Cross-Border Betting: The Legal Gray Areas Between U.S. States

The rise of sports betting across the United States has created a complex and often confusing legal landscape, particularly when it comes to cross-border betting. While the Supreme Court’s 2018 repeal of PASPA (the Professional and Amateur Sports Protection Act) allowed individual states to legalize and regulate sports betting, the patchwork of state laws has led to legal gray areas. Bettors, operators, and regulators alike face challenges in determining what is permitted when wagers cross state lines.

The Legal Patchwork of U.S. Sports Betting

As of late 2024, over 35 states have legalized sports betting in some form, but regulations vary widely from state to state. Some states, such as New Jersey and Pennsylvania, offer robust online and mobile betting markets, while others, like Mississippi, only allow in-person wagering at licensed casinos.

This patchwork creates situations where a bettor in one state can legally place an online wager, but if they travel across state lines—even momentarily—their bet may become illegal. For example, a New York resident who frequently wagers on sports via a mobile app cannot place a bet if they travel to Texas, where sports betting remains prohibited.

The Role of Geolocation Technology

To enforce these state-by-state restrictions, sportsbooks rely on geolocation technology to verify a bettor’s physical location before allowing them to place a wager. Companies like GeoComply use sophisticated software to track users’ IP addresses, GPS data, and Wi-Fi triangulation to ensure compliance with state laws.

However, even with geolocation safeguards in place, there have been instances where bettors attempt to circumvent restrictions using VPNs or spoofing techniques. Such actions can lead to account suspensions, loss of funds, or even legal consequences, as states work to prevent unauthorized cross-border betting.

The Federal Wire Act and Its Implications

A key legal hurdle in cross-border betting is the Federal Wire Act of 1961. Originally enacted to combat organized crime and illegal gambling rings, the law prohibits the transmission of betting information across state lines. Although the Department of Justice issued an opinion in 2011 stating that the Wire Act applies only to sports betting, a 2018 DOJ reinterpretation suggested that all forms of online gambling could be affected.

This uncertainty has caused challenges for sportsbooks that operate in multiple states. While bettors may assume they can place wagers freely when traveling between states that have legalized sports betting, the Wire Act prevents sportsbooks from processing bets that cross state lines. For example, a bet placed in Indiana cannot be processed by a New Jersey-based server, even if both states have legalized sports betting.

Border Town Betting: The Unique Challenges

In states where sports betting is legal, residents who live near the border of a state without legalized betting often face difficulties. A prime example is Missouri, which has not yet passed sports betting legislation. Bettors in cities like Kansas City must physically cross the border into Kansas to place legal bets on their mobile apps.

This has led to an influx of “border bettors” who travel just far enough to trigger geolocation approval before placing wagers. Casinos and sportsbooks in states like Illinois and Iowa have reported similar trends, with bettors from neighboring states frequently crossing over to legally place bets before heading back home. This practice raises concerns for regulators who want to ensure that only residents of legal states have access to sports betting.

The Gray Areas of Multi-State Betting Pools

Another emerging issue is the concept of multi-state betting pools. Some states, like Nevada and New Jersey, have expressed interest in forming shared sports betting liquidity pools to enhance the betting market. However, the Wire Act complicates this effort, as interstate betting on sports remains legally questionable.

By contrast, states have successfully established multi-state agreements for online poker, where player pools from states like Nevada, New Jersey, and Delaware are combined. The sports betting industry is watching closely to see if similar agreements can be structured without violating federal law.

The Challenges for Sportsbooks Operating in Multiple States

For major sportsbook operators like DraftKings, FanDuel, and BetMGM, operating in multiple states means adhering to different regulatory frameworks. Each state has unique licensing requirements, tax structures, and compliance measures. This forces sportsbooks to maintain separate operations in each state, which increases costs and administrative burdens.

Additionally, sportsbooks must navigate state-specific rules on promotional offers, bet types, and advertising restrictions. For instance, a sportsbook may offer a risk-free bet promotion in New Jersey but not in Arizona due to varying state regulations.

Potential Federal Solutions and Industry Advocacy

As cross-border betting continues to create challenges, some industry stakeholders are pushing for federal legislation to standardize sports betting regulations. Proponents argue that a national framework would reduce confusion, improve consumer protections, and allow for more streamlined operations across state lines.

However, opponents believe that sports betting should remain under state control, allowing states to tailor regulations to their specific needs. Given the political climate and states’ desire to control gambling tax revenue, a federal solution remains unlikely in the near future.

The Future of Cross-Border Betting

The legal gray areas surrounding cross-border betting are unlikely to disappear anytime soon. As more states legalize sports betting, regulators, lawmakers, and sportsbook operators will need to address these challenges to ensure a seamless experience for bettors while staying compliant with federal and state laws.

In the meantime, bettors should remain aware of state-specific laws and avoid attempting to bypass geolocation restrictions. As technology advances and the legal landscape evolves, the hope is that clearer guidelines will emerge to facilitate responsible and legal cross-border sports betting in the U.S.