The Role of Geofencing and Geolocation in Gaming and Sports Betting Compliance

In the gaming and sports betting industries, understanding geofencing and geolocation is not just a technical consideration—it's a legal necessity. For operators in the United States, where gambling laws vary widely by state, these tools are critical to ensuring compliance and avoiding legal pitfalls.

Why Geolocation Matters

Geolocation technology allows gaming operators to pinpoint the location of a user attempting to access their platform. This is particularly important in the U.S., where gambling laws differ significantly across state lines. Operators must ensure that users are physically located in a state where their services are legal before allowing them to place bets or engage in skill-based gaming.

A prime example of this can be seen in the early days of sports betting legalization. In 2018 and 2019, sports gambling was illegal in New York but legal in neighboring New Jersey. Every Sunday morning during football season, geolocation data showed hotspots of sports betting activity clustered right over the George Washington Bridge, the Lincoln Tunnel, and bridges connecting Pennsylvania to New Jersey. These were bettors crossing state lines to place wagers legally.

This highlights the critical role geofencing plays in restricting access and ensuring compliance with state-specific laws.

Geolocation in Skill-Based Gaming and Mobile Apps

The same principles apply to skill-based online gaming and mobile app gaming. States vary widely in their definitions of what constitutes illegal gambling, and operators must navigate these differences carefully. Some states have lenient definitions, allowing for broader operations, while others maintain stricter regulations that can prohibit certain types of games altogether.

For operators, geolocation tools are indispensable for:

Restricting Access: Ensuring users can only access gaming platforms where they are legally allowed to operate. Without proper geofencing, you risk serving users in prohibited jurisdictions, which can lead to enforcement actions and platform removal.

Avoiding Penalties: Preventing unauthorized bets or gameplay in states with stricter laws. State attorneys general and gaming regulators actively monitor for violations, and the penalties can be severe—including fines, cease-and-desist orders, and potential criminal charges.

Maintaining Compliance: Adhering to the regulatory requirements of each state where the operator offers services. Many states require operators to demonstrate robust geolocation technology as a condition of operating legally.

The Technology Behind Compliance

Modern geolocation systems use multiple data points to verify a user's location with high accuracy. These typically include:

GPS Data: The most accurate method, using satellite positioning to determine exact coordinates. However, GPS can be unreliable indoors or in areas with poor signal.

Wi-Fi Positioning: Uses nearby Wi-Fi networks to triangulate location. This is particularly effective in urban areas and indoor environments.

Cell Tower Triangulation: Determines location based on proximity to cellular towers. While less accurate than GPS, it provides broader coverage.

IP Address Geolocation: The least accurate method, but useful as a supplementary verification tool.

The most robust systems combine multiple methods to ensure accuracy and prevent users from spoofing their location through VPNs or other tools.

Key Considerations for Operators

To operate successfully in the United States, gaming operators need a thorough understanding of the legal landscape and the technology that supports compliance. Key considerations include:

State-by-State Variance: Some states have lenient gambling laws, while others are highly restrictive. Operators must be aware of the rules in each state where they plan to offer services. For example, Louisiana, Arkansas, and Washington have particularly strict definitions of gambling that can catch operators off guard.

Geolocation Technology: Investing in robust geofencing tools to accurately detect user locations and prevent access in restricted areas. The technology must be reliable, difficult to circumvent, and regularly updated to account for changes in state laws.

Legal Guidance: Consulting with experienced attorneys to navigate the complexities of U.S. gambling regulations and ensure ongoing compliance. The legal landscape is constantly evolving, with new states legalizing various forms of gaming while others tighten restrictions.

Documentation and Audit Trails: Maintaining detailed logs of geolocation checks and access restrictions. These records are essential if your compliance is ever questioned by regulators or if you face legal action.

User Experience Balance: While strict geofencing is legally necessary, operators must implement it in a way that doesn't frustrate legitimate users. False positives—blocking users who are actually in a permitted jurisdiction—can harm your business and reputation.

Real-World Compliance Challenges

Even with sophisticated technology, geolocation compliance presents ongoing challenges:

Border Areas: Users near state lines may experience connectivity issues or false location readings. Operators need buffer zones and clear customer support processes to handle these situations.

VPN Detection: Some users attempt to mask their location using VPNs or proxy servers. Your system must detect and block these attempts while minimizing false positives for users with corporate VPNs or privacy tools.

Mobile Devices: Smartphones can present unique challenges, particularly when users have location services disabled or are using older devices with less accurate positioning technology.

The Consequences of Non-Compliance

Failing to implement proper geolocation controls can have severe consequences:

Regulatory Action: State gaming commissions and attorneys general can issue cease-and-desist orders, impose fines, or pursue criminal charges against operators who allow illegal gambling.

App Store Removal: Apple and Google both require strict compliance with gambling laws. Violations can result in immediate removal from their app stores, effectively ending your mobile distribution.

Payment Processor Termination: Banks and payment processors will terminate relationships with operators who facilitate illegal gambling, cutting off your ability to process transactions.

Civil Liability: Users who place illegal bets may sue to recover their losses, claiming the operator should have prevented them from gambling in the first place.

Conclusion

Geofencing and geolocation are critical tools for gaming and sports betting operators in the U.S., enabling them to comply with varying state laws and avoid costly legal issues. By understanding the regulatory landscape and leveraging technology effectively, operators can expand their reach while maintaining compliance.

The technology is only half the equation—you also need legal expertise to interpret and apply state-specific regulations correctly. A robust geolocation system paired with experienced legal counsel creates a strong foundation for compliant operations.

If you're a gaming operator looking to navigate the complex U.S. legal environment, Jacobs Counsel can help. We provide the legal analysis, opinion letters, and ongoing compliance support you need to operate confidently across state lines. Contact us today to ensure your operations are compliant and positioned for success.