UIGEA (Unlawful Internet Gambling Enforcement Act) Understanding the UIGEA Bill and How it Affects US Online Gambling Options

Gambling has a strong foothold on the Internet. Despite the efforts of legislation to restrain its expansion, it continues to grow. Some gambling laws are outdated; others insufficient or inadequately enforced.

Contradictory rulings regarding gambling laws are not uncommon. While the Unlawful Internet Gambling Enforcement Act of 2006 placed many constraints concerning gambling related transactions on the Internet, with few exclusions, the Department of Justice also declared that, so long as online gambling was allowed at the state level, it was legal. This causes much confusion about the UIGEA itself and the legality of different gambling forms on the Internet.

Origins Of Today's Gambling Restrictions

Current laws regulating online gambling have a surprisingly long history. Some aspects stretch back to the Federal Wire Act, which was passed in 1961; this prohibited specific types of bets. This act also forbade interstate wire communications in an attempt to curtail the phone based mafia run illegal sportsbook rings that were causing great problems at the time the law was passed.

This issue became problematic fifty years later with lottery tickets. In 2011 the Department of Justice decided that the Wire Act did not apply to in-state lottery ticket sales that made use of the Internet. The rise of online casino games and poker created a necessity for new legislation.

Negative Impacts Of Online Gambling

Supporters of the UIGEA and similar laws cite a variety of reasons for opposing the legalization of online gambling. One significant problem is that of problem gamblers; with the constant convenience of Internet access, gambling addicts lack substantial obstacles between themselves and serious trouble.

Sites have few, if any, restrictions to help keep gamblers in check. Supporters of online gambling argue that responsible gamblers should not be penalized for the potential bad behavior of those not responsible enough to enjoy this type of entertainment. There are also concerns about the potential loss of jobs that a switch to an online focus on gambling would cause, although the state based online gambling initiatives which have launched thus far have managed to ensure that this does not occur.

Understanding The UIGEA

The Unlawful Internet Gambling Enforcement Act applies to online games of chance, but to be more specific, it governs the financial aspects of such Internet gambling. Its intent is to sever the flow of profits to businesses that offer unlawful Internet gambling opportunities to prohibit such illegal acts as money laundering and fraud.

To do this, it calls upon the assistance of credit card issuers, banks, and other participants of payment systems; they help by stopping payments to such problem businesses.

The UIGEA came into being as an addition to the Safe Port Act; it prohibits the knowing acceptance by gambling businesses of payments connected with another person's participation in a wager using the Internet which is illegal according to state or federal law. The act leaves certain issues vague, such as the legality of interstate wagers placed on horse racing.

Problems With The Unlawful Internet Gambling Enforcement Act

Along with the Wire Act, the UIGEA works as an online gambling obstacle by way of financial intervention. As with that against alcohol in the 1920s, however, prohibition against gambling has been found ineffective. In simply ignoring the obstacles, prior to any states legalizing online gambling, Americans contributed nearly a tenth of the worldwide online gambling market.

This means Americans spent nearly three billion dollars on unregulated, illegal gaming sites. Proponents of legalized gambling point to the potential taxes that could be collected on such large sums. American gamblers have been able to bypass the UIGEA by participating in legitimate online gambling options that are legally licensed to offer their services to players worldwide.

However, the law is presenting significant challenges for state based online gambling options in Nevada, New Jersey and Delaware with players having difficulty funding their accounts due to the restrictions that are in place by the law.

Gray Areas Of Online Gambling

One of the more publicized moves under the UIGEA occurred in 2011 and was highly debated. The FBI shut down a trio of poker sites; in fact, the three largest sites for poker. The founders of the sites were detained and charged along with others for eleven arrests.

The charges included bank fraud and money laundering and the Department of Justice seized over seventy bank accounts located across fourteen countries. Some lawmakers made the argument that online poker, being a game of skill rather than one of chance, was not actually a crime.

That particular FBI sting is just one example of the confusion surrounding laws regarding online gambling. Regulations complicate matters by allowing individual states to pass their own legislation, which supersedes the federal statutes. In some states, betting on horse races is permitted but online casino games and poker are disallowed.

Nevada began offering legalized gambling online last year, and now New Jersey has fully legalized it, offering slots and blackjack in addition to poker. Other states have proposals regarding online gaming crawling through their legislatures.

Games Of Skill

Online poker has been a point of contention as to its classification because the 2006 UIGEA approved games of skill explicitly, subject to state approval. Nevada is again notable for having online poker available, but only for its residents. New Jersey and Delaware have also launched online poker initiatives for their residents.

Fantasy sports games also fall under this category, but much confusion surrounds this type of game because of differing definitions of a game of skill versus a game of chance. Despite this, fantasy sports games remain, for the most part, legal.

This is not to be confused with sports betting in the United States which is only offered in a handful of states as of 2024

Online Gambling In The Near Future

In Washington D.C., a bill currently being considered would ban formats of online gambling such as online casino games but would provide an exception for online poker. It also exempts any previously approved online horse race betting.

This bill, the IGPCA or Internet Gambling Prohibition and Control Act of 2014, offers clarification of the Wire Act of 1961; this clarification essentially negates the Department of Justice's stance that sporting events alone should be banned.

If it succeeds, the IGPCA would still exempt activities that that were previously exempted by the UIGEA. The effects of this type of law remain to be seen and could strongly impact those states which have already launched online casino gambling businesses.

As new laws are proposed and older legislation comes under scrutiny, the confusion surrounding legal online gambling sites only grows. Debate is widespread on what the laws should prohibit and allow, whether they should exist at all, and the government's right to pass such laws in the first place. In the meantime, the UIGEA and other online gaming restrictions attempt to protect citizens from unregulated gambling with varying degrees of success.

What we can absolutely clarify is that the UIGEA does not prohibit US players from participating in online gambling that is offered by gambling sites that are legally licensed, certified and regulated by a governing jurisdiction outside of the Untied States that has expressly legalized online gambling for their region.