Jun 1 2010

The June 1st UIGEA Deadline

written by: John under News, Poker Law Comments: Comments Off

The fate of online gambling in America will soon be decided. What actually is going to happen is still anyone’s guess. Neither the proponents of online gambling nor its opponents are giving up. So the question might be whether the Treasury and the Department of Justice will allow a second extension in the carrying out of the UIGEA rules. If this does not happen, then the UIGEA rules will be implemented, and this will be an immediate setback for online gambling in America. The fight for online gambling won’t stop, but it will become a harder fight.

John Pappas, Executive Director of the PPA (Poker Players Alliance), states that even if the UIGEA regulations come into effect on June 1st, the industry would not see the same fallout as what occurred four years ago following the law’s passage. “We don’t suspect this to be a doomsday scenario for online poker. To be clear, it is not going to be unlawful for you, the poker player, to play Internet poker. Nothing in the UIGEA makes it illegal for individuals to play.”  If you remember, following the passing of the UIGEA in 2006, online poker sites like PartyPoker and Pacific Poker left the market entirely. Pappas also said, “Nothing should stop you from getting your money off of an online poker site. In fact, the UIGEA prescribes that it would not affect payouts to players. Deposits [are] the open question and we believe that there will always be mechanism for players to deposit money through responsible channels online.”


Recognized as one of the world’s leading authorities on gambling law, I. Nelson Rose states that the UIGEA is the most misunderstood law ever passed impacting Internet gambling. This statute, rammed through without even being read, let alone debated, does not outlaw online gaming. It does only two things: it adds one more felony to gambling businesses that are already breaking the law, and it calls for regulations from the US Treasury and Federal Reserve Board, in consultation with the Department of Justice, requiring banks and other payment processors to identify and block money from players to operators (and not from operators to players) for illegal Internet bets. The proposed regulations were laughed at and withdrawn, but the Bush White House forced Treasury and the Fed to issue final regulations the day before Obama was sworn in. Payment processors were originally given until December 1, 2009 to implement the new regs. Rep. Barney Frank (D-MA) who is rewriting the UIGEA, and Senate Majority Leader Harry Reid (D-NV),  joined by Republican leaders facing pressure from banks, asked for a one year delay. They got six months. The only member of the U.S. Senate

who really cares about internet gambling, Jon Kyl (R.-AZ), used the power granted individual senators to hold up approval of non-controversial appointments to the Treasury. Despite pressure from banks and gambling operators, and movement in Congress to overturn part of the UIGEA, Reid and Treasury Secretary Geithner are not giving in, and have promised the regulations will take full effect on June 1, 2010.

Barney Frank introduced legislation that would in effect revoke the UIGEA and give every US citizen the right to gamble online; even better he is the person that is the Financial Service Committee Chairman. His Bill, H.R. 2267 seeks to allow online gambling operators to become licensed to accept bets from American citizens with a regulatory framework, overturning what the UIGEA seeks to do. H.R.2267 has had the effect of halting the adoption of UIGEA until Congress can determine what the national policy should be regarding money transfers for online gambling. The good news is that Barney Frank has around 60 co-sponsors for his Bill.


The federal agencies estimate that banks will spend one million hours a year complying with these new regulations. This will be difficult for small banks. The regulations will not actually have any impact on Internet gambling. They expressly state that payment processors should not look at individual transactions, only do due diligence when a company wants to set up a new bank account. And how many foreign operators are setting up bank accounts in the US? No illegal ones. And legal ones can get a “reasoned legal opinion” from a gaming lawyer, and under the regulations, the banks are then safe to do business with the Internet gaming operator.

So, technically, of itself, the UIGEA won’t stop anyone from gambling online, instead it criminalizes any financial institution that permits money transfers to, or from, online gambling websites in the pursuance of anything that the government deems to be a “luck” based game. In this respect the act of Internet gambling isn’t prohibited by using, say a bank account or credit card to put funds into, or withdraw funds from, your online gambling accounts will become illegal. Some people have suggested setting up offshore accounts with overseas banks to get around this problem, which in short term might be a solution. So, in essence, we are still in the same place we were yesterday.

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