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Developments in UIGEA & Online Casino Law

By: Joe Valentino, Tuesday December 15th 2009
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The Unlawful Internet Gambling Enforcement Act (UIGEA) was passed in 2006 and its Rules were finally passed late in 2008. These rules were to be effective from December 1, 2009. However certain developments over the last 30 days have given, if not hope, at least breathing time to the United States online gambling industry.

Pressure was being applied by several quarters on the Treasury and the Federal Reserve to defer the implementation of the UIGEA Rules by one year. In the forefront were Congressmen like Barney Frank, whose bill for the legalization and regulation of online gambling was pending in the House Committee. Also favoring the deferral were representative organizations of online gaming operators like Poker Players Alliance. The commercial banks and financial services providers were also pressing for the deferral of the UIGEA Rules on the grounds that they did not have clarity or the resources on blocking funding to illegal online casinos. Just a few days before the deadline the Treasury and the Federal Reserve relented and issued a joint statement deferring the implementation of the UIGEA rules. They did not consent to the one year time sought by the online gaming industry but gave it only six months. This meant that the legislators have six months to repeal the UIGEA and put new laws in place. It also means that that the financial service providers have to be ready to implement what is required of them under the UIGEA rules within six months. Because if the legislators fail to legalize online gambling then the banks and credit card companies will have to start blocking the transfer of funds to illegal online gambling sites.

Barney Frank, the Chairman of the House Financial Services Committee and the main sponsor of the Internet Gambling Regulation, Consumer Protection and Enforcement Act of 2009 (H.R. 2267) acted almost immediately. On December 3 a hearing took place before the committee in Washington. Several eminent persons connected with Internet based industries, and in particular with online gambling, spoke in favor of legalization and regulation. Parry Aftab of WiredSafety stated that the technology required for regulating the online gambling industry was available. Professor Malcolm K. Sparrow of Harvard University said that education and support would be more effective than banning in curbing problem gambling. Samuel Vallandingham of the Independent Community Bankers of America stated that it would be impossible for banks to ever comply with the UIGEA rules. There were the usual detractors of online gambling as well. Another hearing, in which a vote would be taken, will be held early in 2010.

Earlier in September the US 3rd Circuit Court of Appeals had passed a judgment that both the proponents and opponents of online gambling held as a victory for them. This was passed in a case of iMEGA challenging the legality of the UIGEA. The court held that the UIGEA was a valid law but applicable only in states where online gambling was illegal. There are only about six American states that have clearly outlawed online gambling. The remaining states are being claimed by both sides.

At this moment it is difficult to say which way the pendulum will swing. But Harrah's, the leader in land based casino gambling and the owner of the World Series of Poker, is definitely upbeat. It only recently launched its online casino and poker room with much fanfare and that is saying something.

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