Sports Arbitrage Trading For US-residents

Sports arbitrage trading can be pursued from virtually anywhere since most of the bookmakers involved are on the web and can also be reached by phone. However, there are some issues which specifically affect participants in the US.

It is legal for US-residents to trade. However, it is questionable whether or not it is legal for sportsbooks to accept bets from US-residents and this makes it necessary for US-resident traders to make more preparations than others. There are indeed many US-resident traders enjoying considerable success with sports arbitrage.

Interestingly, in the US it is clear that all betting is fully taxable and the IRS expect betting profits to be included in full on tax returns. In this case, you should be sure to also include all of your betting-related losses and expenses in order to minimize the tax liability.

Up until recently, regulation of gambling in the United States was left exclusively to the State Legislatures, who determined the legality or otherwise of gambling activities within their jurisdiction. Some states legalized many forms of gambling, while others legislated to make it illegal to participate in any form of gambling other than the state’s lottery. Nevada is the obvious example of a State which has embraced gambling as a legal form of commerce, while Utah is a noted for its strong anti-gambling stance, and laws deeming all forms of gambling within its jurisdiction illegal.

US State gambling laws were all drafted long before the advent of the Internet, and they do not have provisions dealing specifically with online gambling.

US Federal Gambling Laws

So far, US Government attempts to pass legislation dealing specifically with online gambling have been unsuccessful. Separate Bills sponsored by Sen. Kyle and Rep. Goodlatte, each attempted to ban online gambling but failed to attract the required 2/3 majority Senate vote required to become law. Whilst it is likely that there will be more attempts to pass legislation dealing specifically with online gambling (either to to regulate or to ban), until such legislation is passed existing federal legislation serves as the only guide on this issue.

Federal laws relating to gambling were passed by Congress to deal with inconsistencies in State based gambling laws, especially as they applied to interstate commerce. Although passed recently, US federal laws applying gambling activities were all drafted before the advent of Internet gambling. There are a number of current federal laws that have indirect application to online gambling. These are discussed below.

1. The Wire Wager Act

The Wire Wager Act is the statute that may be applied most directly to restrict the use of the Internet as to gamble. It prohibits the use of a wire transmission facility to foster a gambling pursuit. It provides, in part:

“Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both”.

 

Exactly how this Act applies to Internet wagering is hotly debated. One school of thought in legal circles is that the Wire Act broadly covers any interstate use of the Internet that is related to placing or receiving bets. A second school of thought is that the Wire Wager Act cannot be applied to online gambling generally for two reasons. First, the words “wire communication facility” only apply to transmissions that use wires and the proliferation of wireless Internet access would therefore fall outside the scope of the Act. Second, reference to “bets or wagers on any sporting event or contest” implies the Act might only apply to wagering upon sporting events (not card games or other games based upon chance).
The above issues aside, it is clear that even if the Wire Wager Act can be applied to Internet gambling, it can only be applied to those “being engaged in the business of betting or wagering.” It cannot apply against the online gambler or Internet service providers.

2. The Travel Act, The Interstate Transportation of Wagering Paraphernalia Act, The Professional and Amateur Sports Protection Act, The Federal Aiding and Abetting Statute

The above 4 Statutes all contain provisions that could be construed to apply to internet gambling. However, as for the Wire Wager Act, the question of the validity of their application is hotly debated, and even if they could be adjudged to apply to Internet gambling, their application would be restricted to operators only, and not players or peripheries (ISP’s etc).

See also

Unlawful Internet Gambling Enforcement Act

Gambling Law US

As a result of the current situation, a number of credit card issuers in the US now refuse to authorise any transactions which look as though they may be with any type of gambling site. This can seriously hamper your ability to fund your accounts. You will also find that a most UK & Australian bookmakers like BetBubbles will currently not accept business originating in the US.

Having made a decision to become involved with sports arbitrage, your task becomes one of taking measures to enable you to trade with all books without restriction. Most US-based traders spend some time setting up either UK or Canada-based forwarding addresses and then go on to establish bank accounts in the respective country. This enables them to trade with all sportsbooks without restriction.