March 26th, 2008
Hoping to be seen to be “doing something” about the perceived problem of Internet gambling, Congress approved the Unlawful Internet Gambling Enforcement Act (UIGEA) in October of 2006.1 The Act, however, seems unlikely to stop Internet gambling and could even threaten the stable, smooth operation of America’s banking system. UIGEA and its currently proposed enabling regulations will undermine the financial privacy of all Americans and reduce the security of their bank accounts. In short, UIGEA makes almost no financial, social, or economic sense. It deserves reexamination.
To that end, this paper’s first section gives an overview of UIGEA’s provisions and the regulations proposed to implement them, the second describes the law’s likely and perverse consequences, and its conclusion outlines some principles for reforming or eliminating this harmful law.
About UIGEA and its Implementing Regulations. Congress enacted UIGEA into law as part of a port security measure. The law’s title suggests that it deals with gambling. But UIGEA, at its root, serves to regulate banking and credit cards. It has nothing to do with port security and, just as importantly, does not actually ban any type of Internet gambling activity that was not already illegal under state laws.
Instead, the law focuses on electronic financial transactions potentially linked to Internet gambling. Its core provision, section 5363, forbids people “engaged in the business of betting or wagering” from “knowingly” accepting “in connection with the participation of another person, in unlawful Internet gambling” any automated clearing house transaction, or bank draft. The law, furthermore, offers an amorphous description of “wagers” as any effort to stake: something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome.
Thus, the law touches every sort of financial service provider: banks, credit unions, credit card companies, wire transfer services, and even brokerages. It exempts insurance, stock and commodity trades, fantasy sports leagues, horse racing, and all activities permitted under state and tribal law.
Click here to go to the white paper and read more.
Note: The author of this piece is also a co-author of the article:
No Dice (The American Spectator, 03/25/08)
Author Contact Info: Eli Lehrer, Competitive Enterprise Institute
