The Unlawful Internet Gambling Enforcement Act (UIGEA) was enacted in October, following signing by President George W. Bush. The general purpose of the UIGEA is to disrupt forbidden online gambling sites by striking at their bankrolls. The UIGEA does this by instituting the provision that it will be an offense for US financial businesses to facilitate money transfers to or payments from forbidden gambling and wagering sites. Here is a list of UIGEA online casinos.
If anyone reading this has attempted to fund an account with an offshore online sportsbook (despite our many recommendations to avoid unregulated betting sites) and had trouble depositing with credit cards, that was likely a result of the UIGEA. Banking institutions, credit card issuers and other types of payment processors are all banned from facilitating payments to gambling sites that are considered unlawful.
Unlike the majority of media coverage, the UIGEA does not prohibit online gambling outright. The majority of media coverage over the years has been labeling the UIGEA as an online gambling prohibition, but it is not. The UIGEA does not prohibit any form of gambling or prohibit payments to unlicensed gambling sites. The UIGEA does not prohibit players or money transfers to unlicensed gambling sites.
The UIGEA has successfully completed its first mission to some extent. The law was able to drive some of the biggest internet gambling operators out of serving the US market. This proved to be particularly devastating to internet poker players in the US, as a healthy poker economy depends on having plenty of people playing.
One of the most significant aspects of the UIGEA in today's regulated online gambling landscape to know is that the legislation specifically addresses only unlawful gambling operations. Licensed USA online sportsbooks, poker rooms, and casinos are not targeted.
The UIGEA provides this exemption by deferring to state law. If an online betting site of any type is legal in any state, it is exempt from the UIGEA. We’ll discuss that more below, but the gist of it is if a state says it is legal, the UIGEA does not apply.
In addition to the blanket exemption provided to state-authorized gambling sites, the UIGEA specifically exempts online horse racing and fantasy sports.
The horse racing exemption is part of the UIGEA's definition of "unlawful Internet gambling." In the section of the law reserved for definitions, the UIGEA states:
The term "unlawful Internet gambling" does not include any activity which is lawful under the Interstate Horseracing Act.
The Interstate Horseracing Act is an act of Congress making interstate off-track betting legal, and online racing wagering is included in that. It is thus that horse racing sites such as TVG, TwinSpires and others have been offering their services across the US for years even after the UIGEA was passed.
Fantasy sports were exempted as well by the UIGEA with the definitions section of the act including the following carveout of the definition of "bet or wager:
Playing any educational or simulation sports game or fantasy game or contest in which (if the game or contest is a team or teams) no simulation or fantasy sports team is established on the then-existing membership of a real team which is a member of an amateur or professional sports organization (within the meaning of section 3701 of title 28) and which meets the following requirements:
All prizes and awards presented to winning participants are fixed and made known to the participants before the game or contest and their worth is not subject to variation depending on the number of participants or the amount of any fees paid by said participants.
Every successful result relies on relative skill and knowledge of contestants and is determined by preponderant cumulative statistical results of individuals' performance (contestants in sporting events) in different real-world sporting or other competitions
No successful result is based - on the score, point-spread or any performance or performances of any single real-world team or any collection of such teams
solely on any single performance by any single athlete in any single actual sporting or other competition.
The UIGEA fantasy sports exception is drafted so vaguely that it has generated a great deal of confusion among operators. The first sentence is not well-drafted, but is widely understood to mean that a fantasy player cannot assemble a fantasy team composed of players from the same one team. Because of this, all of the leading DFS sites require that all lineups must include players from a minimum of two teams.
It is also unclear what exactly qualifies as "any single real-world sporting" event. Fantasy sites for years read this to mean that all fantasy games have to cover at least two different games.
More recently, fantasy sites have employed the use of new interpretations of that provision of the law in order to push the boundaries of the exemption. Innovative novel contest formats such as single-game contests are questionable, but to date, have not been challenged.
The impact of UIGEA on online sports betting depends entirely on whether we're talking about legitimate online betting sites licensed in America or illegitimate ones based abroad. The UIGEA is drafted so that it makes at least two locations abundantly clear about not preempting state law.
In § 5361, we have the following sentence that leaves no doubt about the UIGEA deferring to other federal and state laws:
No law or regulation in this subchapter shall be construed to enlarge, restrict, or alter any Federal or State statute or Tribal-State compact pertaining to the prohibition, licensing, or regulation of gambling within the United States.
In § 5362 where definitions are mentioned, the UIGEA states that "unlawful Internet gambling" shall not include bets which meet the following requirements:
The water or bet is originated and received or otherwise made exclusively in a single State;
The bet or wager and the device by which the bet or wager is placed and received or otherwise made is specially licensed by and in accordance with the laws of such State, and the law of such State or the rules contain –
Requirements for age and location verification reasonably calculated to exclude minors and residents of such State
Appropriate data protection requirements so that access by any party whose age and current location has not been verified according to such State's law and regulation is averted.
What these provisions are accomplishing is online gambling and online sports betting are fine as long as it does not break federal or state law. The sole federal law prohibiting sports betting has been repealed, so that addresses half the problem already. As states proceed to legalize online sports betting, the UIGEA will exclude those operations as well.