Everything You Need to Know About the UIGEA Law

UIGEA LawThe Unlawful Internet Gambling Enforcement Act, or the UIGEA for short, is known as being one of the most influential laws to ever pass for online gambling in the United States, and it drastically affected the world stage as well. It’s been one of the most polarizing pieces of legislation to ever pass regarding the online gambling world, and it’s also one of the pieces of legislation that’s responsible for the most misconceptions. There are very specific things that it does and does not cover, and knowing the circumstances of how the bill passed and what its purposes were will help you to have a feel for what the UIGEA Law is all about.

How the UIGEA Law Was Passed

A session of Congress was about to end in October 2006, and Senate Majority Leader Bill Frist faced a problem. He was up for re-election, and his prospects did not look too good. In a maneuver designed to help rally the conservative voters he needed to get, he paired with Senator Jon Kyl to have the UIGEA attached to a port security bill. This port security bill absolutely had to pass within hours, and with some sneaky politics, Frist and Kyl were able to virtually guarantee the UIGEA would be made into law.

What the UIGEA Does

One of the biggest myths about the UIGEA is that it bans online gambling. In actuality, it contains very specific language that states that it does not change the legality of online gambling at all. The UIGEA was primarily about two things, one of which was intended to have some bite and another which, for all practical purposes, was not.

The first aspect of the UIGEA, and the one that caused the most problems, is that it created big penalties for banks and financial institutions that processed deposits for illegal online gambling. However, because it’s ambiguous as to which online gambling is legal or illegal in a lot of places, banks were put on the spot. Instead of risking being fined over something that doesn’t really bring them in much money, most banks decided to ban transactions for online gambling completely. An interesting point to note is that the UIGEA specifically protected withdrawals for online gambling, even if it was deemed illegal, to make sure that US citizens were able to retrieve their funds.

The second aspect of the UIGEA is that it made it illegal for companies to offer online gambling services inside of the United States without a license. This is in spite of the fact that USA had no licensing process in place at the time. While this was probably meant to be a meaningless gesture since all of these companies operated outside of US jurisdiction, some businesses that were publically traded on the London Stock Exchange and other arenas ran into problems. To be listed on these exchanges, they had to adhere to all of the laws of the places that they offered their services, and this meant they had to either pull out of the USA or be removed from the LSE.

The Effects of the UIGEA

Because banks had huge incentives to overblock all transactions for online gambling, even gambling that was legal at the time, it made it extremely difficult for players to get money into their accounts. This effect still lasts today where players from all over have the misconception that banks block these transactions because the gambling is illegal. In fact, they block them because the risk of the government fining them is greater than the reward of getting paid for processing the transactions.