The Last Hurrah

Seen as a last hurrah by the Bush Administration, the U.S. Treasury has just released the rules and regulations required for the implementation of the Unlawful Internet Gambling Enforcement Act (known as the UIGEA). The UIGEA, passed by Congress in 2006, attempted to eradicate any gambling transactions facilitated by the U.S. banking system.

The UIGEA was deceptively attached to a “guaranteed-to-pass” Ports bill, by several Republican legislators, in an attempt to preserve the ability for U.S.-based land casinos to enter into the online gambling market at some juncture down the road. Those who attached the UIGEA to the ports bill, claimed to be doing so for moral and ethical reasons, although the true intent was quite clear, since there were specific carve-outs for horse-racing, interstate lotteries,
and fantasy sports websites. The hastily and poorly-crafted UIGEA legislation failed to identify what illegal gambling transactions actually were, and failed to identify which companies were deemed to be illegal from a transactions standpoint. These major gaffes and omissions made it entirely impossible for the banking system to even contemplate the correct implementation of the UIGEA. Hence, implementation of the UIGEA was effectively delayed.

The Bush administration is attempting a final effort at implementing the UIGEA, with the official rules just having been released by the U.S. Treasury Department. The outgoing Republican party is pushing for this implementation before they leave office, as is common with many exiting administrations.

Unfortunately, UIGEA’s passage forced many ouside-the-U.S. public poker, online bingo, and casino online gambling companies to shut their doors to U.S. players, as they were effectively threatened by the U.S. Department of Justice with sanctions, should they not adhere to the UIGEA. For fear of retribution and damage to their public reputations, many of these companies left the U.S. market. Several lawsuits resulted, and to this day, several countries (e.g., Barbados and Antigua) have ongoing litigation with the World Trade Organization (WTO) over the effects of the UIGEA on their bottom line. The issue at

hand has been the United States government’s control of the Internet and offshore commerce, when these companies clearly reside outside of the United States, and are governed and regulated by their own countries.

With the U.S. Treasuries’ regulations now being handed down to the U.S. banking system, the banking system still does not seem to be clear on how to differentiate between “legal” and “illegal” gambling transactions, and is leaning to just banning all “gambling” transactions, which could be devastating for any legal gambling entities (e.g., horse-racing). Moreover, given the magnitude of today’s global financial banking crisis, it seems rather imprudent for the banking system to be spending their time implementing rules for online gambling transaction prevention. Even further to the point, the banking system is being asked to implement the Treasury’s rules, at their own costs. There are many groups that oppose the implementation of these rules (especially at this particular time), and those groups wish to defer any rulings until an Obama-led administration is in office. Obama is thought to be internet-gambling friendly, and potentially open to the legalization and regulation of online gambling. Such open mindedness, could clearly result in a better-managed online gambling environment, and also could clearly result in a tax windfall for the U.S., which could help combat our rising budget deficit.

Given the timing of the Treasury publishing these rules while the country is in economic turmoil, it is unlikely that the banking system will consider UIGEA implementation during the final months of the Bush administration. Expect these issues to be revisited (possibly in a different light), when Obama takes office.

This entry was posted on Tuesday, January 20th, 2009 at 1:58 pm and is filed under Gambling News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.