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The Revised UIGEA Regulations

By:, Friday November 14th 2008
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The Treasury has released the revised UIGEA regulations. The revised regulations have been entitled "Prohibition on Funding of Unlawful Internet Gambling". Whereas it will be a few days before the fine print is scrutinized the basics appear clear.

Games that depend on chance, predominantly or otherwise, have been defined as gambling games. Online casinos had never really taken the plea that they did not provide gambling services. But if they were looking to separate games like video poker and blackjack that had an element of skill from games like roulette and slots that are a hundred percent chance, that road appears closed. Poker players had taken the stand that poker is a game of skill but the revised regulations have not accepted their view.

There has been no clarification on the more pertinent issue of what constitutes unlawful Internet gambling. The regulations have ducked the issue by stating, "a single, regulatory definition of 'unlawful Internet gambling' would not be practical." The revised regulations have left it to the existing state and federal laws to decide the issue. The problem is that the existing laws are in a mess as the Kentucky fiasco demonstrates. The lack of guidance in the revised regulations is likely to give license to trigger happy states like Kentucky to clamp down on online gambling.

The focus of the regulations has been, as expected, on the prevention of transfer of funds from financial institutions for unlawful Internet gambling. The problem of the vagueness of what constitutes 'unlawful Internet gambling' still stands. However there seems to have been some watering down in this aspect. Previously financial institutions could be legally proceeded against if they had transferred funds for unlawful Internet gambling. Now they just have to exercise due diligence before they transfer funds. If they have done that they are safe and if they have not done that then they could be in trouble. From the regulations it appears that the worst-case scenario could be the financial institutions asking the online casino, to which a player wants to transfer funds, to produce some sort of certificate that it is not engaged in unlawful Internet gambling. This certificate could be a license from some governmental entity or a legal opinion from a practitioner of gambling law.

There are two issues that will be of interest to online casino players. One is that the regulations cover only those transactions that can be initiated from a remote location. Therefore transfers through money orders, cashier's checks and funds given at a physical office would not be covered. For example if funds are transferred through Western Unions' web site then the UIGEA comes into play, but if the player deposits cash at a Western Union office then there is no problem. Another clause states that the restricted transaction refers to funds going to a gambling business and not to a gambler. Hence payouts made by online casinos to its players cannot be blocked.

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