Exploring the UIGEA and How It Affects U.S. Online Gambling

The most significant piece of legislation, from the standpoint of law enforcement, in the history of online gambling in the United States has been the Unlawful Internet Gambling Enforcement Act of 2006, which is commonly known inside the industry as the UIGEA.

This particular act, in effect, bans any business engaged in gambling from accepting any money in association with gambling by way of the internet, and uses the federal government's powers of regulation of banks to facilitate it. There are carve-outs, namely fantasy sports and certain intra-state gambling that may be already legal in that particular state, e.g., horse racing.

The way the UIGEA became law was suspicious at best. It was, in fact, passed on the last day of a congressional session in 2006, right before the break for the mid-term elections. It was a rider added onto the Port Security Improvement Act, which was unrelated, and the "champion" of the UIGEA was Bill Frist, a U.S. senator from Tennessee who was about to leave office. Some lawmakers stated that they had not even seen the text of the bill before voting on it, leaving the impression that it was jammed through "under the table" as part of another piece of legislation to which there was little in the way of controversy or objection.

The intention of the UIGEA was to cut off the supply of funding that would go from a customer to a casino or sportsbook in the way of deposits. So regulations were promoted with the idea of establishing policies on the part of banks and any other avenues by which payment could be made (electronic wallets, etc.) by which any gambling-related transaction could be blocked. Certainly there were going to be ways that operators of gambling businesses could get around the law, but it would be problematic at best, and so many operators simply decided to leave the United States market. Some of these businesses that were publicly traded on exchanges outside of the United States considered it to be too risky for them to be involved in something that was potentially illegal.

Other companies that saw opportunity in the American market, which is the largest in the world, undertook to find ways to bring customers in and fund accounts. It may be more difficult, but it is not impossible, though some operators circumvented the UIGEA in ways that left them exposed legally. In April of 2011, three of the major players in the poker market - Absolute Poker, Full Tilt Poker and PokerStars - were indicted for violating the UIGEA, by camouflaging gambling-related payments to players (through financial institutions) as payment for something else that was largely fictitious. This, to date, has been the biggest blow dealt to any gaming operators as an after-effect of the UIGEA, and it has had its impact throughout the industry.

UIGEA Resources

http://en.wikipedia.org/wiki/Unlawful_Internet_Gambling_Enforcement_Act_of_2006

http://www.casinolistings.com/legal/uigea-news-and-analysis

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