UIGEA and the prospects for US internet gambling

A couple pieces of news on the internet-gambling front. Implementation of the Unlawful Internet Gambling Enforcement Act (UIGEA), which kind-of sort-of makes online gambling illegal in the US, was delayed for another 6 months. The main section of UIGEA directs the Treasury Department to draw up regulations which restrict banks from processing deposits and withdrawals to and from offshore gambling sites. The banks hate this, because they don't want to be made into enforcement agents. In effect, UIGEA would force the banks to scan every transaction to see if it were gambling-related, with civil penalties if they failed.

UIGEA was passed in 2006, with the intention that the regulations be put in place by December of that year. Obviously that hasn't happened, and won't until 2010 at the earliest. UIGEA's main consequence was to give George Bush's Department of Justice moral support to pursue the owners and managers of offshore casinos and sportsbooks. Several prominent owners were arrested at US airports as they switched planes en route between two non-US countries. Neteller, the pre-eminent gambling money-transfer site, stopped accepting US business, and froze the assets of US customers for several months. Pinnaclesports, the most highly regarded sportsbook, closed its doors to US customers. PartyPoker, then the biggest poker site, also refused US business. The net effect has been to drive US customers to shadier sites with higher fees.

Barney Frank (D-MA), the chairman of the House Financial Services Committee, has been a vocal critic of UIGEA. In May of this year, he introduced legislation to repeal UIGEA and legalize and regulate internet gambling in the US. The bill hasn't moved since then, but tomorrow, December 4th, Frank will hold committee hearings. Those who wish can watch them live here. I don't expect many fireworks.

The next step in passage would be committee markup, which may be scheduled for the next week or two. It's an open question whether this bill will pass before the 2010 elections. Intrade's contract on it, UIGEA.AMENDED.DEC10, has flat for quite some time. I just put out a bid at 30 if anyone's interested.