Regulatory Compliance Checklist for Launching Betting Platform in USA

Regulatory Compliance Checklist for Launching Betting Platform in USA

The online betting industry in the United States has experienced rapid growth in recent years, spurred by the 2018 repeal of the Professional and Amateur Sports Protection Act (PASPA). Since then, individual states have been empowered to regulate sports betting, leading to a patchwork of legal frameworks across the country. This evolving legal landscape offers both opportunities and challenges for businesses entering the market.

Importance of Regulatory Compliance

Operating a betting platform in the US requires strict adherence to state and federal laws. Failure to comply can result in heavy fines, loss of licenses, and even criminal charges. Regulatory compliance is essential for legal operation and establishing credibility with users, investors, and partners. This checklist is designed to help operators ensure they meet all legal requirements before launch.

Purpose of the Checklist

This checklist provides a comprehensive guide for entrepreneurs and businesses preparing to launch a betting platform in the United States. By following it, operators can streamline the setup process, mitigate legal risks, and ensure a smooth, compliant launch.

Understand Federal and State Gambling Laws

A thorough understanding of the legal landscape is essential before launching an online betting platform in the United States. While federal laws set overarching limitations, each state has the autonomy to regulate—or prohibit—online gambling within its borders. This dual-layered regulatory structure means that any company entering the market, especially a sports betting app development company, must navigate both federal compliance requirements and the specific regulations of each state in which it intends to operate.

Federal Laws

• Wire Act (1961)
  Prohibits the use of wire communication facilities to transmit bets or wagering information across state lines. This law restricts interstate gambling, making it essential that all betting activity and associated data (including payments) remain within the legal boundaries of a single state.

• Unlawful Internet Gambling Enforcement Act (UIGEA, 2006)
  Prohibits businesses from knowingly accepting payments related to unlawful online gambling. UIGEA doesn't define what is illegal gambling — it relies on other federal or state laws — but it imposes significant compliance obligations on payment processors and betting platforms.

• Professional and Amateur Sports Protection Act (PASPA, 1992 — overturned in 2018)
  This act was struck down by the Supreme Court, enabling states to legalize sports betting individually. The repeal of PASPA is the key development that opened the door for state-level regulation of online sports betting.

State-Level Regulations

• Legalized States
  As of now, online betting is fully legal and regulated in several states, including:
  • New Jersey

  • Pennsylvania

  • Nevada

  • Michigan

  • Colorado

  • Connecticut

  • Illinois

  • New York

• Each of these states requires licensing, adherence to strict operational guidelines, and geolocation controls to ensure users are within state lines.

• States with Pending or Restrictive Legislation
  Some states have bills in progress or only allow limited forms of online gambling (e.g., horse racing, daily fantasy sports). Others, like Utah and Hawaii, have strict anti-gambling laws and are unlikely to legalize online betting in the near term.

Action Items:

• Conduct legal due diligence for each state where you plan to operate.

• Engage local legal counsel familiar with gambling law.

• Stay informed on legislative developments in target states.

Obtain the Necessary Licenses

Before launching, your betting platform must obtain the appropriate licenses for each type of gambling activity and for every jurisdiction in which you plan to operate. Licensing is one of the most critical — and complex — steps in achieving regulatory compliance.

Types of Licenses Required
The type of license you need depends on the services your platform offers:

Sports Betting License – Required for offering fixed-odds or live sports wagering.

Casino Gaming License – For platforms offering slots, table games, and other online casino products.

Poker License – For peer-to-peer poker games.

Vendor/Supplier License – Required if you are providing software, payment processing, or platform support to a licensed operator. This includes any sports betting API provider whose technology integrates with a betting platform or facilitates wagering operations.

Affiliate License – In some states, affiliates promoting betting platforms must be licensed.

Each license comes with distinct application criteria, operational restrictions, and technical requirements.

State-by-State Licensing Process
Each state has its own regulatory body, application process, and compliance framework. Examples include:

New Jersey:
Regulator: NJ Division of Gaming Enforcement (DGE)
Requirements: Background checks, financial disclosures, platform testing, partnership with a land-based license holder
Timeline: 3–6 months (may vary)

Pennsylvania:
Regulator: Pennsylvania Gaming Control Board (PGCB)
Requirements: $10 million application fee (sports wagering), operational controls, software certifications
Timeline: 4–6 months

Michigan:
Regulator: Michigan Gaming Control Board (MGCB)
Requirements: Partnership with a tribal or commercial casino, in-depth vetting
Timeline: 3–6 months

Note: Many states require partnerships with brick-and-mortar casinos or racetracks.

Costs and Processing Times
Application fees can range from $100,000 to $10 million, depending on the license type and state.

Background checks and technical assessments often extend processing times.

Legal and consulting fees should also be budgeted — these can add significantly to upfront costs.

State-by-State Licensing Process

Each state has its own regulatory body, application process, and compliance framework. Examples include:

• New Jersey:
  Regulator: NJ Division of Gaming Enforcement (DGE)
  Requirements: Background checks, financial disclosures, platform testing, partnership with a land-based license holder
  Timeline: 3–6 months (may vary)

• Pennsylvania:
  Regulator: Pennsylvania Gaming Control Board (PGCB)
  Requirements: $10 million application fee (sports wagering), operational controls, software certifications
  Timeline: 4–6 months

• Michigan:
  Regulator: Michigan Gaming Control Board (MGCB)
  Requirements: Partnership with a tribal or commercial casino, in-depth vetting
  Timeline: 3–6 months

Note: Many states require partnerships with brick-and-mortar casinos or racetracks.

Costs and Processing Times

• Application fees can range from $100,000 to $10 million, depending on the license type and state.

• Background checks and technical assessments often extend processing times.

• Legal and consulting fees should also be budgeted — these can add significantly to upfront costs.

Ongoing Compliance and Renewal

• Regular Audits – Financial and technical audits may be required quarterly or annually.

• License Renewals – Most licenses must be renewed every 1–3 years with continued compliance and updated disclosures.

• Reporting – Operators are typically required to submit periodic reports covering revenue, operations, incidents, and responsible gambling efforts.

• Change of Control or Key Personnel – Must be disclosed and sometimes re-approved by regulators.

Action Items:

• Identify target states and determine license types needed.

• Prepare documentation in advance (ownership structure, financials, platform specs).

• Consult with regulatory attorneys to manage applications and interactions with state gaming commissions.

Partner with a Licensed Casino or Sportsbook (If Required)

In several U.S. states, online betting platforms are not permitted to operate independently. Instead, they must partner with an existing, state-licensed land-based casino, racetrack, or sportsbook. These partnerships serve as a regulatory gateway, enabling online platforms to legally enter the market under the umbrella of the land-based licensee.

Why Partnerships Are Required

• Regulatory Alignment: States use existing licensed facilities as anchor points for extending online betting privileges.

• Revenue Sharing: The land-based partner typically receives a portion of online betting revenue.

• Accountability: Partnering with a licensed entity provides regulators with a local point of contact for compliance oversight.

States That Require Partnerships

• New Jersey: Online operators must partner with a land-based casino in Atlantic City.

• Pennsylvania: Online sportsbooks and casinos must operate under a licensed casino or racetrack.

• Michigan: Requires partnerships with either a tribal casino or one of the three commercial casinos in Detroit.

• Illinois: Online sportsbooks must tether to a land-based casino, racetrack, or sports venue.

Examples of Successful Partnerships

• FanDuel & Meadowlands Racetrack (NJ): FanDuel launched its sportsbook in New Jersey through a strategic partnership with Meadowlands, now one of the top-performing sportsbooks in the state.

• BetMGM & Borgata (NJ): BetMGM, the digital arm of MGM Resorts, operates through Borgata Hotel Casino & Spa, an MGM property in Atlantic City.

• DraftKings & Casino Queen (IL): DraftKings entered Illinois via a partnership and rebranding deal with Casino Queen in East St. Louis.

• Barstool Sportsbook & Penn National Gaming (Multiple States): Penn’s ownership stake in Barstool allowed for seamless expansion in multiple regulated markets.

Action Items:

• Research partnership requirements in your target states.

• Approach licensed casinos or racetracks with a clear proposal and compliance plan.

• Draft and negotiate partnership agreements with legal counsel familiar with gaming law.

• Register the partnership with the relevant state regulator as part of your licensing process.

Implement Geolocation and Age Verification

Ensuring that users are of legal age and located within the boundaries of a jurisdiction where betting is permitted is fundamental to maintaining compliance. U.S. regulators place strict requirements on these areas, and failure to meet them can lead to fines, license suspension, or revocation.

Geolocation Compliance

• Geofencing Technology:
  Platforms must use advanced geolocation tools to verify that users are physically located within a state where online betting is legal. This typically involves:
  • Device IP address analysis

  • GPS and Wi-Fi triangulation

  • Browser location services

  • Cell tower signal tracking for mobile users

• Approved Providers:
  Common vendors like GeoComply offer regulatory-grade solutions that integrate seamlessly with betting platforms and report directly to state regulators.

• Enforcement:
  Transactions attempted from outside legal jurisdictions must be blocked in real-time. Even false positives (e.g., close to a state border) can trigger compliance issues if not handled properly.

Age Verification

• Legal Minimum Age:
  Most states mandate that users be 21 or older to participate in online sports betting or casino gaming.

• Verification Methods:
  • User-submitted government-issued ID (e.g., driver’s license or passport)

  • Social Security Number (SSN) verification for U.S. citizens

  • Cross-checking against third-party databases (e.g., credit bureaus or ID verification services)

• Real-Time Checks:
  Verification should occur before account activation or deposit, not after.

Know Your Customer (KYC) Compliance

• Required Data Points:
  • Full name

  • Date of birth

  • Physical address

  • SSN or TIN (where applicable)

  • Government-issued ID

• KYC Goals:
  • Prevent fraud and identity theft

  • Ensure eligibility (age and jurisdiction)

  • Support AML (Anti-Money Laundering) efforts

• Best Practices:
  • Use KYC tools that integrate with AML screening

  • Store customer data securely and comply with state and federal data privacy laws (e.g., CCPA, GDPR if applicable)

Action Items:

• Partner with licensed geolocation and identity verification providers.

• Design your onboarding flow to block users who fail age or location checks.

• Implement a robust KYC protocol before allowing deposits or gameplay.

Ensure Secure Payment Processing

Payment processing is a high-risk area in online betting, strictly governed by U.S. regulations such as the Unlawful Internet Gambling Enforcement Act (UIGEA). Operators must implement secure, transparent, and compliant financial systems that support both user experience and regulatory expectations.

Compliance with UIGEA

• Scope of UIGEA:
  The UIGEA prohibits businesses from knowingly accepting payments related to unlawful online gambling. While the law does not make online gambling illegal by itself, it criminalizes the processing of payments for unlicensed or unauthorized gaming activities.

• Operational Impact:
  Betting operators must ensure they:
  • Only operate in jurisdictions where they are fully licensed

  • Work with banks and payment processors that understand and support legal gambling

  • Monitor transactions for suspicious or illegal activity

Approved Payment Gateways

• Specialized Providers:
  Not all payment processors handle gambling transactions. Use approved gateways experienced with high-risk industries, such as:
  • Worldpay

  • Paysafe

  • Nuvei

  • Sightline Payments

  • Trustly

  • PayNearMe (for cash deposits)

• Support for Multiple Payment Methods:
  • Debit/Credit cards (Visa, Mastercard — with restrictions)

  • ACH/eChecks

  • Online banking transfers

  • Digital wallets (e.g., PayPal, Venmo – where permitted)

  • Prepaid cards

  • Cryptocurrency (very limited acceptance and subject to extra scrutiny)

Anti-Money Laundering (AML) Policies

• AML Program Requirements:
  • Written policies and procedures

  • Customer Due Diligence (CDD)

  • Suspicious Activity Reporting (SAR)

  • Transaction monitoring systems

  • Employee training programs

• Regulatory Oversight:
  Regulators (e.g., the Financial Crimes Enforcement Network — FinCEN) may audit your platform for AML compliance. Failure to meet these standards can result in significant penalties.

• Best Practices:
  • Set deposit and withdrawal thresholds to flag large transactions

  • Require enhanced verification for high-risk users

  • Regularly review AML protocols with legal counsel and compliance officers

Action Items:

• Integrate a payment processor that is licensed for gambling transactions.

• Design workflows to flag and report suspicious transactions.

• Implement and maintain a formal AML compliance program in line with federal and state requirements.

Implement Responsible Gambling Measures

Responsible gambling is a critical component of regulatory compliance and ethical platform operation. U.S. states require betting platforms to provide users with tools and resources to manage their gambling behavior and prevent addiction.

Self-Exclusion Programs

• Voluntary Self-Exclusion:
  Users must be able to voluntarily exclude themselves from accessing their accounts for a set period (temporary or permanent).

• Integration with State Databases:
  Many states maintain self-exclusion lists that operators are required to check and enforce. Integration may be mandatory (e.g., New Jersey, Pennsylvania).

• Immediate Enforcement:
  Once a self-exclusion request is received, the account must be locked immediately and all marketing communications halted.

Deposit Limits and Cooling-Off Periods

• Deposit and Spending Limits:
  Platforms should allow users to set:
  • Daily, weekly, or monthly deposit and wagering limits

  • Maximum time limits for gameplay sessions

• Cooling-Off Periods:
  Users should be able to initiate a cooling-off period, during which they are locked out of their account for a chosen timeframe (e.g., 24 hours, 7 days).

• Enforceable by Design:
  These features must be easy to access, irreversible during the active period, and prominently displayed in account settings.

Links to Problem Gambling Resources

• Prominent Placement:
  Include visible links on your website and app to professional help services.

• Recommended Resources:
  • National Council on Problem Gambling (NCPG)

  • 1-800-GAMBLER helpline

  • State-specific resources (e.g., New Jersey’s Council on Compulsive Gambling)

• Mandatory Messaging:
  Many states require specific responsible gambling messages to appear on marketing materials and in-app banners (e.g., “Bet with your head, not over it”).

Action Items:

• Build or integrate responsible gambling tools directly into the platform.

• Train customer support staff to recognize and respond to signs of problem gambling.

• Stay updated on evolving state-specific RG requirements and adapt accordingly.

Data Protection and Cybersecurity

Handling sensitive user data — including financial, identity, and location information — places a legal and ethical obligation on operators to maintain the highest standards of privacy and security. Regulatory compliance must align with both state and federal requirements to protect users and mitigate the risk of breaches.

Compliance with State and Federal Data Privacy Laws

• State-Level Requirements:
  • California Consumer Privacy Act (CCPA): Grants California residents rights to know, delete, and opt out of data sharing. If your platform serves CA users, compliance is mandatory.

  • Other States: States like Colorado, Connecticut, Virginia, and Utah have enacted similar privacy laws. Platforms must tailor compliance to each jurisdiction where they operate.

• Federal Guidelines:
  • While the U.S. lacks a single federal privacy law, regulators such as the FTC enforce consumer data protection under fair trade practices.

  • If applicable, comply with financial-sector standards such as the Gramm-Leach-Bliley Act (GLBA).

• Best Practices:
  • Publish a clear privacy policy

  • Obtain affirmative consent for data collection

  • Honor user data access and deletion requests

Encryption and Secure Storage of User Data

• Data Encryption:
  • Use AES-256 encryption or better for sensitive data in transit and at rest.

  • Apply TLS/SSL certificates to secure all web traffic.

• Access Controls:
  • Enforce role-based access to user data.

  • Regularly update credentials, use multi-factor authentication (MFA) for admin accounts.

• Data Retention Policies:
  • Store only the data necessary for operations and regulatory reporting.

  • Purge inactive user data per legal and internal policies.

Fraud Prevention Measures

• Real-Time Monitoring:
  • Monitor for unusual betting patterns, account takeovers, and chargeback fraud.

  • Use machine learning or behavior analytics to detect anomalies.

• Transaction Limits & Triggers:
  • Set thresholds to flag large or rapid deposit/withdrawal activity.

  • Require enhanced verification for high-risk behavior.

• Third-Party Tools:
  • Integrate fraud detection services like ThreatMetrix, Sift, or Kount.

Action Items:

• Conduct regular cybersecurity audits and penetration testing.

• Develop and enforce a written Information Security Policy.

• Maintain incident response and breach notification plans in compliance with state laws.

Advertising and Marketing Restrictions

Promoting your platform must be done responsibly and in accordance with both federal and state laws. Regulators closely monitor gambling-related marketing to prevent misleading content and protect vulnerable populations.

FTC and State-Specific Advertising Rules

• Federal Trade Commission (FTC):
  Advertising must be truthful, non-deceptive, and evidence-based. Claims such as "guaranteed wins" or misleading payout rates can trigger enforcement action.

• State Regulations:
  States like New Jersey, Pennsylvania, and Illinois impose additional requirements, including:
  • Pre-approval of advertising content

  • Mandatory disclosures about odds and terms

  • Prohibitions on using unlicensed celebrity endorsements or fake testimonials

Prohibitions on Targeting Minors or Vulnerable Groups

• Minors:
  Ads must not be directed at individuals under 21 (or under the legal age in the jurisdiction). Avoid cartoon imagery, youthful slang, or platforms primarily used by minors (e.g., TikTok, YouTube Kids).

• Vulnerable Groups:
  • Do not advertise using themes or messaging that exploit financial desperation or addiction.

  • Avoid aggressive retargeting or high-pressure tactics.

Mandatory Responsible Gambling Disclaimers

• Required Disclaimers:
  • Include responsible gambling messages such as:
    
    
    “If you or someone you know has a gambling problem, call 1-800-GAMBLER.”
    

  • Prominently display disclaimers on ads, promotions, and the platform interface.

• Opt-Out Mechanisms:
  Users must be allowed to opt out of marketing communications at any time.

9. Tax Compliance

Online betting operators must fulfill strict tax obligations at both the federal and state levels. Noncompliance can lead to audits, fines, and license suspension.

Federal and State Tax Obligations

• Corporate Taxation:
  Your platform is subject to corporate income tax on net revenue, based on your business structure and where operations are conducted.

• State-Level Gaming Taxes:
  Most states impose gaming-specific taxes on gross revenue (e.g., 15–36% depending on the state). These must be reported and paid regularly (monthly or quarterly).

Reporting Winnings to the IRS

• Form W-2G:
  Required when a user wins:
  • $600 or more in sports betting (if the payout is 300x the wager)

  • $1,200 or more in slot machine or bingo winnings

  • $5,000 or more in poker tournament prizes

• Backup Withholding:
  If the player fails to provide a valid Taxpayer Identification Number (TIN), the operator may be required to withhold 24% of the winnings for the IRS.

• User Access to Tax Forms:
  • Provide downloadable 1099/W-2G forms in user dashboards

  • Notify users via email when forms are ready for tax season

Action Items:

• Implement reporting systems to track and report user winnings.

• Work with a tax advisor familiar with gaming revenue and IRS compliance.

• Stay current on changing tax rates and thresholds in each jurisdiction.

Ongoing Compliance and Audits

Compliance isn’t a one-time task — it requires continuous effort and vigilance. Regulatory authorities conduct periodic reviews to ensure operators uphold licensing conditions and protect users.

Regular Reporting to Regulatory Bodies

• Financial Reports:
  Monthly or quarterly reports detailing gross gaming revenue (GGR), tax contributions, and promotional spend.

• Operational Metrics:
  Some jurisdictions require reporting on user activity, bet volumes, KYC verification rates, and RG (responsible gambling) tool usage.

• Incident and Breach Notifications:
  Prompt reporting of security breaches, AML violations, or responsible gambling issues is often mandatory.

Third-Party Audits for Fairness and Security

• RNG and Game Fairness Audits:
  Independent testing labs (e.g., GLI, iTech Labs) must verify the integrity of Random Number Generators (RNGs) and game outcomes.

• Security Audits:
  Regular penetration testing and security reviews must be performed and submitted to regulators. Audits cover infrastructure, data handling, and threat detection systems.

• Certification Maintenance:
  You may be required to maintain certifications such as ISO/IEC 27001 (information security) or PCI DSS (payment security).

Staying Updated on Legal Changes

• Ongoing Legal Monitoring:
  State laws evolve rapidly — bills legalizing or restricting betting are frequently introduced.

• Subscription to Alerts:
  Subscribe to legal tracking services or gaming law bulletins to stay ahead of compliance updates.

• Compliance Officer or External Counsel:
  Appoint an internal compliance lead or retain a law firm to interpret and implement new regulations as they arise.

Why Choose Bettoblock for Betting Platform Development and Integration Services?

Bettoblock stands out as a trusted partner for businesses aiming to enter the fast-evolving online betting industry. With years of experience in gaming technology and regulatory markets, we specialize in delivering scalable, compliant, and fully integrated platforms that help operators go live faster and with greater confidence. Whether you're a startup looking for a turnkey launch or an established brand expanding into new jurisdictions, our expertise ensures that your entry into the betting space is smooth, secure, and strategically sound.

One of our core offerings is a powerful sportsbook software provider designed to accelerate time-to-market while reducing the technical and operational overhead of building from scratch. Our platform comes pre-equipped with sportsbook software, payment integrations, risk management tools, KYC and geolocation modules, and a suite of player engagement features—all customized under your brand. This enables you to focus on growth, marketing, and customer experience, while we handle the technology and compliance behind the scenes.

At Bettoblock, we also take pride in providing unmatched regulatory support. From helping you understand and navigate licensing processes to ensuring full compliance with state and federal gambling laws, our legal and operational advisors are with you at every step. For businesses that want a reliable, scalable, and fully supported betting platform, our white label sportsbook solution offers the perfect combination of speed, flexibility, and compliance.

Conclusion

Launching a betting platform in the U.S. is a major opportunity, but it comes with strict legal responsibilities. Operators must understand both federal and state gambling laws, secure licenses, and often partner with licensed land-based casinos. Compliance also includes implementing geolocation, age verification, and KYC protocols. Ensuring secure payments, anti-fraud controls, and responsible gambling features is essential from day one.

Data privacy and cybersecurity must be prioritized to protect user information and meet regulations like the CCPA. Advertising must follow FTC rules and avoid targeting minors, while accurate tax reporting, including to the IRS, is mandatory. Ongoing compliance requires regular audits and legal updates. Working with gambling attorneys and compliance experts is crucial for long-term, lawful success.