The UIGEA - Is Your Business in Compliance?
By David Schollenberger
On 30 September 2006, the US Congress passed the

Unlawful Internet Gambling Enforcement Act 2006,

which was signed into law by President Bush on 13th

October 2006. The Act went through in the final hours

of the Senate's legislative session as an amendment to

the Safe Port Act, a bill seeking to improve maritime

and cargo security.There was little discussion about the

Act in the Senate, no procedural objections were

raised by Senators that could have derailed it and it

was signed by President Bush without mention of the

Internet Gambling prohibition being a component of

the Safe Port Act. The Internet Gambling Enforcement

Act was a Bill that had failed several years running in

the Senate.

The Act essentially prohibits acceptance of any

payment instrument by operators for unlawful internet

gambling. Earlier versions of the Bill combined the

Goodlatte and Leach Bills.The Goodlatte Bill amended

the Wire Act to specifically prohibit the use of the

internet for both sports betting and other forms of

casino style games. The Leach Bill prohibited the

acceptance of financial instruments for unlawful

internet gambling. The final wording of the Act Bill

follows the Leach Bill and therefore does not define

'unlawful internet gambling'. This is left to the existing

law, which is arguably not clear on whether it applies to

both sports betting and casino style games. The crucial

point is that the US Department of Justice has always

taken the view that both remote sports betting and

casino styles games are prohibited and unlawful under

the Wire Act.

The Act carves out skill gaming, fantasy sports and

horserace betting where permitted by federal or state

legislation. This has caused some operators in the

remote gaming industry outside the US to cry that the

Act is protectionist and discriminates against foreign


There is also a carve out for those providing inactive

computer services to operators such as ISP or web

hosting services, and relieving such interactive

computer services providers of liability if the same

promptly takes down the offensive site or link upon

notice. This limitation does not apply, to the extent

such interactive computer service provider has actual

knowledge and control of the illegal gambling activities.

What constitutes actual knowledge and control is not

clearly explained in the Act. In view of this ambiguity,

interactive computer services providers for US facing

operators should look carefully at their factual situation

and take advice.

The Act prescribes a period of 270 days when the

Federal Reserve Bank and the Attorney General are

tasked with developing and issuing regulations to guide

financial institutions how they will need to identify,

code and block illegal gambling transactions. This 270

day period does not however suspend the effect of the

underlying prohibitions of the Act in prohibiting

operators from accepting financial instruments for

unlawful internet gambling and for financial institutions

not to make payments that can be already identified as

payments for illegal gambling. So operators, their

payment system suppliers and other suppliers should

be in compliance already, or face being charged under

the Act as a principal or as an accomplice in aiding and

abetting an illegal activity.

Many of the leading major publicly traded remote

sports betting and casino games companies have

announced that they will no longer operate in the US

market. The leading UK banks have also announced

they will no longer provide services to US facing

operators. Others, perhaps in denial, have decided to

either continue trading with US customers as they

have been or wait until the regulations developed in

the 270 day period are implemented. There will

undoubtedly be more headline arrests in the coming

months before the dust settles and the industry comes

to terms with the new reality.

Aldwych House 81 Aldwych London WC2B 4RP Tel +44 (0)20 7404 4433 Fax +44 (0)20 7430 1133

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Further Information

For more information and any other gaming related issues


David Schollenberger

Partner and Head of Gaming Team

Manches LLP

+44 (0) 207 404 4433

This briefing note is intended merely to provide a

summary of the law in this area and is not a

comprehensive guide. It is not intended to provide legal

advice for specific cases. Note:The law and practice in this

note is stated as at October 2006.

Manches LLP

October 2006

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