UIGEA Rules Proposal
October 31st, 2007
In the middle of the night in October of 2006, American lawmakers passed the Unlawful Internet Gambling Enforcement Act (UIGEA) without any discussion or debate. The new act declared that it would be illegal for banks to process online poker transactions.
The anti-gaming legislative language was attached to a Port Security Bill, which meant that any politician who dared veto the bill would be committing professional suicide. Politicians don’t want to be labeled soft on homeland defense and terrorism. That spells doom, especially in an election year. Alas, the vote passed by an overwhelming majority and the UIGEA era was ushered in as online poker players and operators anticipated the end of online poker as they knew it.
The fallout over the UIGEA rippled through the entire online poker industry. Many online poker companies closed their doors to American players, while several others stuck around. A handful of the smaller online poker sites ceased operations altogether and the rest were gobbled up by bigger companies. Two distinct groups emerged: online sites that would continue to serve the massive American market and online sites that wouldn’t. The sites that continued to do business in America took a tremendous risk, yet over the last year they have thrived. Meanwhile, their competitors who left America scrambled to find a solvent player base in emerging markets such as Eastern Europe, South America, and Asia.
Online poker sites generated the majority of advertising revenue for websites, magazines, and television programs. The UIGEA drastically reduced or altogether eliminated their advertising budgets.
Online poker sites generated the majority of advertising revenue for websites, magazines, and television programs. The UIGEA affected the rest of the poker industry as several online poker sites drastically reduced or altogether eliminated their advertising budgets. The immediate result was that people lost jobs as U.S. based websites shut down, magazines stopped publishing, and television programs were cancelled. As a freelance writer in the poker industry, I lost more than half of my clients within a month of the UIGEA, and the ones that I retained asked me to take a pay cut. I wasn’t the only one affected. Poker Player Newspaper reduced the number of pages they published since online poker sites could no longer buy full page ads. Veteran writers who had been covering poker in Las Vegas for decades all of a sudden found themselves without a steady paycheck.
It would take almost a full year before the United States Treasury and the Federal Reserve proposed rules for the implementation of the UIGEA. On October 1, 2006, they released a 52-page document and issued a statement that the new rules were “reasonably designed to prevent payments being made to gambling businesses in connection with unlawful Internet gambling.”
Lou Krieger, a professional poker player and editor of Poker Player Newspaper, explained on his blog, “The US regulations make banks responsible for blocking credit and debit card payments for online gambling. It also bars online casinos and other bank customers from receiving Internet gambling proceeds. Barring online casinos is more show than go, however, since online casinos are all located offshore-beyond the law’s reach.”
The most promising part of the proposal is that neither the Department of Treasury, nor the UIGEA define which specific online gambling activities are legal and which activities are illegal. They are deferring to existing state, federal, and tribal laws. In short, they went out of their way to avoid stating whether or not online poker is legal or illegal.
According to an article that Amy Calistri wrote at Poker News, “At this point in time, there will be no master list of unlawful internet gaming businesses. While the Agencies have stated some of the benefits to participants by creating such a list, they also cite the cost, accuracy issues, and liabilities associated with its creation. Just the time to accurately research and interpret all of the state, federal, and tribal gaming laws was cited as an impediment.”
Again, that’s good news for many businesses that were worried about being put on a black list by American banks.
Poker players, the American banking community, and anyone who values Internet and personal freedoms should be troubled by this intrusive rule.
Former U.S. Senator Alfonse D’Amato, who is currently the Poker Player Alliance’s Chairman said, “Poker players, the American banking community, and anyone who values Internet and personal freedoms should be troubled by this intrusive rule. Deputizing private U.S. financial institutions to determine what are lawful and unlawful transactions will lead to the monitoring and blocking of the personal and lawful financial transactions of many of their customers who wish to play games of skill, like poker, on the internet. This seems more like the actions of Iran than the USA. We are hopeful that sensibility will prevail before these rules are finalized.”
There is a commenting period through December 12th, 2007 where banks are not yet required to follow the new rules. They also have between now and December 12th to contact the Board of Governors of the Federal Reserve System and the Department of Treasury. Once the period is over, there’s another round of re-evaluation which could take up to 180 days. That means banks will not start enforcing the new rules until the middle of 2008 at the earliest… if they decide to enforce them at all.
That’s the big question.
Will the American banks spend the time, money, and effort to prohibit transactions from international online poker sites to their American clients? Will an American bank block a wire transfer from your favorite online poker site? Will they not accept a check from them either?
I guess we’ll find out in the summer of 2008, unless drastic legal changes are made before then.
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