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Online Gambling Laws
by Nick Lewandowski
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Overview
Online gambling law deals specifically with Internet companies (and their websites) engaged in the acts of transferring and accepting funds, generally from outside the United States, in connection with sports betting, online poker games and other games of chance. Most online gambling legislation is relatively recent, and is no doubt partly a result post-9/11 anxiety about the money transfers in cyberspace, in addition to more traditional concerns over consumer protection.
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2001 to 2006
The years 2001 to 2006 saw an explosion in the amount of traffic Internet gambling sites. Stimulated in part by popular revival of poker, numerous gambling websites arose catering to card players across the United States. They were accompanied by new and pre-existing sites dedicated to sports betting. Many of these websites operated outside the United States, however, and thus fell outside the United States government's regulation jurisdiction. In brief: the online operators had devised a system through which they could circumvent US tax and gambling law. US citizens were able to gamble online playing games that would be illegal if they physically existed inside the state. Since this was an entirely new legal situation, legislation was drafted to reel in the online gambling operators--with the intent of protecting consumers and monitoring the transfer of online funds.
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The Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA)
Passed in October 2006, the UIEGA was targeted specifically at the operators of the gambling sites. It created a formal definition for unlawful Internet gambling: the acceptance of funds electronically or otherwise from a bettor in connection with betting or wagering, if that wagering were in violation of existing state anti-gambling legislation. The law did not forbid participation in online gambling; it only criminalized the acceptance of funds on the part of the website operators. Many of the online poker sites immediately suspended transactions with US residents, while others, such as Fulltiltpoker.com continued to remain open for business. There was disagreement in the online gambling and legal communities over the exact nature of the new law.
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Criticism of UIGEA
The major criticism (and subsequent loophole) of UIGEA was that it was vague. The gambling sites that remained open argued that the law only applies to players in states where laws expressly forbade internet gambling, as the law itself stated. This created an enormous loop-hole, as many states did not have any legislation covering online gambling at all, let alone legislation making it illegal. Many websites, such as Pokerstars, continued and still continue to operate under this legal basis, though they can deal only through banks willing to handle money that, so far as the law is concerned, may or may not be illegal.
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The Internet Gambling Regulation, Consumer Protection, and Enforcement Act
A bill was introduced by Representative Barney Frank in May, 2009 that would legalize and regulate certain types of online gambling (online casinos and poker games, but not sports books). The language of the law was more specific than UIGEA. It removed all references to state law and subjected all forms of online gambling (save those expressly prohibited) to the same licensing process. This bill, however, has not yet been passed, and hearings have been delayed until September, 2009.
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The Future of Online Gambling Laws
Predicting the exact future of online gambling would be difficult, but it is fair to surmise that the hearings on Rep. Frank's Bill will have an enormous impact on the direction of future legislation. In the meantime, online gambling sites, their players and their bankers continue to occupy the same nebulous space they have been shoved since UIGEA was passed in 2006.
