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UIGEA, iMEGA And Frank's Bill

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By: Adam Richards, Wednesday July 22nd 2009

The UIGEA was the 2006 bill that became law to prohibit gambling businesses from accepting payments for internet gambling. It was always a somewhat ambiguous law, one that had a clear intent but indirect wording in an attempt to ban online poker and gambling in the US. UIGEA was enacted to prohibit institutions from accepting payments from any person engaged in the business of betting or wagering with a business in unlawful Internet gambling. Provisions of UIGEA prohibit the acceptance of payments relating to bets or wagers involving use of the Internet if those activities are unlawful under applicable law.

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The UIGEA is a Federal law which, through its implication, changed the landscape of online gambling in the US and affected internet gambling around the world. The Act was the most publicly debated legislation at its time by players in the US and operators worldwide.
The UIGEA was passed in the House of Representatives on 5-4-2006, strategically attached to the Safe Port Act in order to guarantee its passing. It was then passed in the Senate under title VII of the 'Port Security Improvement Act of 2006' on September 14, 2006. President Bush signed it into law on October 13, 2006, becoming the law of the land.

The appeal filed by iMEGA against the Department of Justice (DoJ) in the UIGEA case was heard on July 7 in the 3rd U.S. Circuit Court of Appeals in Philadelphia. Those following the case had reported that the hearing had not gone well for iMEGA. However there was no immediate reaction then from iMEGA. Now the iMEGA website carries a press release in which the organization has admitted that the line of reasoning taken by the panel had put the iMEGA legal team on the back foot.

The judges concentrated on two issues that apparently the iMEGA lawyers were not prepared for. One issue was the location of the online bet. iMEGA tried to argue that the location was where the server of the Internet gambling operator was located. However the judges were inclined to accept the view that the bet was placed at the location of the player’s computer. This view would nullify the argument that the states did not have jurisdiction over the Internet gambling. The second issue was that of third-party standing. The lower court had ruled that iMEGA could represent the Internet gambling operators. However the issue before this court was whether iMEGA could also represent the individual players. Here the panel of judges was inclined to believe that iMEGA could not represent individual players because they were not in any way associated with iMEGA. This line of reasoning was important because iMEGA had argued that the UIGEA violates the first Amendment rights of the individual players.

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In the statement released by iMEGA, chairman Joe Brennan Jr. said, “That was a tough panel. They bore down on us, and they went in a direction that, given the vagueness challenge we were making, seemed odd. Since the statute targets banks and credit card companies, it was unusual that there were no questions about them.”

According to experts the court decision is not expected any time soon. The court may wait till the legislature decides on the outcome of Barney Frank’s bill seeking to overturn the UIGEA. If that bill passes and then the decision of the court would become irrelevant. Another reason that the court may be willing to wait is that the UIGEA has not yet gone into effect.

Meanwhile support is mounting for HR 2267, more popularly known as Barney Frank's anti-UIGEA bill. The names of five more co-sponsors were released bringing the total number of supporters to 47. These new co-sponsors are Representatives Joe Courtney (Connecticut), Frank A. LoBiondo (New Jersey), John H. Adler (New Jersey), Paul D. Tonko (New York) and Walter Minnick (Idaho). Of these only Representative LoBiondo is from the Republican Party. Despite the talk of bipartisan support for the bill, the present scenario indicates an almost near total Democrat support. Of the 47 supporters 42 are Democrats. The bill is expected to be heard in the committee in September.

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Comment by: Richards On: July 23, 2009
The argument made but the judges in this case that the bet was the location of where the player is located is simply wrong. The bet and actual wager only takes place when the server received the request from the player. The client is really just a shell it actually contains or deals with 'ZERO' logic in the gaming process. I really think that they're wrong here.