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Big in 2010: UIGEA Causing (Some) Problems

31 December 2010 by admin

This is part of a series that will look back at who and what was big in the online gambling world in the year 2010. Earlier parts of the Big in 2010 series can be found here.

DeptOfInjustice-smallIf you have followed online gambling news this year, you have undoubtedly seen a lot of stories on the Unlawful Internet Gambling Enforcement Act (UIGEA). For all the wrong reasons, UIGEA was a big part of online gambling in 2010, though not nearly as big as gambling opponents had hoped.

The U.S. Congress passed UIGEA back in 2006 as part of the SAFE Port Act, but the law didn’t actually go into effect until June 1, 2010. At that time, financial institutions were required to abide by the law. What the law actually required them to do has been disputed by many, but a literal reading of the law says that they are only required to block transactions involving “unlawful” online gambling.

The law never defines what types of online gambling are illegal. Courts have since ruled that UIGEA does not make any form of gambling illegal and only requires banks to block transactions from gambling that is already illegal. Therefore, you could argue that UIGEA only requires banks to block transactions related to online sports betting, which is banned by the Interstate Wire Act of 1961.

The banks and other financial institutions asked the Treasury Department and Justice Department for clarification of what types of transactions they need to block. No clarification was given. They asked for a list of companies to look for and transactions to monitor, but none were provided. The government put the burden on the banks, asking them to become investigators and lawyers at the same time.

Government-DespairAs a result, there were a few instances of banks blocking transactions, and many of them should not have been blocked. Some credit card companies, such as VISA, stopped accepting transactions with online casinos. Some online payment processors, such as PayPal, did the same. Overall, though, there was little change and American customers were still able to play at their favorite online casinos and poker rooms, with a few exceptions.

There were efforts in the U.S. House of Representatives and Senate to repeal UIGEA and replace it with a framework of online gambling regulation, but those efforts failed. Another effort to regulate online poker only also failed during the lame duck session of Congress.

The UIGEA, though a nuisance, was found to be without teeth, and the banks have too much on their plate to spend a lot of time looking for transactions the government won’t even define as illegal. For the few people who had their winnings seized by the government or were unable to make a withdrawal from the casino, UIGEA was a major source of frustration. For most people, though, it was nothing more than a boogey man intended to scare people into complying with a non-existing ban. Still, effective or not, UIGEA and efforts to repeal it were huge stories in 2010.

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