Iowa Gambling Regulation

Sitting between the Mississippi and Missouri Rivers, Iowa is a state that is situated in the Midwestern part of the USA. It is the 13th most populated US state, and what it is best known for are its rolling plains and endless cornfields.

Unlike most other states, Iowa boasts rather permissive gambling-related laws, which is yet another thing the territory is recognized for. In fact, the Hawkeye State, as Iowa is also known, now has a thriving gambling market because it is home to over 20 brick-and-mortar casinos. Yet, citizens of the state will not get to enjoy the same profusion when online casinos are concerned due to the fact that this form of gambling is off limits.

Sports betting is also a much-enjoyed pastime within the lines of the state, and its citizens can engage in such activities over the Internet and offline.

According to a survey conducted by the Oxford Economics and American Gaming Association back in 2013, the gambling market brought the state over $2.5 billion, while the total tax revenue stood at $726 billion. As it becomes evident from the figures, the gambling industry bears upon the economy of the state and adds value to it.

The legislation of the state leaves almost no room for interpretations in terms of the legality of the different forms of gambling as it is clearly-cut and unambiguous. Still, what is rather surprising about Iowa is that a great store is set by referendums on whether gambling activities should be continued in the individual counties or not.

Iowa Gambling Laws

Something essential that should be mentioned about the gambling-related legislation of the USA is that it continues to be highly restrictive even today. Since each state is entitled to regulate the different forms of gambling on its own, the legality of sports betting and playing casino games varies from one state to another.

New Jersey and Pennsylvania are among the states where gambling continues to thrive at an unseen pace. Iowa has also got a fair share of attention as its gaming market has started to gain momentum during the past few years.

Iowa’s Nascent Gambling Industry

Pari-Mutuel Wagering Act

Establishment of the Very First Riverboat Casinos

Iowa and its Referendums

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Iowa’s Nascent Gambling Industry

Iowa is certainly not like the rest of the USA states that have a tough stance on gambling. In essence, citizens of the state were not permitted to engage in any kind of gambling activities between 1846 and 1972 when Article III of the Constitution was repealed.

The Constitution of the state that was in place back in 1846 declared the sale of lottery tickets and the authorization of lotteries unlawful, and the same terms were incorporated into the state’s constitution from 1857. The term lottery was utilized so as to describe the different forms of gambling, rather than to describe one specific form. Pinball machines were also prohibited after a decision of the Supreme Court of Iowa because of the availability of the element of chance. This also called into question the legality of bingo.

The grip of the state started to loosen back in 1970 when the idea to repeal section 28 of Article III, which addresses gambling was put on the table. When the ban on the lottery was lifted back in 1973, citizens of the state were permitted to engage in raffles and games of chance, which is the case with bingo.

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Pari-Mutuel Wagering Act

One more landmark event from the development of the gambling industry in Iowa was the approval of the Pari-Mutuel Wagering Act back in 1983, which legalized wagering on dog and horse races. The State Racing Commission was established under the provisions of the Act, and it was appointed at the beginning of July the same year.

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Establishment of the Very First Riverboat Casinos

The next few years were no less eventful when the gambling industry in the Hawkeye State was concerned as the state lottery, together with excursion boat gambling were given the green light.

Interestingly enough, Iowa’s very first riverboat casino opened its doors in April 1991. Initially, there were a total of three riverboats per day, but just a month after that day, one more was introduced.

Several major pieces of legislation were given the nod in March 1994 when the imposed limits on wagers and losses were removed, and the age restriction for taking part in gambling activities was raised from 18 to 21 years.

Gambling-related regulations were further relaxed in the next few years, which resulted in the establishment of tribal gaming centers and brick-and-mortar casinos.

What is essential to note is that the access of Iowa’s citizens to the different types of casino games is not circumscribed, which is a common occurrence across some of the other US states. What this means is that players are entitled to wager on slots, poker, video poker, casino-style bingo, together with table and card classics.

As it was already mentioned, the gambling industry in Iowa is streets ahead when compared to other parts of the USA as the state prides itself over 23 gambling premises that include a racino, riverboat casino, tribal bingo casinos, tribal casinos, and brick-and-mortar casinos, and most of these are concentrated in the city of Council Bluffs.

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Iowa and its Referendums

As it turns out, the approach Iowa’s policymakers have assumed is out of the common run because multiple referendums on gambling-related matters have been held throughout the years. Referendums are held every eight years, and depending on the results, gaming operators will be permitted to continue providing their services or will be forced to cease operations. Interestingly enough, since 1994 when the first referendum took place, voters have invariably supported the expansion of the gambling industry within their counties.

Something essential that is worth noting, however, is that the operations of the three Native American casinos are impervious to the results from the referendums for the simple reason that they fall under the oversight of a separate structure.

Iowa and Online Casinos

In spite of the fact that most forms of gambling are made legal within the lines of the state, the same cannot be said about playing casino games over the Internet. The gambling market in Iowa poses as a growth-driver, which is the reason why the lack of a significant legislative push for the legalization of web-based casinos comes as a surprise.

Legal Status of Online Casinos

Online Casinos in Iowa and the Road Ahead

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Legal Status of Online Casinos

Although online betting is not specifically addressed, Iowa’s Code declares that citizens of the state are not allowed to possess gambling devices and gives a description of what such devices are. Under the provisions of the Code, a gambling device “means a device used or adapted or designed to be used for gambling and includes, but is not limited to, roulette wheels, klondike tables, punchboards, faro layouts, keno layouts, numbers tickets, slot machines, Pachislo skill-stop machine or any other similar machine or device, push cards, jar tickets, and pull-tabs”.

When sports betting was legalized, including its virtual form, many citizens of the state hoped that the same would happen with playing casino games remotely. Since no mention was made about this form of entertainment, brick-and-mortar casinos remain players’ only choice.

One of the attempts to legalize online gambling was back in 2012 when policymakers insisted on the creation of a poker network. This idea was ultimately repudiated because of the rejections introduced by Republicans.

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Online Casinos in Iowa and the Road Ahead

It turns out that the Coronavirus pandemic has driven interest in the legalization of interactive casinos in Iowa, and there is an increasing number of gaming operators that pursue the adoption of regulations that will decriminalize playing casino games over the Internet.

With this in mind, whether policymakers will put the question of the legal status of online casinos in the Hawkeye State during their next session is yet to be seen.

Although gaming operators are prohibited from running interactive casinos within the territory of the state, there are a number of offshore casinos that cater to the needs of players. Playing at such casinos might not incur penalties of some kind, but the risks such actions bear should not be underestimated.

Presently, several of the brick-and-mortar casinos that operate within the lines of Iowa have introduced social casino sites. The options that are available to lovers of this type of entertainment include Harrah’s Council Bluffs, Horseshoe Council Bluffs, Bettendorf, and Waterloo, among others.

Wagering on Sports in Iowa

As far as sports betting and wagering on fantasy sports in Iowa goes, punters are permitted to take part in such activities over the Internet and offline after 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).

Something essential that should be noted, however, is that gambling enthusiasts will only be entitled to wager on sports remotely, provided that they have already downloaded the app of the bookie they have settled on and have visited its premises in order to wrap up the registration process by proving their identity and age.

Interestingly enough, sports betting is still in its infancy in the state as this form of gambling was made legal back in 2019, which made Iowa the 11th state to give punters the go-ahead to lay their stakes on sports. The regulation of wagering on sports betting and fantasy sports was assigned to the Racing and Gaming Commission.

Iowa was the very first Midwestern state that signed off on wagering on sports, and Indiana and Illinois followed into its footsteps shortly after this.

Gambling enthusiasts will not be prevented from betting on sports through handheld devices too, provided that they are physically on the territory of Iowa. As is the case with other US states where online betting is not against the law, a geofencing will be employed so that any attempts to bet on sports outside Iowa will be staved off.

Iowa Taxes on Gambling

No matter whether gambling enthusiasts are residents of Iowa or not, they will be required to pay a tax on the winnings they have managed to amass.

On most occasions, the amount players will be prompted to pay will be withheld when the generated winnings are paid out. While betting on sports or playing casino games on the territory of Iowa, 5% of their winnings will be deducted for the income tax purposes of the state. The portion of the winnings that go for federal tax purposes stands at 24%. What is important to remember is that in some cases, filing an income tax return might also be required.

It is worth noting, however, that players will be exempted from withholding, provided that they have bet at American Indian Casinos. Still, players will be required to pay an income tax on their winnings.

Lottery winnings are subject to withholding, given that the amount the individual has won goes over $600. Players’ winnings will be subject to withholding also if they have taken part in raffles or have wagered on games of skill or chance, and the amount won is greater than $600.

As far as parimutuel betting goes, a withholding tax will be imposed on winnings that overstep the $1,000 limit. Finally, players will be required to pay a withholding tax on their winnings from slot machines, no matter whether it comes to racetracks or riverboats, on condition that they pass over the $1,200 threshold.

Who is Required to Pay Iowa Income Tax on Winnings

Out-of-state Winnings and Tax for Non-residents of Iowa

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Who is Required to Pay Iowa Income Tax on Winnings

Another thing gambling enthusiasts need to be aware of is that they will be required to report their winnings as “other income”, no matter if they have won them while betting on horse or dog races, bingo, lotteries, raffles, or while playing casino games.

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Out-of-state Winnings and Tax for Non-residents of Iowa

Non-residents of the state, on the other hand, will be required to file a return of source income, given that the winnings they have collected outrun the $1,000 limit, while their gross income is greater than $9,000.

In terms of out-of-state winnings, residents of Iowa will be entitled to file an income tax return and of course, pay the respective levy on the specific amount in that other state. What they should be mindful of, however, is that they will be liable to pay a tax on these winnings in Iowa as well.

Gaming Regulatory Bodies in Iowa

Iowa’s Racing and Gaming Commission started functioning after the Pari-Mutuel Wagering Act was given the nod back in 1983, and currently, it is the only regulator that is tasked with the oversight of gambling-related activities within the state.

Under the provisions of the act, the Governor is responsible for appointing all the five members the Commission is made up of. Still, the appointment of the Commission members does not go without the approval of Iowa’s Senate. The term of the members cannot last longer than three years, and a maximum of three of its representatives can be from one and the same party.

The responsibilities the Commission is assigned are broad-ranging, and they include administration of both, the Excursion Boat Gambling Act and the Pari-Mutuel Wagering Acts. Therefore, betting on fantasy sports, sports betting, and commercial betting, among others, fall under the purview of the Commission.

Providing licenses to gambling operators and guaranteeing the protection of gambling enthusiasts are two more of the objectives of the Commission.

Conclusion

There is no denying that Iowa is one of the US states with the most gambling-friendly climates. Its residents are given an extensive range of brick-and-mortar casinos to take a pick from. Sports bettors are not prevented from taking part in their favorite pastime as well, and they are entitled to decide if they prefer to place their stakes over the Internet or offline.

Perhaps, the biggest issue for residents of the Hawkeye State is that playing casino games remotely is illegal. With this in mind, players seem to be ripe for the changes that need to be introduced to the state’s legislation in order to lift the ban. In spite of the fact that the most likely change might be the legalization of online casinos, the road ahead remains unclear at this point.