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Unintended Effects of UIGEA Encroaching Online Revenue for Horseracing Industry

7 July 2010 by Devon Chappell

It looks like more than just online casino operators have some “ish” with the U.S. online gambling ban – Unlawful Internet Gambling Enforcement Act – infamously passed under the Bush administration back in 2005 as part of an attachment to a port security bill. Surprisingly enough, it’s the same folks who would seemingly have benefited from the UIGEA, who are now complaining about, well, it’s ineptness.

Here’s a little background: When the UIGEA was passed, it basically banned all forms of online gambling, except for parimutuel horserace wagering and fantasy sports betting. I know, go figure. How are those any different than other forms of gambling? Anyhow, the only problem was that – despite the carve-outs – there were no guidelines on exactly how financial institutions and online payment processors would successfully go about filtering all of the different types of internet wagering transactions, i.e., online casinos, poker rooms, sportsbooks, bingo, skill games etc.

As a result, credit card companies are now erring on the side of caution and blocking most, if not all transactions that come through online betting websites. There simply is no way to confidently identify which transactions are allowed and which are not. Whereas there was more wiggle room for credit card companies during the last four years, now that the UIGEA has gone into effect (as of this year basically), online betting websites are now experiencing a spike in blocked transactions, some of which are apparently “legal”.

And not that U.S. players are not finding ways to gamble at online casinos (because they are), it’s just simply a big fat mess on the regulatory front. Looking back, Congressman Barney Frank’s labeling of the UIGEA as the “stupidest law ever passed” rings even truer today. So, while Barney Frank and others are working to get the UIGEA overturned and new legislation passed to effectively regulate online gambling, other politicians with interests in parimutuel horserace wagering are looking to pass legislation that would clarify the vagueness of the UIGEA.

Introducing House Representatives Scott Murphy (New York Democrat) and Brett Guthrie (Kentucky Republican). Basically representing the two largest horseracing jurisdictions in America, the pair are teaming up to drum support for the “The Wire Clarification Act”, aka House of Representatives 5599. The legislation, if passed, will apparently provide clarification that the Wire Act (the original bill that apparently made internet gambling transactions illegal, despite the fact that the internet didn’t even exist at the time) is not applicable under regulated activities of the Interstate Horseracing Act.

Now, I don’t know about everyone else, but does it seem strange there is no mention of the UIGEA in this bill? I mean, wasn’t the UIGEA supposed to supersede or at least clarify The Wire Act? It’s as if nobody wants to even touch the UIGEA. Why that is, is well, anybody’s guess. Stepping on toes maybe? Or is this a concession to the overall view that the UIGEA is such a messy bill that will eventually become null and void, and so why bother with it? It definitely makes you wonder.

In the meantime, Congressman Murphy from New York says the $210 million brought in from the Aqueduct Racetrack, Belmont Park and Saratoga Race Course last year, contributed $18.5 million to the New York Racing Association, and that the industry itself is now worth $39 billion, with online wagering making up a “substantial portion” of said revenue.

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One Response to “Unintended Effects of UIGEA Encroaching Online Revenue for Horseracing Industry”

  1. Here’s my experience with casinos and the Government: when the government feels it can make money from something, it legalises it. Look at the UK Govt who recently created a “casino zone” for its casino operators taking just 15% tax, but offering the UK as a safe haven for online gamblers. I personally don’t feel it will be too long before the online gambling act prohibiting US players is repealed. But it will happen only once the US Government can get a share of the action – at least that’s my thought.