UIGEA is an acronym for Unlawful Internet Gambling Enforcement Act, which is a 2006 law that applies to poker and other types of gambling on the Internet. It was passed as part of the SAFE Port Act, even though it has nothing to do with ports or national security.
A common misconception about UIGEA is that it made online gambling illegal. That is not the case. UIGEA made it illegal to knowingly accept payments for illegal Internet gambling.
That might seem like a nitpicky difference, but it’s actually quite a large difference. The difference is that it remains legal to accept payments for LEGAL Internet gambling.
Since no federal law prohibits online gambling (although the Justice Department used to claim that the Wire Act prohibited online gambling of any kind), the state laws start to matter greatly. Some states DO have laws explicitly prohibiting online gambling, while other states have no laws on the matter.
Fantasy sports are specifically exempted from this particular law.
One of the claims made in the language of the law is that Internet gambling transactions are a growing problem for banks and credit card companies. I’m not sure how these transactions present a problem for either the banks or the credit card companies, but that’s what it says in the law. Like many aspects of law and government, some of this stuff just seems to come out of nowhere. (According to the Wikipedia article on the UIGEA, this assertion comes from the National Gambling Impact Study Commission–good luck remembering the name of THAT commission, eh?)
Up until the time UIGEA was passed, most online gambling companies ignored any potential legal repercussions via the United States government. Even though the Justice Department had rattled its sabers a few times citing the Wire Act, legal advice that online casinos and Internet cardrooms received explained that court precedent supported the idea that the Wire Act only applied to sports betting. So there were several sportsbooks who didn’t accept bettors from the United States, but online casinos and poker rooms accepted United States real money players as a matter of course.
That changed after UIGEA. Many online gambling companies, including many online poker rooms, are publicly traded corporations. All of the publicly traded companies (like Party Poker and Cryptologic) in the industry stopped taking real money players from the United States in the wake of UIGEA’s passage. Other companies, like PokerStars and Full Tilt Poker, continued to accept real money players from the United States until “Black Friday,” which happened a few years later.
UIGEA defines gambling as risking money on the outcome of a sports contest or any game subject to chance. Some people argue that poker isn’t gambling because it’s a game of skill, but it’s hard to argue that UIGEA’s definition of gambling doesn’t apply to poker. Clearly, you’re risking something of value in every hand which you play–unless you’re playing for play chips, which are worthless. And the role of chance in determining the outcome of a hand is obvious to anyone who’s ever had his pocket aces busted by some clown holding trash who got lucky on the flop.
UIGEA doesn’t make it illegal to conduct the transfers of this money. It makes it illegal to receive payments for this purchase. So banks and credit card processors are protected from the implications of the law, and so are the bettors. The only party this law could possibly affect is the company on the receiving end of these kinds of funds.
Violations of UIGEA can result in a maximum of a five year prison sentence. The courts could also rule that someone convicted of violating UIGEA would be banned from running or operating an otherwise legal gambling business at some point in the future.
Barney Frank, one of the more level-headed and reasonable legislators in DC, proposed legislation that would repeal large parts of the Unlawful Internet Gambling Enforcement Act. God bless him. His legislation was introduced in 2009, and it specifically excluded poker from the definitions related to illegal gambling online. As far as I know, this particular bill was never passed, but it’s nice to know that someone in Washington D.C has poker players’ backs on this one.