Understanding Online Gambling Licenses

What are online gambling licenses? Why do online casinos need gambling licenses?

gambling license

Gambling License: What Is It? Why Is It Important?

Legalized online gambling in the United States is not a question of if, but when it will happen nationwide. It seems like every other month, another state is legalizing online gambling. As it stands, 10 states have some form of legalized online gambling: online casinos, online sports betting, or online poker.

Those 10 states are:

  • New Jersey
  • Pennsylvania
  • Indiana
  • West Virginia
  • Iowa
  • New Hampshire
  • Nevada
  • Delaware
  • Oregon
  • Rhode Island

While only 20% of the country might not seem like a lot, the writing is on the wall when you consider that all but two states — Hawaii and Utah — have legalized some form of in-person gambling.

However, before we can get to the point of every state offering online slots, online blackjack, or legal online sports betting, there is one huge requirement. Before an online casino can open, it must obtain a gambling license.

Gambling licenses, also known as gaming licenses, in the U.S. are issued by the state in which the casino (land-based or online) operates. Furthermore, each state has its own gaming board, which is designed to regulate all gambling businesses within its borders.

It is illegal to run a gambling operation — a casino or otherwise — without acquiring a license from your state gaming board.

What is a Gambling License?

A gambling or gaming license gives a company or organization legal authority to conduct gambling operations publicly in the state within which that license is acquired. In other words, any business that facilitates any gambling activity without first obtaining a gaming license is breaking the law and risking stiff legal repercussions.

In basic terms, it gives a company approval to conduct gambling practices publicly. However, it isn’t as simple as it sounds as there are many strict rules and regulations that come with this license to ensure a safe and fair gambling experience for customers and employees alike.

The process of obtaining a gaming license can take a casino anywhere from a few months to a year. This depends on a variety of factors within the application because there are several different levels of background checks that precede the approval of the license. The goal is to confirm that the prospective casino will be a reliable and trustworthy place for people to play.

The Purpose of Gaming Licenses

Most governments that issue licenses to gambling operations have a specific list of rules that the businesses must follow. Some of the most common rules a gaming establishment must follow are:

  • Pass a “fit and proper person” test for owners and senior management.
  • The random number generator (RNG) software must undergo regular periodic testing and validation.
  • Observe a list of permitted (and prohibited) clientele.
  • Publish and maintain current data on each offered game’s return to player (RTP) percentage.
  • Provide telephone, email, and/or online chat customer support information.
  • Display elapsed playing time in all gaming software.
  • Establish limits on deposits.
  • Establish and observe waiting periods on limit increases.
  • Respond quickly and fairly to complaints.

These guidelines are in place to safeguard both the casino and its players against a variety of potential problems and errors on a daily basis. Those employed by casinos, those playing at them, and even the games being played need to be up to a certain standard to try to minimize these problems and be able to remedy them if and when they do occur.

Another very important reason for acquiring a license is to establish credibility. Banks and credit card companies will not approve transactions with unlicensed companies, so a casino could only get so far without one.

How To Get an Online Gaming License

For companies vying for online gambling licenses, there is a detailed process involved. First, they must reach an agreement with a land-based casino. This provides an extra sense of credibility as the land-based casino has already been through the licensing and testing process, so having a contract with a legitimate casino ensures that the online company will act in accordance with its land-based counterpart.

Once the online company strikes a deal with a land-based casino, the licensing process can begin. The first step is particularly thorough and, therefore, can be the longest part of the process. The company must undergo a check of each part of its business operations. This is to make sure the company is financially and legally stable enough to sustain an online casino.

Next, there is a lengthy personnel check. The state of New Jersey requires that all company employees undergo a deep background check including finances, criminal records, assets/liabilities, etc. This is done to reduce the chances of incidents, such as fraud or theft, from occurring within the company.

Finally, the company will have to submit its games to the state for testing in an independent lab. This is to identify and eliminate any flaws in the game that could lead to problems down the line. After this, the company will submit a $100,000 application fee and then wait for the results. If the application is approved, the initial fee will be applied toward the $400,000 licensing fee. A company that receives approval for its online gaming license will be in the clear to operate publicly for the next five years.

The reason this process is so extensive — and expensive — is primarily to protect the consumer. This process weeds out companies that aren’t as legitimate or as serious about online gambling. It also makes online gambling much safer for the consumer as there are records of everything and not as much room for error.

From the perspective of the consumer, a licensed casino is much more attractive due to its success rate. Games that have been thoroughly tested should never have problems, so the consumer should never unjustly lose their money. And even if these kinds of problems do arise, licensed casinos are required to have people to help in such situations. Therefore, the experience should be seamless for consumers, which will lead to an ideal gaming experience.

Online Gambling in New Jersey

New Jersey, which has one of the strictest gaming boards worldwide, has seen tremendous success since it legalized online gambling. New Jersey enjoyed a net revenue of $220 million from online gaming in 2017 alone. So, while the process can be a hassle, it clearly is paying off to get everything right before opening a gaming company to the public.

Licensed online casinos in New Jersey make a lot of sense because the land-based casino partners in Atlantic City are some of the most popular casinos in the country. For New Jersey residents who live in other parts of the state and want to play without making the 2+ hour drive down south, it’s a smart business move to have vetted online gaming options instead. The presence of established online casinos statewide provides an equal experience for all without sacrificing quality.

This sentiment can be extended to the rest of the U.S., as well, as a strong gaming experience for all is something that Americans should be able to expect. Gambling licenses are the foundation for a healthy and reputable gaming experience for everyone.