The UnInGEn-ious Act’s Non-Impact on Internet Gambling

by on October 6, 2006 · 10 comments

With the Unlawful Internet Gambling Enforcement Act of 2006, Congress took aim at Internet gambling, pulled the trigger, and shot the domestic financial services industry. The regulatory bloodshed might temporarily put off American consumers of Internet gambling services. Very quickly, though, foreign financial services will step into the breach. More likely than not, Internet gambling will continue unabated. Federal lawmakers will have done little more than won a sound-bite for the upcoming elections and encouraged the widespread use of Internet-based financial systems capable of wholly escaping U.S. control. Hence my moniker for the new law: The UnInGEn-ious Act.


Congress passed the UnInGEn-ious Act as subchapter IV of the SAFE Port Act, H.R. 4954, 109th Cong., 2nd Sess. (2006). Strictly speaking, because the SAFE Port Act has yet to receive a presidential signature, it has not yet become law. It surely will, though.

The UnInGEn-ious Act does not outlaw Internet gambling per se. Instead it prohibits anyone “engaged in the business of betting or wagering” from knowingly accepting payment “in connection with the participation of another person in unlawful Internet gambling.” Id. § 5363. Mere consumers face no liability under the Act. Nor, thanks to the Act’s careful definition of “unlawful Internet gambling,” id. § 5362, do a variety of intrastate, intratribal, or interstate horseracing gaming services. In other words, the UnInGEn-ious Act basically targets new online competitors to more traditional gambling services.

The UnInGEn-ious Act aims to stymie those upstarts not by outlawing them outright, but rather by choking off their revenue. The Act thus threatens civil injunctions, id. § 5365, and criminal penalties, id. § 5366, against gambling businesses that accept payment for illegal Internet services. Unless run or owned by a person who runs an illegal online gambling site, id. §§ 5365(c)(2), 5367, interactive computer services or telecommunications services will suffer no worse than an order to take down an offending site or link, id. § 5365(c)(1).

Domestic financial services face the threat of a bevy of new regulations, issued by the Federal Reserve in consultation with the Attorney General, designed to identify and prevent transactions prohibited by the UnInGEn-ious Act. Id. § 5364. Although the exact form of those regulations won’t be known for some time, the Act limits their scope to what can “be reasonably designed to identify and block or otherwise prevent or prohibit” offending transactions, id. § (b)(1), specifies that the regulations must “to the extent practical, permit any participant in a payment system to choose among alternative means” of achieving the Act’s goals, id. § (b)(2), and must “exempt certain restricted transactions or designated payment systems from any requirement imposed under such regulations, if . . . it is not reasonably practical to identify and block, or otherwise prevent or prohibit the acceptance of, such transactions . . . .”id. § (b)(3). The Act also warns regulators to “ensure that transactions in connection with any activity excluded from the definition of unlawful internet gambling,” i.e., the intrastate, intratribal, or interstate horseracing gaming services mentioned above, “are not blocked or otherwise prevented or prohibited by the prescribed regulations.”

What does all this mean for internet gambling? Not much. Credit card services subject to U.S. law have been blocking most internet casino and sportsbook transactions for some time. The industry has thus already begun the transition to alternative payment systems such as NeTeller and Firepay, that can escape the reach of U.S. law. Some online gambling services even offer discounts to encourage consumers to give up their credit cards.

Because they stay safely overseas, NeTeller, Firepay, and other alternatives to U.S.-based financial services can escape the reach of the UnInGEn-ious Act and other domestic regulations. Thanks to the veil of secrecy that these new financial services cast over their customers’ transactions, moreover, it looks very unlikely that U.S. authorities will be able to selectively prohibit domestic transactions that ultimately end up funding Internet gambling services. The UnInGEn-ious Act thus does little more than speed up the flight of Internet-based gaming and financial services from the U.S. to more friendly homes oversea. Since U.S. consumers will still enjoy free access to those services, they will hardly notice the difference. If only we could just as freely escape from the uningenious government services of domestic politicians!

[Crossposted to Agoraphilia.]

  • V

    I’m not sure why nobody brings up the obvious side of this issue. When you play a game in vegas, you know that even though the odds are against you they are legitimately so. Dice have a one in six chance of landing wherever, the cards are in their physical places. Online, the site can execute whatever code it wants. The odds can be stacked against the consumer far beyond what ordinary casinos would allow.

    If we’re looking to protect US consumers, we shouldn’t be banning internet gambling. We should be advertising how these operations work and AUDIT THEIR CODE to certify that there are no digitally weighted dice and publish the publish the results.

  • V

    I’m not sure why nobody brings up the obvious side of this issue. When you play a game in vegas, you know that even though the odds are against you they are legitimately so. Dice have a one in six chance of landing wherever, the cards are in their physical places. Online, the site can execute whatever code it wants. The odds can be stacked against the consumer far beyond what ordinary casinos would allow.

    If we’re looking to protect US consumers, we shouldn’t be banning internet gambling. We should be advertising how these operations work and AUDIT THEIR CODE to certify that there are no digitally weighted dice and publish the publish the results.

  • http://blogs.law.harvard.edu/cmusings Derek Slater

    Tom,
    I hope you’re right that most poker players will be unaffected, but color me skeptical. Here’s analysis from the Poker Players Alliance lobbying group:
    http://www.pokerplayersalliance.org/alerts/Analysis_of_Internet_Gambling_Prohibition_Act.pdf

    Party Gaming and 888 are going to block all transactions from customers with US addresses – at least, that’s how I’ve read their press statements. So unless you can fake your address to Party Poker and the party that sends money to Party Poker, you’re out of luck. And even though I bet some people will take the time to do this, I think many ordinary Americans will be frustrated and effectively denied access beyond the near term.
    While not a knockdown argument against your view, let me note that the stocks of the poker companies were halved, and Neteller et al were hit hard to. Are you saying those stock holders were all chicken littles, mistakenly afraid of those companies losing US customers?

  • http://blogs.law.harvard.edu/cmusings Derek Slater

    Tom,

    I hope you’re right that most poker players will be unaffected, but color me skeptical. Here’s analysis from the Poker Players Alliance lobbying group:
    http://www.pokerplayersalliance.org/alerts/Anal

    Party Gaming and 888 are going to block all transactions from customers with US addresses – at least, that’s how I’ve read their press statements. So unless you can fake your address to Party Poker and the party that sends money to Party Poker, you’re out of luck. And even though I bet some people will take the time to do this, I think many ordinary Americans will be frustrated and effectively denied access beyond the near term.

    While not a knockdown argument against your view, let me note that the stocks of the poker companies were halved, and Neteller et al were hit hard to. Are you saying those stock holders were all chicken littles, mistakenly afraid of those companies losing US customers?

  • http://www.tomwbell.com Tom

    V, there is nothing now stopping Internet casinos and the like from volunteering to undergo audits by objective and trusted third parties. And, unsurprisingly, they do so; see, e.g., this casino’s promise. So while I agree that domestic bans on Internet gambling work to the disadvantage of U.S. consumers, I don’t think the supposed need for audits justifies regulation.

  • http://www.tomwbell.com Tom

    V, there is nothing now stopping Internet casinos and the like from volunteering to undergo audits by objective and trusted third parties. And, unsurprisingly, they do so; see, e.g., this casino’s promise. So while I agree that domestic bans on Internet gambling work to the disadvantage of U.S. consumers, I don’t think the supposed need for audits justifies regulation.

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  • Bill Monroe

    For the best article on this subject, read “Unintended Consequences of a Monetary Control Scheme” by a U.S. lawyer and gambling writer named Mark Schopper, who wrote the book on Internet Gambling. The article is available on the Internet for free, just search for it by its title. He predicted this would happen in 2001, and the genius of his article is he also predicted the consequences, which will be devastating to the banking system because of e-cash, which money launderers will love. The U.S. Government is so ill informed it is scarry.

  • Bill Monroe

    For the best article on this subject, read “Unintended Consequences of a Monetary Control Scheme” by a U.S. lawyer and gambling writer named Mark Schopper, who wrote the book on Internet Gambling. The article is available on the Internet for free, just search for it by its title. He predicted this would happen in 2001, and the genius of his article is he also predicted the consequences, which will be devastating to the banking system because of e-cash, which money launderers will love. The U.S. Government is so ill informed it is scarry.

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