Online gambling law a bluff

The future of Internet gambling in the United States is uncertain.
By
  • Julian Switala
June 23, 2010

In the vast oceans of online poker, players’ only fears were of card sharks. But now there is a new deep sea monster: a piece of legislation.
Just this month the Unlawful Internet Gambling Enforcement Act went into force. The act, which passed as a provision  of the SAFE Port Act of 2006, legally mandates financial institutions to identify and block the acceptance of restricted transactions. In other words, banks are now legally liable for when they fail to stop gamblers from transferring money to online gambling establishments.
Despite this seemingly straightforward state of affairs, the UIGEA is not only riddled with ambiguities in both its text and implementation, it also faces staunch opposition from poker players and politicians.
There are glaring problems with the UIGEA as soon as one reads it. Although the act prohibits transferring funds to an unlawful Internet gambling site, it also provides exemptions to state lotteries, horseracing and fantasy sports. These exceptions, with no explanation for why they exist, are arbitrary. What is even more confounding is that the act utterly fails to define what “unlawful Internet gambling” is.  Indeed, federal regulators “were defeated by the difficulty of defining what was unlawful,” claims Whittier Law School professor I. Nelson Rose, who is a leading authority on gambling law.
In light of these challenges, federal agencies put the burden on banks.  According to Steve Kenneally, vice president of the American Bankers Association —  a trade association representing more than 95 percent of the banking industry’s assets  — there is no way for banks “to differentiate between what’s lawful and unlawful when it comes zipping through the computer network at 10,000 requests a minute.” That’s especially true, he says, because “what’s unlawful for one state for one user may not be unlawful in another state under different state laws.”
In its text, the UIGEA only pertains to financial transmission systems that allow individuals to remotely transfer funds from a nonphysical office.  However,  although financial institutions and the online gambling industry are preventing deposits using U.S. bank debit cards, credit cards  and gift cards,  online poker players are still able to deposit money through electronic checks , cashier’s checks , paper checks, money orders, wire transfers, foreign bank credit cards, overseas payment processors  or by simply sending cash to the online gambling institution.
Currently, politicians Barney Frank, D—Mass., and Jim McDermott, D—Wash., are fighting against the UIGEA.  Frank argues that it is “so dumb and oppressive that it will create support to repeal the bill.”  McDermott wishes to regulate and tax the online gambling industry, which has the potential to generate $42 billion in tax revenue over 10 years.  Although taxes may disincentivize people from gambling, McDermott is correct that the UIGEA “hasn’t prevented the millions of Americans who want to gamble online from doing it.” 
Significantly, the UIGEA does not make internal gambling illegal, only certain transfers of funds, and even then it only holds financial institutions liable, not actual players. To date, not a single U.S. citizen has ever been charged, fined, or prosecuted for playing poker online. 
Julian Switala welcomes comments at jswitala@mndaily.com.

Comment Policy

The Minnesota Daily welcomes thoughtful discussion on all of our stories, but please keep comments civil and on-topic. Read our full guidelines here.
Minnesota Daily Serving the University of Minnesota Community since 1900