Poker Article: UIGEA - U.S. Treasury Enforces Law

In a last ditch attempt by the Bush Administration, the United States Treasury Department has finally drafted the regulations associated with the implementation of the UIGEA (Unlawful Internet Gambling Enforcement Act of 2006). The UIGEA attempted to eliminate the U.S. banking system from supporting any financial transactions associated with online gambling.

As part of a rider that was attached to a sure-to-pass Ports bill in 2006, the Bush Administration was able to attach the poorly-defined UIGEA to the ports bill, literally 30 minutes before the Ports bill went up for a Congressional vote (and was passed). The trickery associated with this move, along with the fact that the UIGEA was poorly written, and literally slapped together at the last minute, left the UIGEA in a poor state, that could not be interpreted properly by the U.S. banking system, who was chartered to implement and enforce the UIGEA. The definition of what constituted a gambling transaction and what did not, was clearly omitted from the UIGEA draft, and this in itself, left the banking system with a charter that was unattainable. Given that the U.S. banking system was asked to implement rules that were ill-defined, and also asked to implement the law at their own cost, the implementation of the UIGEA was for the most part delayed, until the rules were clearly specified.

Now that the current Republican administration has only several months of tenure remaining, thanks to a Barack Obama-led Democratic landslide, they are hoping to push this law into action, now that the U.S. Treasury has submitted the final draft of the regulations to be followed. This draft is described as a move which is commonly achieved for outgoing administrations to ratify controversial regulations before leaving office, and is commonly known as the practice of "midnight drop".

UIGEA carved out exemption for fantasy sports, interstate lotteries, and horse race wagering. The passing of this law forced many non-U.S.-based public gambling companies to close their doors to the U.S. market. This, in turn, has resulted in several ongoing lawsuits and battles with the WTO (World Trade Organization) over the rights of the U.S. government to control the Internet and economical entities that are outside the jurisdiction of the United States.

More importantly, the U.S. banking system has continuously questioned how that they will be able to differentiate between legal and illegal gambling companies and gambling transactions. Given the current worldwide financial credit meltdown, it does not appear to be a prudent time for the U.S. banking industry to burden themselves with deciding how to implement these rules, especially since they have infinitely larger concerns these days (like maintaining the solvency of the U.S. financial system). Several groups who are opposed to the implementation of UIGEA currently, have petitioned the U.S. Office of Management and Budget (whose job it is to actually implement the regulations put forth by the Treasury department), to prevent these rules from being etched in stone. Specifically, they have asked governing officials to wait until the new Obama-led administration takes office, so that a full review of the practicality of implementation can be thoroughly analyzed.

It is likely that given the timing of the Treasuries' UIGEA mandates, relative to the current economic and financial crisis, that any decisions regarding implementation will be deferred to the Obama administration. It is thought by many, that the Obama administration will be more lenient towards online gambling, and that they may see online gaming regulation as a taxable vehicle that could provide a windfall to help reduce our current monumental budget deficit. It will be interesting to see if anything transpires in this regard, during the last few months of the Bush Administraion.