UIGEA – What Is It & How Did It Effect Online Poker?

While the US government made attempts in the past to push anti-gambling legislation no one could foresee the passing of the Unlawful Internet Gambling Enforcement Act (UIGEA), to have such a detrimental effect as it did. For many the passing of the bill was a complete shock and shook the entire industry, from online players, to the sites who immediately stopped accepting them, to the payment processors who literally closed down overnight.

This article provides a little bit of insight into the passing of the UIGEA, the impact it had on the gambling industry as a whole and the legal ramifications the UIGEA has had since.

History of the UIGEA

Ever since the late 90’s, the US government has made many futile attempts to pass an anti-gambling legislation. Their efforts were unsuccessful simply because a bill such as anti-gambling was easier said than done. Each year the bill was brought to the house, and each year it would go un-passed with most attempts running out of time because of the amount of controversy and discussion that took place among senators. It wasn’t until 2006 that the move towards an anti-gambling legislation really went into overdrive. Many of the US Senators were now preaching that online gambling was taking money from the pockets of Americans. US citizens were sending billions to offshore companies that could not be taxed and in turn was causing a huge drain to the US economy. Not to mention their biggest argument thus far has been that these companies destroy families and create degenerate gamblers and at one point even went as far to say that online gambling helped fuel terrorists through money laundering schemes.  Even with the mass media publishing these claims, many Americans felt that online gambling was a personal choice. In 2006 the bill was again pushed back.

The Midnight Squeeze

Although the bill had once again been defeated the Republican’s were not going to take it lying down. During the summer of 2006, two bills were introduced to the House – the Goodlatte Bill and the Leach Bill. The difference between the two bills was that the Goodlatte Bill was created to expand the Wire Act where as the Leech bill was introduced to cease funding from payment processors to online gambling sites. Of the two, the Goodlatte bill seen the most controversy and because of that, the House combined both bills and passed the Goodlatte/Leech Bill and was sent to the Senate for review. The new revised bill was not expected to pass. Because of this Senator Bill Frist attached the Goodlatte/Leech Bill to the SAFE Port Act right before it was signed. How could he do this? Since there was still some concern over the Wire Act and some of the provisions in the Goodlatte Bill, Senator Bill Frist removed it. Add the importance of the Port Security Act, having the UIGEA tied into the Port Security Act made the bill unstoppable and was passed into law.

Industry’s Response to the UIGEA

Immediately following the passing of the UIGEA, the industry seen many online poker and casino sites begin to withdraw services from the US market with the first being Party Poker and 888 Poker. The first to go were companies who were publicly traded and felt heat from their shareholders. The landslide continued with a number of payment processors also taking the same steps as the poker sites in order to protect their company. While in normal circumstances this would make sense, the gambling websites and payment processors acted without delay and did so without waiting for interpretation of the UIGEA its meaning. The biggest discrepancy voiced from individuals was the UIGEA did not define what exactly unlawful internet gambling was. Following the closure of the US market, the PPA (Poker Player’s Alliance), made it evident that they would fight for the rights of players and their personal choice to gamble online. With membership to the PPA sky rocketing overnight, many felt that the not-for-profit group could impede the new legislation. By 2008 memberships topped off at nearly 2 million people.

What the UIGEA Does or is Meant to Do

In its current form, the UIGEA forces banks and financial institutions from processing gambling transactions to and from online gambling sites. This can include certain payment processors, which is why most US players have experienced difficulties in using their credit cards to deposit online, or with checks. At the same time, companies accepting bets from US players, or providing the means to do so were hunted down by the DOJ. During the last few years companies like Neteller, Party Poker, and SportsBet have all settled with the US government over violations of the Wire Act.  That said there has yet to be a single US citizen who has faced legal prosecution as a result of gambling online.

Further complications rose between the State and Federal laws allowing each state to determine whether or not they will allow their residents to bet online. In 2008 Kentucky Senator “name” set a precedent by taking more than 100 online gambling sites to court suing for the domains. As a result, nearly all websites immediately blocked players who lived in or within the vicinity of the State of Kentucky from accessing their websites through IP’s. On the other side, California is undergoing hearings to legalize online poker in California , while the DOJ successfully managed to have four poker sites shut down in April 2011.

Criticism and Fight of the UIGEA

Multiple groups and lobbyists have challenged the UIGEA. Given the fact that the law does not define what unlawful internet gambling really is, the multiple discrepancies behind it, and the fact that it is hypocrisy in its truest form, its been one of the most argued laws in recent years. Many of the mass media outlets have dubbed online gambling as illegal when it’s not, merely from mass confusion over what the logistics really are. What frustrated people more was the exemptions the law had including horse racing, fantasy sports, state lotteries all of which allowed US citizens’ to place bets online, so long as their local and state laws approved. As these are games of chance, many of the organizations fighting for the rights of poker players have fought with arguments of exemption due to poker being a game of skill, not luck. As of to date many states including North Carolina have concluded that poker is a game of skill, however the Federal government has not made the same judgement.

Bills Introduced to Repeal the UIGEA

While there have been groups such as the PPA who have lobbied for the repeal of the UIGEA, Congressman Barney Frank made headlines by introducing the HR 2046 ( Internet Gambling Regulation and Enforcement Act which was devised to regulate and license online gambling within the United States. Other bills introduced include the HR 2607 by McDermott which was meant to amend the current tax code to allow for regulation. Shelley Berkley introduced the HR2140 which was to allow the government time to study online gambling and how to properly regulate it. Robert Wexler brought forth the HR 2610 to amend the current UIGEA to exempt games of skill such as poker, maj hong etc. Barney Frank’s most recent attempts include the HR 2267 and HR 2268. HR 2267, if passed would regulate online gambling within the United States, while HR 2268 is requesting that the current date of compliance for credit card companies and banks to follow specified regulations prohibiting the funding of unlawful Internet gambling be delayed from December 1, 2009, to December 1, 2010.

UIGEA Lawsuits and World Trade Organization Violations

Due to the UIGEA being so vague a number of organizations have come forward and filed lawsuits against the government based on the fact that the UIGEA is unconstitutional. iMEGA is one of these groups and claims that the Unlawful Internet Gambling Enforcement Act violates the rights or individuals among other violations to the First Amendment. The United States received controversy from across the globe. The RGA, also known as Remote Gambling Association filed a complaint with the European Commission in 2007, claiming the United States was in violation of its WTO commitments because it was monopolizing the market by not allowing foreign gambling companies to operate within the US market. In March of 2008, the World Trade Organization found the United States to be non-compliant with WTO obligations. Additional countries came forward and were later compensated for the US blocking foreign operators. As a result, the US came to agreements with the EU, Japan, and Antigua which affected US Copyrights and international shipping.