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6 Month Reprieve on UIGEA Implementation

30 November 2009, Staff writer

Back in 2006 when the Bush Administration passed the Unlawful Internet Gambling Enforcement Act ("UIGEA"), the deadline set for implementation of its relevant operative provisions was 1 December 2009.

The law requires that banks and financial institutions block all transactions between US residents and online gambling operators deemed related to 'unlawful internet gambling'.

The date has since become somewhat of a D-Day for stakeholders in the industry, and more particularly those charged with the onerous responsibility of blocking online gambling payments...the banks.  Banks and payment processors have made no secret of the fact that they will have difficulties in correctly identifying and blocking payments in accordance with UIGEA.  Financial services industry organizations have publically described UIGEA's implementation rules as ambiguous, burdensome and unlikely to prevent Americans from gambling online.

One of the major concerns is that while UIGEA requires that banks block all payments connected with 'unlawful internet gambling', nowhere in the Act does it define what exactly this is.  In a slightly farcical situation, the banks are required to make this determination, even when legal experts across the country are divided as to what does or doesn't constitute unlawful internet gambling.  A flow on effect from the expected confusion on implementation is the likely blocking of clearly legal online gambling related transactions such as lottery ticket and horse race bets purchased in certain States.

Back in early October Financial Services Committee Chairman Barney Frank and various other parties in support of a push to repeal UIGEA and replace it with laws to legalize and regulate online gambling penned a request to the powers that be to delay UIGEA's implementation.  That request was heard and yesterday Treasury Secretary Tim Geithner and  Chairman of the Federal Reserve Ben Bernanke agreed to push the date back 6 months to 1 June 2010.

The reprieve is a significant one as it relieves banking sector of an administrative burden they really didn't need right now, as well as allowing various local lottery and wagering operators to avoid lost business from mistaken payment blocks.  But some industry observers see the move as far more significant than this.

There is a push in Washington to have UIGEA repealed.  Frank introduced H.R. 2267 earlier in the year - a bill designed to replace UIGEA with measures to license, regulate and (combined with H.R. 2268) tax online gambling operators.  The bill now has over 60 co-sponsors and has won the support of key lobbying interests previously opposed to a regulated online gambling industry (in particular the American Gaming Association and key members like Harrahs).

Those optimistic about the prospects of these proposed new laws believe that the implementation delay is a recognition from the Obama Administration that a workable alternative to UIGEA is welcomed.  Particularly if such an alternative can raise anywhere near the $42 billion (over 10 years) that Treasury forecast it will.

In any case, Barney and his friends have at least 6 more months to push their cause, and the banks can breath a sigh of relief.

For a discussion of the current online casino legislative environment in the US, click here  All Rights Reserved

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