A new law targeting online gambling operations goes into effect in 2010. The question is: Does it apply to the multi-million dollar online poker industry? The short answer: No one's sure.
The Unlawful Internet Gambling Enforcement Act (UIGEA) was passed in 2006 as part of the "Safe Port Act." However, the main part of the law didn't go into effect immediately, rather it becomes effective on June 1, 2010.
So, what's the law supposed to do? It's meant to shut-down illegal online gambling operations - both inside and outside the US. It does this by:
- Barring internet gambling "operators" from accepting money from bettors in connection with any online gambling that's illegal under state or federal law. This means taking money by cash, check, credit card, and electronic fund transfer (ETF)
- Requiring banks and other financial institutions to develop and follow policies and procedures to help stop the flow of money from bettors to illegal online gambling operations (this is the part of the law that becomes effective in June 2010)
- Giving the federal attorney general, as well as each state's attorney general, the ability to file criminal and civil actions to enforce the UIGEA. Civil actions might include forcing a website to shut down or cutting its access to the internet. Criminal punishments include fines and up to five years in prison
The UIGEA does not make it illegal for you or me to place a bet or gamble online. Rather, it makes it illegal for the online game operator or website to take our money on the bet.
In general, the UIGEA bans online gambling if the bet or wager involves chance, rather than skill, and if the bet is illegal under federal law or the laws of the state where the bet is made or received. Good examples are sporting events and typical "casino games," like roulette and craps.
There are exceptions, though. In addition to Nevada, many states allow some form of online and in-person gambling for money, such as playing a state-run lottery and betting on horse and dog racing. And, if no money is involved, it's perfectly legal in all states to simply play a game of poker, dice, or whatever.
Nonetheless, even if you don't violate the UIGEA by gambling for money, you could be breaking the laws in your state, meaning you could be fined, sent to jail, or both, depending on the laws in your state.
Online poker is a multi-billion dollar industry. As of 2009, 10 million people in the US gamble real money playing poker online. Gambling operators such as PokerStars, Full Tilt Poker, and others make millions of dollars each year on bets made from the US and other countries around the world.
Will the UIGEA shut them down? Maybe, maybe not. The US Department of Justice (DOJ) apparently thinks so. In 2009, after years of investigation by the DOJ, PartyGaming, which once was a world leader in online gaming, including poker, agreed to pay the federal government $105 million in exchange for its agreement not to prosecute the company for violating US gambling laws.
Others, of course, disagree with the DOJ, including PokerStars and Full Tilt. They continue taking bets from US poker players. That's because they're of the opinion that poker is a game of skill, not a game of chance, and so the UIGEA doesn't apply to their online operations.
Who's right, the DOJ or the poker houses? No one can be sure right now. We may find out sometime after June 1, 2010 if the DOJ decides to take action against online poker operations.
What You Can Do
If you own or operate an online poker site, you should talk to an attorney and get her opinion about whether the UIGEA applies to you. In fact, get more than one opinion, if possible. Later, if the DOJ or a state attorney general comes after you under the UIGEA, you may be able to defend yourself by showing you relied on the advice of legal counsel when taking online poker bets. It just may help you avoid some fines or jail time.
If you're an online poker player, and the DOJ tries to use the UIGEA to shut down poker sites, you may want to empty your account of any winnings held by the site. Otherwise, when the DOJ starts a case, those funds may be frozen and you may have to wait years before you see the money - if you get it at all. (Don't forget to report those winnings on your taxes!)
And don't forget about state law enforcement, either. Remember, in many states, online internet poker is probably illegal, just like most other gambling, whether its online or in-person. If you're going to continue to play, be prepared to pay the price if you're caught.
Whether you run an online game or play it, it's never a good idea to gamble with the law. If and when the UIGEA and online poker ever meet, it's best to have an idea of how things might play out before hand.
Questions for Your Attorney
- I own an internet café. Can I get into legal trouble if my customers use my computers to gamble online?
- Is it illegal if I set up dozens of computers and charge customers to use them for online gambling?
- Some friends and I play poker every Saturday, usually no one wins or loses more than $100. Are we breaking the law, really?