Situated between the Mississippi and Missouri rivers, Iowa is located in the Midwestern United States. It is the 13th most populous US state, and it is best known for its rolling plains and endless cornfields.
Unlike most other states, Iowa has relatively permissive gambling-related laws, another reason the state is well known. In fact, the Hawkeye State, as Iowa is also known, now has a thriving gambling market because it is home to more than 20 brick-and-mortar casinos. However, residents do not enjoy the same abundance when it comes to online casinos because this form of gambling is off-limits.
Sports betting is also a popular pastime in the state, and residents can engage in it both online and offline.
According to a survey conducted by Oxford Economics and the American Gaming Association in 2013, the gambling market generated more than $2.5 billion for the state, while total tax revenue amounted to $726 billion. These figures make it clear that the gambling industry has a positive impact on the state’s economy.
State legislation leaves little room for interpretation regarding the legality of the various forms of gambling, as it is clear-cut and unambiguous. Still, Iowa relies heavily on referendums to decide whether gambling activities should continue in individual counties.
Iowa Gambling Laws
It is important to note that the gambling legislation in the USA remains highly restrictive today. Because each state is entitled to regulate different forms of gambling independently, the legality of sports betting and casino games varies from one state to another.
New Jersey and Pennsylvania are among the states where gambling has been expanding at an unprecedented pace. Iowa has also drawn considerable attention, as its gaming market has gained momentum over the past few years.
Iowa’s Nascent Gambling Industry
Pari-Mutuel Wagering Act
Establishment of the Very First Riverboat Casinos
Iowa and its ReferendumsIowa and Online Casinos
Although most forms of gambling are legal in the state, online casino gaming remains prohibited. Iowa’s gambling market is viewed as a growth driver, making the lack of a significant legislative push for the legalization of web-based casinos surprising.
Legal Status of Online Casinos
Online Casinos in Iowa and the Road AheadWagering on Sports in Iowa
Regarding sports betting and fantasy sports in Iowa, bettors have been allowed to participate both online and offline since Senate Bill 617 was approved. Under the provisions of the bill, “sports wagering as provided by this chapter is legal when conducted by a licensee” (Division I; Sports Wagering; Section 1).
However, bettors can wager on sports remotely only after they have downloaded the sportsbook’s app and visited the operator’s premises to complete registration by verifying their identity and age.
Sports betting is still in its infancy in the state, as this form of gambling became legal only in 2019, making Iowa the 11th state to allow bettors to wager on sports. Regulation of sports betting and fantasy sports was assigned to the Racing and Gaming Commission.
Iowa was the first Midwestern state to approve sports wagering, and Indiana and Illinois followed in its footsteps shortly afterward.
Bettors can also wager from handheld devices, as long as they are physically within Iowa. As in other US states where online betting is legal, geofencing is used so that any attempts to place sports bets outside Iowa are blocked.
Iowa Taxes on Gambling
Regardless of residency, gambling enthusiasts are required to pay tax on their winnings earned in Iowa.
In most cases, the tax owed is withheld when winnings are paid out. When betting on sports or playing casino games within Iowa, 5% of winnings is deducted for state income tax purposes. An additional 24% is withheld for federal taxes. Players should keep in mind that they may still need to file an income tax return in some situations.
However, withholdings do not apply to winnings earned at American Indian Casinos, although the income remains taxable.
Lottery winnings are subject to withholding when the amount exceeds $600. The same threshold applies to winnings from raffles and games of skill or chance, meaning amounts greater than $600 trigger withholding.
For parimutuel betting, withholding applies to winnings over $1,000. Finally, players are required to pay withholding tax on slot machine winnings from racetracks or riverboats when the payout exceeds $1,200.
Who is Required to Pay Iowa Income Tax on Winnings
Out-of-state Winnings and Tax for Non-residents of IowaGaming Regulatory Bodies in Iowa
Iowa’s Racing and Gaming Commission began operating after the Pari-Mutuel Wagering Act was approved in 1983, and it is currently the only regulator overseeing gambling activities in the state.
Under the act, the Governor appoints all five members of the Commission. These appointments require confirmation by the Iowa Senate. Commissioners serve terms of no more than three years, and no more than three commissioners may belong to the same political party.
The Commission’s responsibilities are broad and include administration of both the Excursion Boat Gambling Act and the Pari-Mutuel Wagering Acts. Therefore, fantasy sports, sports betting, commercial gambling, and other activities fall under the Commission’s purview.
Issuing licenses to gambling operators and protecting players are two additional objectives of the Commission.
Conclusion
There is no doubt that Iowa is one of the most gambling-friendly states in the country. Residents can choose from a wide range of brick-and-mortar casinos. Sports bettors can also enjoy their favorite pastime and may decide whether to place their wagers online or in person.
Perhaps the biggest issue for residents of the Hawkeye State is that playing casino games online is illegal. Given this, players appear ready for the legislative changes needed to lift the ban. Although the most likely change would be the legalization of online casinos, the road ahead remains unclear.