Online Gambling Reforms: Inside the NCLGS Model Internet Gaming Act

Addressing Fragmentation in iGaming Regulation

Online gambling in the U.S. is a patchwork quilt of regulations. Some states embrace it; others shun it. Even among the seven states where iGaming is legal, rules about tax rates, player protections, and licensing vary widely. This inconsistency creates headaches for operators and leaves consumers unsure about what protections are in place.

That’s where the Model Internet Gaming Act seeks to smooth out these rough edges by introducing universal standards. It’s not a one-size-fits-all approach, but rather a flexible framework that states can adapt to their needs. At its core, the Act aims to streamline licensing, tighten compliance requirements, and promote best practices, ensuring that all stakeholders — states, operators, and players — benefit. Here are three pillars of the draft:

Licensing and Compliance

Under the proposed law, operators and suppliers must secure five-year licenses. This isn’t just a rubber-stamp process. Applicants must undergo rigorous background checks to prove their financial stability, integrity, and adherence to Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols. Existing sports betting operators in good standing may benefit from an expedited application process — a nod to leveraging established infrastructure.

Taxation Guidelines

One of the Act’s standout features is its recommendation of a 15%-25% tax rate on adjusted gross revenue. This range balances generating state revenue with maintaining market competitiveness. It’s a sweet spot that reflects the U.S. average (19%) while steering clear of extremes like Pennsylvania’s 54% rate on online slots. States adopting this range could enjoy healthy tax revenue without driving operators away.

Responsible Gaming Measures

The legislation places significant emphasis on player protection:

• Self-Exclusion Tools: Players can voluntarily exclude themselves from platforms.
• Deposit and Spending Limits: Daily, weekly, and monthly caps aim to prevent over-gambling.
• Advertising Restrictions: Promotions targeting minors or appearing on college campuses are prohibited, and all ads must include responsible gaming messages.

Ban on Sweepstakes Casinos

Perhaps the most talked-about feature of the draft is its outright ban on sweepstakes casinos. These operations, which mimic traditional casino games while skirting regulatory oversight, have long been a thorn in the side of the gaming industry. They exploit legal loopholes, operate without licensing, and often target vulnerable populations.

Under the proposed Act, sweepstakes casinos would face severe penalties: fines of $10,000 to $100,000 per violation, with repeat offenders risking imprisonment. By categorizing these activities as illegal, the legislation aims to close loopholes and restore clarity to what constitutes lawful gaming.

The American Gaming Association (AGA) has applauded this move, emphasizing in their document that unregulated gaming machines — whether sweepstakes, gray, or skill-based — pose risks to consumers and undermine the integrity of the broader gaming industry. The Act’s hardline stance sends a clear message: only transparent and regulated gaming activities are welcome.

Collaborative Development and Public Input

The draft legislation reflects months of collaboration among lawmakers, industry experts, and stakeholders. Input came from representatives of states like Michigan, Pennsylvania, and Massachusetts, as well as organizations such as the Massachusetts Council on Gaming and Health and Spectrum Gaming Group.

The NCLGS has made it clear: this is not a rigid mandate but a living document designed to adapt to individual states’ needs. Public comments are open until December 31st, 2024, offering stakeholders a chance to weigh in before revisions are finalized.

Implications of the Model Internet Gaming Act for the Gaming Industry

The Model Internet Gaming Act could have far-reaching impacts:

• For States: A unified framework simplifies the legislative process, ensuring iGaming contributes to state revenues and protects consumers.
• For Operators: Consistency across states reduces compliance costs and barriers to entry.
• For Players: Robust protections enhance trust and safety in the online gambling experience.

However, challenges remain. States with entrenched gaming interests or high tax rates may resist adopting the framework. Additionally, implementing such a comprehensive act will require significant coordination among lawmakers, regulators, and the industry.

The Model Internet Gaming Act isn’t just a legislative proposal — it’s a vision for the future of online gambling in the United States. By addressing inconsistencies, promoting responsible gaming, and taking a firm stand against unregulated activities, it lays the groundwork for a safer, more transparent industry. Whether it achieves its goals will depend on how states embrace and adapt it, but one thing is certain: the conversation about the future of iGaming just got a lot more interesting.