Addressing the Sequels of UIGEA on electronic gambling

The Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) was passed into law with a view to bringing internet gambling to a halt. 

According to its sponsors’ legislation needed to be enacted so as to curb unwanted effects from electronic gambling which include lack of collectability of debts stemming from Internet gambling, fraud, money laundering, and pathological and underage gaming. 

Lack or inadequacy of legislation to address an activity that by nature had no borders was also a motivation. These evils, however, were not properly addressed by the UIGEA.

On the contrary, it brought confusion to the space while draining investment from US electronic gambling ventures in favor of Europe and Asia. Further, existing internet gambling outlets closed in the US while opening shop elsewhere in the world where they prospered.

Others were able to mutate into electronic. These results could have been forecast by just giving the most cursory reading to UIGEA. To begin with key terms of the law, such as “unlawful internet gambling,” were not defined.  Then there are numerous exceptions which are ill defined and have weak substantiation.   Finally, by placing the liability on the provider while leaving the gambler free from guilt demand for online gambling continued to grow.

The operational rationale by which UIGEA impacts gambling is by prohibiting monetary transfers from individuals involved in Internet gambling. However, the law does not subject the individual bettor to criminal penalties, nor does it explicitly prohibit all forms of Internet gambling. 

By the time UNIGEA was passed, the online casino industry was experiencing an early boom in the United States.

To be sure, the internet boom had triggered a lot of innovations in the gambling industry led by Neteller, Cryptologic, and Playtech. All these three companies moved out of the US as they could not process transactions through the net or display their games in US territory. From the financial viewpoint Monday, October, the 3rd 2006 saw the evaporation of US $ 7B in online gambling operations 

According the world most authoritative gambling expert, Professor Nelson Rose “The UIGEA scared every publicly traded Internet gambling company into dropping out of the U.S. market. Even privately owned web operators restructured, separating their operations, so American executives have nothing to do with the gaming side of the business.”

Among the groups most affected was Party Gaming, which had, until then, retained a massive portion of the US poker market. In the short notice, the group had to remove itself from the US industry and invest its efforts in other locations around the world.

Thousands of criminal investigations were opened against poker; casino and sports betting sites including Bovada, 5dimes, and Betonline which allegedly continued to serve US customers.

Investigations took many years to prosper as it wasn’t easy for the prosecutors to make their case against the operators because the UIGEA is only an “enforcement” act. This means that for it to be used against someone, there has to be a violation of some other state or federal law related to online gambling.

Most of these companies have since entered into settlements with the DoJ. Most recently, on September 30, 2020, 5Dimes settled. The settlement agreement with the U.S. Attorney for the Eastern District of Pennsylvania (EDPA) that allows 5Dimes to apply to enter the legal, regulated U.S. gaming industry under a new corporate structure, free and clear of any restrictions on the use or transfer of its assets and in full compliance with U.S. law. 

This settlement agreement the direct result of years of work and dedication to the fledgling company by Laura Varela, widow of the company’s founder William Sean Creighton. Ms Varela initiated cooperation with the DoJ in 2019 with a view to resolve the criminal investigation and clear the company. Her efforts not only cleared the company to unfold a new development stage with licensed operations in the US but also protected the identity of 5Dimes customers.

Indeed, Ms. Varela’s cooperation did not include disclosing customers’ information or identity. With Esports poised to grow exponentially over the next decade, 5Dimes has a great opportunity to cash in a portion of this development. 

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