Gambling is a hobby that many nationalities, including Americans, enjoy. Because it is available in the World Wide Web, there is much danger as to the security and accuracy of the profiles of the players. However, what the government is most concerned about is the profits of the players that must be taxed in accordance with Internal Revenue Service (IRS) regulations.

This is supported by the fact that Internet gambling is illegal due to the Wire Act, introduced in 1961. This act banned sports betting done in shops or over the phone. However, since there were no computers yet in the decade when this act was established, no law was made to address online gambling.

Though there were several attempts by various officials and institutions to amend the law, no one has been successful enough to clarify the legal and official stand of the country concerning online gambling.

Nevertheless, the U. S. Department of Justice insists that gambling on the Internet is still illegal. Therefore, this becomes a problem when it comes to taxes, especially because the IRS requires all gambling winnings, especially those from the Internet, to be reported to their office.

However, many online casinos refuse to divulge their earnings and avoid any arm of the government that tries to prosecute them. Nevertheless, the IRS can also prosecute them for not admitting their profits.

The IRS decided to implement the rule that US-based online gambling sites shall send W2G tax forms to the players, so they can report their profits individually. However, there is a problem when it comes to the companies operating in Gibraltar and Antigua, because they simply instruct the players to pay the applicable federal, state and local taxes.