Inside Asian Gaming

January 2014 | INSIDE ASIAN GAMING 37 TECH TALK 2006 (UIGEA) after determining that new mechanisms for enforcing gambling laws on the Internet were necessary, especially where gambling crossed state or national borders. UIGEA doesn’t itself make Internet gaming illegal, it makes the processing of payments related to unlawful Internet gaming illegal. What is considered “unlawful Internet gambling” under UIGEA is Internet bets or wagers unlawful under any applicable federal or state law. UIGEA contains an intrastate exception—intermediate routing of electronic data is not considered for the purposes of determining where a bet or wager was initiated and received. The passage of UIGEA brought Internet gaming in the US to a screeching halt, as many banks, payment processors and credit card companies refused to transact business in the Internet gaming market. Up until 2011, in addition to state laws prohibiting Internet gambling, the US Wire Act was considered the federal trigger for UIGEA. Under the Wire Act, “whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.” For decades, the US Department of Justice considered the Wire Act applicable to all types of gaming. However, in 2011, the department reversed its long-standing position, finding that“interstate transmissions of wire communications that do not relate to a ‘sporting event or contest’ fall outside the reach of the Wire Act.” This came in response to an inquiry from Illinois and New York regarding the legality of the use of the Internet and out-of-state payment processors for intrastate sales of lottery tickets. State of Play Due in part to the 2011 DOJ opinion interpreting the Wire Act and UIGEA’s intermediate routing exemption, Bitcoin hasn’t been the only Internet wagering entity gaining notoriety in 2013. Last year also saw the launch of state-sponsored Internet gaming. Nevada, New Jersey and Delaware have all legalized Internet gaming, and other states may be looking to do the same in 2014. The method by which Nevada, New Jersey and Delaware have moved to legalize Internet gaming places Bitcoin Internet casinos in a tough position—continue to operate under a cloud of legal ambiguity and uncertainty or find ways to adapt to the regulatory environment growing around them. As Bitcoin’s popularity increases, the former option becomes less and less of a possibility. Bitcoin casinos operated despite the halt of Internet operations in the US post-UIGEA and outside the regulatory schemes launched in Nevada, New Jersey and Delaware on legal theories that were largely based on the uncertainty and unknown that was Bitcoin. First, Bitcoin is not a currency and thus does not constitute gambling. Second, Bitcoin does not use banks or e-commerce payment processors to process payments, thus no violation of UIGEA occurs. However, the attention Bitcoin received Certain businesses hopped onto the Bitcoin bandwagon early and enthusiastically. During Bitcoin’s short existence, Internet- based casinos have become one of its most popular outlets. Bitcoin casino operators have been and continue to accept bets from US players (although some sites maintain certain age and location restrictions).