Dealing with the UIGEA

If you play poker online or have an Internet sportsbook, there's a good chance you are aware of the Unlawful Internet Gaming Enforcement Act (UIGEA). It passed the House of Representatives earlier this year, but when it appeared it would not make it to the Senate floor before winter recess, UIGEA champion Bill Frist (R-TN) simply tacked it on as a rider to a Port Security bill that no one in the Senate (especially not during election season) would dare vote against, particularly during election season.

The bill does not talk about the individual bettor, but it bars websites from accepting bets from U.S. bettors, and it prohibits banks and credit cards from facilitating such transactions.

They aren't kidding, either. The founders of two online sportsbooks and the leading internet "ewallet" for gambling transactions (Neteller) have been arrested in the last few months.

The effect the bill has had on the U.S. gaming public has been palpable, but not devastating. Roughly half of the sportsbooks and poker sites that accepted U.S. patronage stopped doing so. Most of the third party banks that allowed you to transfer money from your bank account to a gambling site have stopped accepting American customers.

On the other hand, every site that still accepts has payment options that Americans can use. It's just that it may only be one or two choices, and those choices may change quite a bit in the coming months and years.

Or maybe not. The U.S. sportsbook and poker industry is much too large and profitable for some companies not to take on the risk and step up to assist American gamblers. If you want to start such an "ewallet" company, the sacrifice would be that you would have to set up shop outside of the US, where gambling is legal, and forget about coming to the U.S. to visit.

You would not need to worry about extradition, though, as international law only allows for extradition if the crime committed is illegal in both the host country and the visited country. These companies also have more solid legal footing than you might expect in other ways; the U.S.' position on Internet gambling is contrary to the position of the World Trade Organization, which the U.S. is a part of and ostensibly is supposed to uphold their principles as a member. This is why the nation of Antigua sued the U.S. in WTO court, and won. But the WTO is, as you might imagine, pretty powerless to enforce their dicta. They aren't going to kick the U.S. out of the WTO for this.

The other large correlation between the gambling sites and ewallets' decision to stay in the U.S. market or abandon it is whether the company in question is publicly traded on a stock exchange. Those that are have been the quickest to leave the U.S. It does no good for your shares if you are blatantly violating U.S. law.

However, even after the Neteller arrests last week, a company new to the ewallet industry (at least as far as gambling goes), Nucharge, has propped up and signed on as an accepted deposit option at Bodog. There will be more new such companies. And they will have learned from the mistakes of their predecessors. The U.S. government can't completely wipe out the practice of sending money overseas. They can only make it slightly more inconvenient, and try to block ABC company from getting U.S. cash, only to be replaced by DEF company. The market will stay one step ahead.

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