March 25th, 2008
Anybody who has spent time in Washington knows that Congress often passes bad laws. But even the most widely derided laws — think of 2003’s Medicare drug benefit — end up doing roughly what their authors set out to do.
The misbegotten 2006 Unlawful Internet Gambling Enforcement Act (UIGEA), however, won’t even get that far. It will fail at its intended purpose of ending most Internet gambling while simultaneously creating enormous headaches for banking institutions and account holders. It’s a bad, bad law.
Despite its name, the Act has rather little to do with gambling. It doesn’t actually outlaw any online game — there’s still no federal penalty for wagering $1,000 on the spin of a virtual roulette wheel — and doesn’t directly create any new federal penalties for running an online casino.
Instead, the Act imposes an obligation on banking institutions to block transactions “related” to illegal online gambling. At first blush, this looks like an elegant solution for those who dislike gaming. Rather than trying to force all online gambling sites out of business directly or penalize people who play a few hands of poker online, the law — a brainchild of recently unseated Iowa Republican Jim Leach — simply threatens to cut off the money that makes gambling possible.
In practice, the language of the law, the nature of the Internet, and the wide availability of gambling in the United States make the law both unenforceable and enormously burdensome.
LANGUAGE FIRST: The statute’s definition of “gambling” contains dozens of loopholes. Some exceptions, like a safe harbor for stock and insurance transactions stem from common sense. Others, like loopholes for state lotteries and horse racing, are there because of the political power of existing industries.
Finally — and here is real the doozy — the government has decided not to create a particular list of “blocked” providers. Banks really don’t have any clearly defined law to enforce. So they’re most likely to simply leave it unenforced or, if threatened by regulators, over-enforce the law by blocking all sorts of perfectly legal transactions.
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Author Contact Info: Eli Lehrer & Michelle Minton, American Spectator
