Online gambling is a fairly recent practice, yet a very controversial one. Its history began in the 90's, as the internet began increasing in popularity. One of the first events to take place was when the government of an island in the Caribbean, Antigua and Barbuda, passed a law in 1994 which allowed online casinos to base there. This was called the Free Trade and Processing Act. Realizing the almost endless possibilities of making money through online gambling, several entrepreneurs jumped at the now legal chance to start this new venture.

Different companies were formed that same year and more continued to be formed in the years that followed. Some of these companies were creating online casinos, and others were designing the software needed to run the financial transactions of online gambling and developing new games. As online casinos started to increase in number and become an extremely lucrative business, with reported revenues of nearly 835 million dollars in 1998 alone, different layers of the U.S government began to take notice. One in particular, Senator Jon Kyl, a Republican from Arizona, decided he would be the leader against online casinos and introduced the Internet Gambling Prohibition Act in an attempt to restrict gambling activity in the United States. The bill failed to pass in Congress, and online gambling continued to flourish, possibly even better thanks to the media attention it had received courtesy of the senator.

As online gambling continued, a few companies created software packages that could be leased by online gaming sites for a percentage of their earnings. This helps many new online gaming sites appear. Around this time, Canada also began to curb online gaming activities, raiding offices and eventually fining one of the largest online gambling servers.

In 1999, Senator Kyl presents a revised version of his Prohibition Act bill, and once again, it fails to gain the support needed in order to pass. Meanwhile, Australia allows the creation of an online casino, which in the end became the only one allowed and is currently still in operation. Although many more would-be casinos attempted to obtain licenses in Australia, the Australian government quickly formed a law preventing any new online gambling operations.

In 2000, Republican Senator Bob Goodlatte of Virginia introduces a further revised Prohibition Act to congress, and it is once more turned down. The following year, two bills that would help cut online gambling are passed in Congress. One was an updated version of the Wire Act, which makes it unlawful for individuals to be involved in the business of betting or gambling. The other bill attempts to prevent online payment to online casinos by prohibiting institutions based in the U.S. from handling such payments, making it more difficult for U.S. residents to engage in online gambling.

A few lawsuits occurred in the years that followed, and in 2006, several arrests of online gambling CEOs were made. At the same time, the U.S imposed sanctions on offshore gambling companies, resulting in Antigua and Barbuda filing a case with the World Trade Organization, which rules that U.S. actions are discriminatory and unlawful.

Nonetheless, in October, 2006, the Unlawful Internet Gambling Enforcement Act is approved by congress, although many question the integrity of the means used to pass it. Online casinos continue to operate and attempt to change laws to their favor; meanwhile, most operate offshore, although U.S residents still make up a large part of their clientele.