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10/07/2010 No.32
he Good Gambler
The Editor, Richard Whitehouse makes regular contributions to coverage of the gambling world.
Email : TheEditor on any subject.
Unlawful Internet Gambling Enforcement Act

WSOP 2010 not fazed by UIGEA

With a target date of 2008 for implementation, the Unlawful Internet Gambling Enforcement Act (UIGEA) finally came into effect in the USA on 1 June 2010. UIGEA was originally approved back in 2006 but implementation was delayed because of protests from civil liberties groups and the vague nature of the legislative text. The UIGEA requires financial institutions to block transactions to and from online gambling websites and effectively enforces a ban on online gambling.

Although hurting some individual online companies quite badly, with many small firms going out of existance altogether, the big winners have been those that held their nerve and moved offshore or to Canadian Indian reservations like Full Tilt Poker.

The proof, if proof were needed, that the UIGEA has had little effect on the present online gambling world is the ongoing 2010 World Series of Poker Championship event that has just started with 7,319 players in Las Vegas. This is the second largest tournament of all time, and second only to the 2006 WSOP Championship event which was pre-UIGEA. By the estimates of the tournament organiser more than half of the players in this years championship have gained their entry stake from online qualifying events.

Now however the Treasury has told banks that they must introduce mandatory enforcement of the UIGEA rules, that is they must block the transfer of money by US citizens to 'illegal gambling sites'. The trouble is that, all bar Pokerstars, the international gambling sites relying on US customers are hiding their identity by using payment processor's that don't carry the 7995 code that indicates online gambling. Infact since June 1st it is only Pokerstars' customers that have reported problems with credit card transactions and even they report that other methods still work.

Martin Owens, an Internet Gambling Attorney highlighted the inanity of the law even more. "As long as a given bank or financial institution promulgates and follows its required procedures under 31 USC sec 5364 to keep out "restricted transactions", it cannot be prosecuted, nor any of its employees, for violating the UIGEA even if the restricted transaction goes through. Only if the bank or financial house actively and knowingly engages in the gambling business will it wind up in trouble with the Feds (sec 5367)." He then goes on to say, "The only people who can violate the UIGEA are the Internet gambling businesses which accept US financial instruments to pay for 'unlawful Internet gambling' whatever the hell that is. It is the usual silly paradox: the law cannot reach those with whom it complains, and has no complaint against those it can reach."

Americans have many methods to deposit funds other than credit cards including, money transfers; e-wallet options (excluding companies like NETeller, Moneybookers and similar which prohibit U.S. citizens); prepaid credit cards which have no name associated with them and are available at grocery stores, pharmacies etc.; prepaid debit cards and various other methods. Indeed smaller sports betting firms that are willing to ignore the UIGEA rules are picking up many customers from the likes of Pinnacle, Ladbrokes and William Hill that refuse US custom.

To date no company has been charged under the UIGEA and lawsuits against gambling companies such as the one launched earlier this year by a Federal Grand Jury for money laundering against Full Tilt Poker, Howard Lederer and Chris Ferguson was for a different law. But almost every lawyer agrees that any suit which is launched against a poker site and tries to charge them with violating the UIGEA will be thrown out because no court has ruled what constitutes illegal gambling under the UIGEA.

Internet Gambling Attorney Martin Owens writes again, "The real difficulty with the UIGEA is that it should never have been written in the first place. It is the Un-law : Unnecessary, unintelligible, unenforceable. It was meant to throttle unlicensed Internet gambling ("unlawful Internet gambling") in the USA by preventing the use of US financial instruments to pay for it. But to this day there is no definition of just what that "unlawful Internet gambling" is or is not. The first attempt at defining it, in at 31 U.S.C. 5362(10) (A) only serves to highlight the confusion; - to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made. There's clarity for you!"

An unintended victim of UIGEA is American Horse Racing. The US domestic horseracing industry is worth about $39 billion and sustains 1.4 million jobs, while lawful wagering via the Internet represents a substantial portion of the total funds bet on the sport. But credit card companies felt that it was no longer safe under the 1940’s-era Wire Act to accept online transactions on pari-mutuel betting, an essential component of the racing economy.

NYRA, which runs Aqueduct, Saratoga and Belmont, have been trying to balance the books for the last eight months. In December there were doubts that the group would be still be operating due to its financial situation. NYRA was only kept afloat through a $25million state loan in late last month just to stave off a shutdown and fund this summer’s racing. The NYRA is still awaiting funds that would be derived from a plan to install video slot machines at Aqueduct. This would generate revenues of approximately $1million per day, not only securing the future of all three tracks but also providing long-term capital to the state and $200million in licensing fees that is sorely needed to fill this year’s budget deficit.

Still, if the UIGEA ever does threaten the world's online gambling business which is so heavily dependent on American money, there are plenty of British citizens willing to take up the fight. With a proliferation of 'remote operation' software available it is a tried and tested route for US sports bettors to operate 'sleeping' computers in the UK with willing partners being paid to keep them online 24/7. Using personal UK accounts US citizens can easily place bets with all companies unwilling to take US money, including the worlds biggest betting exchange Betfair.

As one Las Vegas sports punter told me, "we've never had more access to bookmakers around the world, and its all down to the UIGEA.".