UIGEA: Unlawful Internet Gambling Enforcement Act

The Unlawful Internet Gambling Enforcement Act of 2006 might go down as the most impactful piece of legislation ever levelled at the world of online gambling. When it came down the pike in controversial fashion, many people thought it had sounded the death knell for the entire industry, which was taking off at the time. As time has passed, however, the UIGEA has lost much of its power, because more states are legalizing online gambling and because the top offshore betting sites have found ways around the act to serve United States customers.

Much of the controversy surrounding the Unlawful Internet Gambling Enforcement Act of 2006 came from the way in which it was passed. Instead of being passed by Congress after advantages and disadvantages were aired out and debates were held on its merits, the UIGEA was snuck through right before a Congressional break on a so-called “must-pass” piece of legislation. In other words, it was tacked quietly onto a bill that was going to pass, even as many Senators didn’t realize what was in the UIGEA part of the bill.

Essentially, the Unlawful Internet Gambling Enforcement Act made it illegal for unlicensed gambling sites to accept payments from online gamblers. As a result, even though gamblers could still technically bet on these sites, they lack the ability to pay for bets or receive payment for their winnings.

The timing of this bill proved especially harmful, as it came right at the time that online poker was booming due to the popularity of Texas Hold ‘em tournaments on television. Websites that possessed a broad customer base of poker players suddenly had to find a way to adjust, with many of them eventually closing down operations. Online sports gambling sites also took a hit in the wake of the passage of UIGEA.

Over the years, however, the impact of the Unlawful Internet Gambling Enforcement Act of 2006 has lessened to the point where online gambling is once again thriving. For example, fantasy sports and horse racing—two popular betting avenues—were always considered exempt from the law. And a general move toward legalizing online gambling in the United States has flourished in recent years, making the UIGEA seem less threatening to payment processors and online gambling sites than it once did.

In the following article, we’ll talk about the Unlawful Internet Gambling Enforcement Act of 2006, explain what it is, how it came about, and the impact it had. We’ll also talk about the exceptions to the law and how the online gambling industry has worked to overcome its restrictions. Finally, we’ll take a look at whether or not the UIGEA still has any effect on the online gambling industry today.

How Did the Unlawful Internet Gambling Enforcement Act Come to Pass?

Although previous efforts to curb internet gambling with overseas ties had failed around the turn of the millennium, the Unlawful Internet Gambling Enforcement Act of 2006 first came to life as a separate bill. Jim Leach, a member of the House of Representatives, authored a bill known as the Internet Gambling Prohibition and Gambling Enforcement Act, referred to in short as HR 4411. This bill, although somewhat different, contained many of the same restrictions that would be found in the UIGEA.

But HR 4411 stalled in the Senate upon its introduction there. A year later, as US Congress members were getting set for their recess at the end of the year and preparing to deal with their election campaigns, the supporters of cracking down on internet gambling seized an opportunity. They essentially attached the Unlawful Internet Gambling Enforcement Act to a separate bill known as the Safe Port Act of 2006.

This bill served its purpose because it was slated to beef up security against potential terrorism at US ports, and UIGEA supporters knew that everybody in Congress would get on board with it. It passed unanimously in the Senate and only had two dissenters in the House of Representatives. As a result, the Unlawful Internet Gambling Enforcement Act of 2006 became part of the law of the land.

The only problem: Many of the Congress members who gave their stamp of approval had never really read the UIGEA part of the Safe Port Act. Whether or not the UIGEA would have become law without the trickery is difficult to say. But the bottom line remains that, in October of 2006, President George W. Bush made it official with his signature.

What Does the Unlawful Internet Gambling Enforcement Act Stipulate?

  1. Many people immediately misunderstood the actual stipulations of the Unlawful Internet Gambling Enforcement Act of 2006. In no way does it prohibit online gambling, nor does it actually hold payment providers (such as credit card companies) or even internet providers responsible. Although, it did ask that payment providers block any transactions that they could prove were lined up for internet gambling.
  2. Instead, as the typically wordy text actually stipulates, it makes it illegal for companies involved in internet gambling to accept payments from or send payments to their customers. Companies that shunned these restrictions could face legal consequences from the US government. Essentially, if the person doing the wagering did so from a jurisdiction where internet wagering is illegal, the site in question could not accept that bet.
  3. The UIGEA also took a stab at defining what constitutes gambling, although the wording that it used left it open for interpretation. By most accounts, the law was aimed at the prevalence of online poker, which was targeted with a provision on “games subject to chance.” In addition, the bill mentions sports gambling in particular as a no-no for internet gambling.

“The Act 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” -UIGEA

UIGEA 2006 Exemptions

The Unlawful Internet Gambling Enforcement Act of 2006 left things vague enough for a few major areas of online gambling to sneak through unscathed. UIGEA fantasy sports restrictions were pretty much nonexistent. DFS sailed through without a problem thanks to a provision in the bill that exempted them. This is because they weren’t tied directly to the outcome of a sports event and because the teams were constructed by the players and not related to actual sports teams. What confused the matter was the fact that the law also says that any gambling prohibited by states or tribes wouldn’t be allowed, which meant that there was some contradiction in terms of fantasy sports.

In addition, horse racing wagering did not feel any blowback from the bill. A 1979 betting law attached to horse racing superseded the effects of the UIGEA. As a result, two of the most popular forms of internet gambling survived the scope of this bill.

Immediate Impact of the UIGEA

  • At the time of the passage of the Unlawful Internet Gambling Enforcement Act of 2006, online poker had climbed to its absolute peak. After all, the popularity of televised poker events had encouraged many amateurs to try it on their own, and the easiest way to do that was to play online. But these players would soon find their pastime severely interrupted by the UIGEA final rule.
  • On a broad level, any overseas company publicly-traded on the stock market made it a point to pretty much wash their hands of their online gambling operations in the United States. Their UIGEA risk assessment told them that it was better to cut ties than to risk prosecution. That knocked out some of the major players on the market in a hurry.
  • Even online gambling sites without any ties to such publicly-traded companies immediately felt the sting of the UIGEA 2009 (which is when the law was first enacted after final rules and regulations were worked out). There were no legal ways for them to receive payments from most of their customers in the United States, especially from those who used credit cards. As a result, they would have faced financial losses that made it difficult for them to operate.
  • The companies who did survive generally banned any association with US players. The US poker and sports bettors who did persist had to come up with alternative means of funding their accounts while finding new sites with their favorite games. They could no longer count on using their favorite credit card because of the UIGEA final rule.
  • Unfortunately, some of the more unscrupulous entities within the online gambling industry took advantage of the UIGEA text to their own ends. These sites essentially used the UIGEA as an excuse to shut down operations before their customers could get the money left in their accounts. As online gambling is an unregulated industry, these customers had no real recourse to get their money back.
  • The fantasy sports industry may have gained new prominence as an indirect result of the UIGEA news. In fact, daily fantasy sports, which now represents one of the strongest parts of the industry, likely arose from the effect of the law. Since fantasy sports were left relatively untouched, many gamblers who had been stymied in their other pursuits moved on to whatever area they could.

The UIGEA in the Present Day

Although the UIGEA threatened to topple the world of online gambling at the time of its creation, its impact has lessened considerably over the years. Many backers of internet gambling have called for a complete UIGEA repeal. That would mean lawmakers would have to battle over the issue all over again, however, they might not wish to do with so many other pressing issues on the docket.

You can look to the prevalence of legalized online gambling in the United States as the reason that the UIGEA has lost its teeth. If a state permits legalized online gambling, as many have adopted in recent years, any online betting operation within that state can take and process payments with no problem whatsoever. As a result, many casinos have opened up their own online betting operations tied to what they have at their physical location.

Let’s take a look at some of the modern facets of online gambling and how they have or haven’t been affected by the UIGEA 2006.

Online Casino Gambling From Within the United States

If you are an online gambler within the United States, you need to realize that nothing that you do in terms of casino gambling online is illegal. If you can find US online casino sites that will take your wagers and pay them out, feel free to use them. After all, many people prefer online gambling to the hassle of going to the casino to play casino games, slot machines, and table games.

The only drawback you might find is searching for ways to fund your accounts. We’ll talk more about that in the section about payment processing. But from the customer’s point of view, all the UIGEA can do right now is force you to look around a little bit more for a site that fits you best.

Online Sports Betting From Within the United States

We already talked about the way that the UIGEA fantasy sports impact has been minimal at best. If anything, it only strengthened the industry. After all, in the immediate aftermath of the UIGEA news, fantasy sports represented pretty much the only game in town safe from lawmakers.

As is the case with casino gambling, however, the UIGEA shouldn’t make too much of an impact anymore on your search for a top sports betting website. Again, your payment options might be restricted. But for the most part, as long as you can find a reliable site that willingly takes your action, you can bet on all your favorite sports without having to worry about legal hassles.

Payment Processing for the UIGEA

When the UIGEA update first stunned gamblers, many credit card companies quickly cracked down on all associations with online gambling. That left gamblers without their number one source of funding. But it also left the door open for alternatives to fill the gap.

Red, White, Blue Bitcoin

Among those alternatives, cryptocurrency quickly rose above the rest of the pack because of how well it suited the process of online gambling. No government or lawmaker can claim any jurisdiction over the digital coins, which can be used as currency in the same way you use dollars and cents. Boasting immediate settlement times and absolute anonymity, cryptocurrencies like Bitcoin have surged in popularity to the point where some gambling sites have the coins as the only method of payment.

As for credit cards, you should try out a favorite card first (or check the gambling site to see if it’s accepted) before assuming that you can’t use it. Since the Unlawful Internet Gambling Enforcement Act of 2006 isn’t a hot-button issue like it once was, and since gambling is legal in so many jurisdictions these days, it’s become much more likely for credit card companies to allow payment to gambling sites to pass through unhindered. You might be surprised to find your favorite card to be perfectly acceptable.

Even if not, you can find other payment options besides credit cards and cryptocurrency. Pre-paid cards, bank transfers, and third-party online payment systems like PayPal have all made their way into the online gambling world. You should choose the method that is most convenient and cost-effective for you, only ruling a method out if you find that it doesn’t work.

Frequently Asked Questions About the UIGEA

Does the UIGEA Mean I Can Be Prosecuted for Online Gambling?

The UIGEA says nothing about prosecuting online gamblers, so you can rest assured that you can continue your online wagering (or start it up, if you haven’t already) without the FBI breaking down your door. Instead, the Unlawful Internet Gambling Enforcement Act targets internet gambling operations. They are the only ones who need to worry about prosecution of any kind and even that is highly unlikely at this point.

Does the UIGEA Affect Non-Us Players?

Since US gamblers don’t have to concern themselves about being targeted by the UIGEA, non-US players clearly have no cause to worry. Because the laws in many overseas jurisdictions tend to be much more lax concerning internet gambling than is the case in the United States, gamblers from those places really don’t have any reason for alarm.

The only possible effect they might have felt from the UIGEA might have been when the law was first enacted and some sites shut down completely. Since then, they are likely to have found other gambling sites for their wagering pleasure.

Will the UIGEA Ever Be Repealed?

At this point, the UIGEA has dropped well down the scale in terms of importance. Bettors hoping for some sort of UIGEA update or UIGEA repeal will likely have to wait on that. Some Democratic lawmakers made rumblings about repealing the law when it went into effect back in 2009, but nothing ever came from it.

If it were to be repealed, the bettors and gambling industry advocates who hated the law would likely feel some sense of triumph in an almost ceremonial way. And it wouldn’t make too much of a difference to the practice of online gambling as it is conducted today, other than perhaps allowing a few more credit card transactions to go through. The most likely outcome for the Unlawful Internet Gambling Enforcement Act of 2006 is for it stay on the books as a law that has become irrelevant.

Were the UIGEA Poker Restrictions Harsher Than Was the Case for Other Gambling Endeavors?

Not really, although it might seem that way. All online casino games essentially fell under the jurisdiction of the UIGEA, not just poker. It’s just that online poker stood as the most popular game around when the law was first enacted.

The good news is that gamblers who wish to do so shouldn’t have any problems finding an online site that offers poker in the current environment. Maybe a local United States casino site can do the trick, or an offshore site that has survived the impact of the UIGEA might provide great poker action. In any case, your poker play should be largely unaffected by any future UIGEA news.

Is It True That Bitcoin Was Created as a Reaction to the UIGEA?

Well, the timing of the creation of Bitcoin certainly holds some interesting coincidences to the enactment of the UIGEA. Lawmakers passed the Unlawful Internet Gambling Enforcement Act in 2006 and then began enforcement in 2009. The creators of Bitcoin published an explanation of its existence in 2008 and began trading a year later.

Those who believe in this theory point to the fact that Bitcoin creates a way for consumers to assume control over their finances and spend their money in whatever way they see fit without any government interference. And Bitcoin certainly came in handy for those looking to gamble online after finding other payment methods denied by the UIGEA. But Bitcoin’s creators probably had much bigger fish to fry in mind with their new invention, even though it certainly did fit well into the online gambling sphere.

Conclusion on UIGEA

When people look back on it in years to come, the UIGEA 2006 will stand out as an example of lawmakers pulling a fast one on an unsuspecting public. Far more constituents of those who pushed the law suffered aggravation at the hands of the UIGEA than there were those who derived benefits from it. The governmental overreach led to chaos in a rising industry to the point where some wondered whether it could recover.

Luckily, the demand for online gambling caused more and more jurisdictions and lawmakers to realize that fighting against the tide was futile. The Unlawful Internet Gambling Enforcement Act of 2006 still exists today, but it doesn’t really faze the online gambling world much anymore. Hopefully, no other efforts to stem the tide will cause as much havoc in the future as the UIGEA once did.