Wire Act does not prohibit non-sports Internet gambling."

The DOJ disagrees with the Fifth Circuit Court of Appeals decision, and the Wire Act still serves as the foundation for all of the DOJ’s arguments against the legality of Internet gambling for both sports wagering and non-sports wagering. DOJ officials have asserted this belief several times before Congress since 2002. It has also asserted this belief when advising the U.S. Virgin Islands and the states of Nevada and North Dakota against regulating online gaming and when threatening to prosecute media companies who advertised for online gambling companies with aiding and abetting an illegal activity in 2003.

The DOJ was successful in convicting Jay Cohen, president of World Sports Exchange, for Wire Act violations in 2000.

In the fall of 2006 the United States enacted the Unlawful Internet Gambling Enforcement Act (UIGEA), which makes it illegal for financial institutions to facilitate payment transactions between offshore gambling operations and American customers. The law says nothing about it being illegal for a person located in the U.S. to gamble on an Internet site, however. The Federal Reserve and Treasury are now in the midst of drafting the regulations under which this new law will be enforced. There is speculation that the regulations may exempt banks from preventing the use of paper checks, electronic checks and ACH deposits because of the vast burden monitoring these payment forms would impose on them.

The UIGEA has resulted in the online gambling industry’s publicly listed companies withdrawing from the American market, but most of the private companies continue to serve it. These private companies are betting that the UIGEA will prove ineffective in blocking payments, and they continue to operate in jurisdictions outside the reach of U.S. authorities.

Federal gambling law does not address games of skill.

Internet gambling on horse racing is permitted by the Interstate Horse Racing Act in states that have chosen to regulate such wagering. Although the DOJ insists that the Act is not consistent with the Wire Act it has never filed charges against any of the many domestic remote horse race wagering operators.

Internet horse race wagering has been specifically legalized in the states of California, Nevada, Oregon and South Dakota.

The states of Illinois, Michigan, Indiana, Nevada, Oregon, South Dakota, Washington and Louisiana have all passed legislation that specifically prohibits unauthorized forms of Internet gambling. All forms of gambling are illegal in Hawaii and Utah.

Nevada legislators have passed a law permitting intrastate Internet wagering but have taken few steps to introduce a system. Such a system would require technology that can sufficiently verify a player’s age and location. The DOJ has also said such a system would violate federal law.

Officials from the US Treasury and the Department of Justice published the 52 pages of proposed regulations that they hope will enforce the UIGEA in October of 2007.

Under the proposed rule, financial firms that participate in designated payment systems must implement policies and procedures that are designed to halt payments being made to gambling businesses in connection with unlawful Internet gambling.

Certain participants in designated payment systems would be exempt from the proposed rule because the government questions the practicality of these participants attempting to identify and block unlawful Internet gambling transactions. For example, participants in automated clearing houses, check collection and wire transfer systems would be exempt, barring a beneficiary’s bank or a bank that is directly involved with an illegal gambling business.

The proposed rule also outlines the types of policies and procedures that non-exempt participants in designated payment systems may adopt in order to prevent transactions that are restricted by the UIGEA.

The Federal Reserve and Treasury and the DOJ requested that comments about the proposed rule be submitted by December 12, 2007.

In April 2008, federal regulators and representatives of the financial services community testified before Congress that any attempts to enforce the UIGEA would result in serious regulatory burdens. A result of the testimony was new legislation introduced by Reps. Barney Frank and Ron Paul, proponents of legalizing and regulating online gaming, that would prohibit the Department of the Treasury and Federal Reserve System from implementing any regulations related to the UIGEA.

In October 2008, the state of Kentucky was granted permission by the Franklin County Circuit Judge Thomas Wingate to begin the seizure of gambling websites. In January 2009, the Kentucky Court of Appeals overturned the ruling in a 2-1 decision because domain names are not gambling devices under Kentucky law. Kentucky State Officials are appealing the decision at the State Supreme Court.

As of December 2009, regulations for the enforcement of the UIGEA have not been adopted.

In September of 2009, the Interactive Media Entertainment and Gaming Association (iMEGA) challenged the UIGEA legislation, stating that the law was vague and intruded on individual privacy rights. The US Third Third Circuit Court of Appeals upheld the UIGEA and rejects iMEGA's arguments.