The Unlawful Internet Gambling Enforcement Act

Things were good before the Bush Administration passed the Unlawful Internet Gambling Enforcement Act in 2006. Really good.

Players were signing up to publicly traded and privately owned poker sites in droves. Reports show that more than 100,000 players were signing up to Party Poker, 888, Sportingbet and Bwin …each month. 87% of the entire market was US players. At the peak of the boom – around 2005, 2006 – online poker in the United States was worth $1 billion annually.

Then The US Government Passed the UIGEA

George Bush signed it into law on October 13th, 2006. The gist of the bill is this:

It “prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law.”

In English – it prohibits companies from processing payments for illegal gambling to and from US customers. This doesn’t apply to activities like fantasy sports, inter-tribal gaming, state lotteries, or (legal) intrastate gambling. It’s also important to make clear that the bill only applies to the processing side of things. It does NOT ban any form of gambling, online or otherwise.

The UIGEA was Congress’ last-ditch effort to regulate online gambling in the US to some capacity. Since 1995 various members introduced new bills and amendments for the Wire Act to accommodate the changes in technology. All their previous attempts failed, though.

After a couple attempts the UIGEA passed 317-93 in July 2006. It was attached to the Safe Port Act – to expedite its passage – which passed 409-2. BUT …many members of congress claimed the bill was pushed through hastily and that they didn’t get the chance to see the final language of the bill. Other reports suggest that all members were aware of the provisions.

In any event, George Bush passed the bill in October 2006. It went into full effect in June 2010.

What Happened After It Passed

It was almost like night and day. All the publicly traded companies announced they were going to stop accepting real money customers from the US. This hurt them financially …A LOT. Party Poker’s stock dropped 60% overnight. Other companies reported losses ranging from $30 to $50 million annually. There was a total loss (market capitalization loss) of (an estimated) $7 billion.

Then there were individuals like Party Poker alum Anurag Dikshit. He was (wrongly) fined $300 and sentenced to 1 year probation for operating in the United States pre-UIGEA, which, according to the US Government, violated the Wire Act.

(We now know this was an error on the US Government’s part. Read our Wire Act and Wire Act reversal write ups for more details.)

Arguably, US players were hurt most of all. Because the following companies exited the US market, leaving players with few options to turn to:

  • Paradise poker
  • 888
  • PKR
  • Ongame Network
  • Ipoker Network
  • Cryptologic Network
  • Boss Media
  • Entraction Network

Most players found a new home at PokerStars and Full Tilt Poker, two privately owned companies that decided to pick up the ball and run with. They quickly captured the US market and became worldwide leaders in the poker industry. At least for the next 5 years.

An Example of the UIGEA in Action

There are plenty of examples of the UIGEA in action. But, arguably, the biggest example is the Black Friday indictments. We have an entire page dedicated to Black Friday, so we’ll just cover the basics here.

Black Friday is the name players gave to April 15th, the day the US Government seized the domain names of PokerStars, Full Tilt, Absolute, and Ultimate Bet Poker. They indicted the owners and CEOs of these poker sites, as well as payment processors and banks, on charges of fraud and money laundering.

In short – they violated the UIGEA …BIG TIME!

What these companies did was create shell companies so they could get banks to process their (illegal) transactions. The banks thought they were retail stores, when in reality they were processing millions in gambling monies.

The Department of Justice didn’t like that. So, with the help of Daniel Tzvetkoff, the owner of the now defunct Intabill (a company that helped poker sites process payments), they built a case against PokerStars and the others.

The result was Black Friday – several sites were shut down and the Department of Justice froze 75 banks in 14 different countries, along with millions of dollars in players’ money.

It also started the chain events that would lead to the bankruptcy of Absolute Poker and Ultimate Bet, and the downfall of Full Tilt Poker. All thanks to the UIGEA (and a tattletale).

The Current Climate in America

Players still play poker at offshore sites like Bovada. And thanks to the UIGEA these sites have a heck of a time processing payments. It can take several weeks – sometimes even a few months – for a simple withdrawal to go through.

But it’s not only offshore sites that suffer. Intrastate poker sites do, too. In fact, experts suggest that one of the reasons why sites in Nevada, New Jersey and Delaware failed to meet expectations is because of how hard it’s been for players to fund their accounts. And that’s thanks (in part) to the UIGEA – no bank wanted to process deposits, even though the sites were totally legit (licensed and regulated).

Things have gotten better. More and more banks are relaxing and allowing players in regulated states to make online gambling deposits. Many casinos have created more options, too, which include making deposits in person. They also created a partnership of sorts with Neteller so that players could use the Net+ card to fund their accounts.

So, things are looking up …but thanks to the UIGEA it’ll be awhile – maybe even years – before funding your account is as easy as it was pre-2006.

Sources

http://www.gamblingandthelaw.com/index.php?option=com_content&view=article&id=261:the-new-uigea-regulations-opportunities-for-operators&catid=3:recently-published-articles&Itemid=8

http://stoppredatorygambling.org/wp-content/uploads/2012/12/UIGEA-2006-Fact-Sheet.pdf

http://www.gigse.com/sites/default/files/USOnlinePoker_GCAmericas.pdf