Online Gambling Law Trailblazers Are Doing a Rethink

They blazed a legislative trail shortly after the turn of the millennium and now find themselves wondering whether they took right path. Governments that thought they could control how, where and with whom their residents chose to gamble with on the internet are now having to rethink their online gambling strategy.

One of the best case studies in this regard is the Australian experience.

In 2001 the Australian Government surprised many industry observers when they passed the Interactive Gambling Act 2001 ("the Act"). The Act took a prohibitive approach to online gambling, rendering it illegal for offshore operators to offer their product to Australian residents, as well as limiting the nature of bets that locally licensed operators could offer. 'In-play' sports bets were a notable bet type that Australian licensed sports books could not offer.

It was a bold law with clear intent; to limit Australian resident access to gambling sites that were not licensed in Australia. But from its release many believed that the government was being overly optimistic regarding their ability to effectively police the provisions of the Act. One blaringly obvious issue was that those who the legislation was primarily aimed at - offshore online gambling sites, were beyond the jurisdiction of the Australian judiciary and therefore unlikely to change their operating practices because of the law.

Another key difficulty was the fact that the law would have no real impact on either Australian's propensity to gamble, or their ability to access the sites which the legislation was supposed to prohibit.

Nevertheless, lawmakers thought the Act would make a difference and curb 'illegal' online gambling. But the reality 8 years down the track is that the number of Australians gambling online at websites prohibited by the Act can be counted in the hundreds of thousands. Locally licensed operators are now complaining that they can't compete with their offshore counterparts and the government is seeing millions of dollars in potential tax revenue flowing out of the country.

As a result, the Australian Government is now undertaking a consultation process to study gambling reform. This is government speak for 'we got it wrong the first time round and are now going to have to do an about face.

And the Australians are not alone. France is another country that went down the online gambling ban path, only to do an about face years later and announce their intentions to enact new laws opening up their online gambling market and licensing processes. Of course France has the added incentive of having to please the European Commission and not breach freedom of provision of services laws. But that's another story altogether.

Online Gambling's - UIGEA

The Unlawful Internet Gambling Enforcement Act (UIGEA) is a part of the Security and Accountability For Every Port Act of 2006, or commonly known as the SAFE Port Act. The SAFE Port Act was enacted to cover online gambling and the U.S ports in relation with the continuous threat of terrorism. Title VIII of this Act has covered online gambling and is also commonly known as the Unlawful Internet Gambling Enforcement Act of 2006. This title prohibits the transfer of funds from a financial institution to an Internet gambling site, with the notable exceptions of fantasy sports, online lotteries, and horse/harness racing. Title VIII's main objective is to prevent money laundering by terrorist organizations.

Surprise spread quickly over the online gambling industry when the UIGEA was passed by Congress in 2006. Several publicly listed members of the gambling industry took it so seriously that they ceased taking bets from American players even before having read the Statute. The UIGEA faced severe criticism both internationally and from the online gambling players community in the U.S. The international community that was critically affected by the loss of the players from the US, has pressed the matter that UIGEA has violated WTO standards. Antigua who is a major online gambling destination, has claimed $ 3.4 billion after it has obtained a ruling from WTO. Despite all the protests and criticism, the US authorities remain silent and continue to ignore the issue.

The opposition within the online gambling community is more effective. Online poker players, together, formed the coalition, Poker Players Alliance aiming to speak with one voice in order to promote poker, and to protect their rights as players. Online casino players have also organized the group Interactive Media Entertainment & Gaming Association (IMEGA) that aims to foster cooperation between the online industry and government at all levels, and to promote innovation, openness and freedom on the Internet.

The iMEGA went to court in March 2008 on behalf of a client against the UIGEA. The judge rejected the petition but acknowledged that there were deficiencies in the UIGEA that were best addressed by higher courts. The iMEGA has filed an appeal in the higher courts. The Internet gambling industry has challenged the UIGEA on several counts. The foremost is that it violates the fundamental rights of privacy, speech, expression, and conduct. Another important argument is that the UIGEA discriminates against Internet gambling as compared to land-based gambling. There are several arguments that are technical rather than fundamental. The most forceful of these is that the UIGEA does not define Internet gambling and is therefore vague. Several legislative challenges have been initiated against the UIGEA as well. The bill HR 6870 seeks suspension of the UIGEA till all issues raised against the UIGEA have been satisfactorily addressed. The bill S 3616 seeks to identify poker as a game of skill and therefore take it out of the purview of the UIGEA.

The online gambling community has come to terms with the fact that if it wants prohibition of Internet gambling removed then it will have to accept regulation. In fact many have begun to advocate regulation. In addition to the issue of money laundering regulation will address issues like underage, problem gambling and tax avoidance that will therefore increase the credibility of the online gambling industry.

Online Gambling and Banking

Before the US Congress passed the Unlawful Internet Gambling Act, transactions with online casinos were quite convenient and easy. Today most banking institutions are declining their customers' request to do any type of credit or debit card transactions related with online gambling. The size of your bankroll does not have any bearing at all, banks are simply refusing to carry out this type of transactions, even though this law has not been finalized yet.

Although most major credit card companies do not accept online gambling transactions there are some that do, but then these transactions are treated as "cash advancement" which bear a much higher interest rate. For this reason more and more online gamblers and online casinos are shying away from using Credit and Debit Card payments to handle their online gambling transactions, instead many are opting for online processor services, which have become very popular in the online gambling community.

With the introduction of this new Act on Internet Gambling, more and more online based processor websites are popping up on the internet as these entrepreneurs realized the need for such a service. Today there are many different methods for deposit and payment transactions at online casinos. Some of the popular online companies offering these online processor services are; Bank Wire/E-wallet, Pre-Paid ATM, NETteller, Citadel, Fire Pay, Eco Card and Click2Pay and even though these are all web based companies that are accessible to anyone who has internet access, if you happen to live in the USA, depending on which online casino you happen to log into, you may or may not be able to sign up for these services.

Whatever the outcome of the Unlawful Internet Gambling Act, and despite the banks refusal to carry out Credit Cards/Debit Cards transactions relating to online gambling, it is in the interest of the online casino websites as well as the online gambling community to find a way to work around these obstacles and ensure that online gambling will be around for a very long time to come.