Iowa Governor Kim Reynolds has approved a wide-ranging gambling bill that strengthens enforcement against unlicensed sweepstakes operators while reshaping how the state handles tax withholding on gambling winnings.

Reynolds signed Senate File 2289 on May 15, giving the Iowa Racing and Gaming Commission expanded authority to pursue unauthorized betting and sweepstakes businesses operating in the state. It also updates financial reporting rules tied to gambling payouts and raises reimbursement limits for commission members.

In a letter sent to Secretary of State Paul Pate, Reynolds wrote, “I hereby transmit: Senate File 2289, an Act relating to matters under the purview of the department of inspections, appeals, and licensing, and including effective date provisions.” She added, “The above Senate File is hereby approved on this date.”

The legislation allows state regulators to issue enforcement actions against companies or individuals offering gambling products in Iowa without proper licensing approval. This applies to sports wagering, fantasy sports contests, pari-mutuel wagering, advance deposit wagering, and sweepstakes-style gambling platforms.

One section of the legislation states the commission may take action “including but not limited to issuing cease and desist orders and obtaining injunctive relief against a person offering games of chance, gambling, sports wagering, or illegal sweepstakes in this state without holding an appropriate license issued by the commission or otherwise being specifically authorized by law.”

Iowa anti-sweepstakes bill comes amid national scrutiny

The bill follows growing debate over online sweepstakes casinos and other gambling products operating outside traditional regulatory systems. We previously reported that Iowa lawmakers advanced the proposal after concerns that unlicensed operators were reaching consumers without following the same standards required of state-approved sportsbooks and casinos.

Lawmakers in other states have also started taking similar action. In Maine, legislators recently approved a bill banning online sweepstakes casinos entirely.

Iowa’s new law also increases penalties tied to unlawful sports wagering activity. People convicted of certain betting violations may now face permanent exclusion from sports wagering, advance deposit sports wagering, excursion gambling boats, and licensed gambling facilities overseen by the commission.

Another section rewrites Iowa’s gambling withholding requirements by removing older fixed-dollar thresholds and connecting withholding obligations directly to federal reporting standards.

Under the updated language, state income tax “shall be withheld” on certain gambling winnings when the winnings are “in an amount sufficient to require that an information return be filed pursuant to 26 U.S.C. §6041.”

A fiscal analysis released May 20 projected the changes would remain revenue neutral overall, though some tax collections could arrive later than before. Analysts estimated Iowa’s General Fund may temporarily lose $7.8 million during fiscal year 2027 before that money shifts into fiscal year 2028 collections.

Featured image: Governor Kim Reynolds via Facebook

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