Editorial: New US Legislation – How Will It Affect You?

2006 October 20, Jonny Vincent

On Friday, President Bush signed into law the recent Congress-approved "Unlawful Internet Gambling Enforcement Act of 2006", which aims to severely hamper the online gambling industry's access to its largest market, the United States.

There is a great deal of misinformed information circulating the internet in regards to this new law, even from news sources that should know better. It is largely unknown whether the new law will be able to stem the incredible rise in popularity that online gambling has enjoyed since the late 1990's, but the initial signs are that the industry, as a whole, will be largely unaffected.

The US government now has around 265 days to work with the banking industry to determine how they will be able to regulate online gambling transactions. There are doubts within the industry as to whether regulation will end up being possible without an overhaul of the current banking systems.

The US banking industry was opposed to this bill from the outset, and suceeded in having the wording changed to give them an 'out', so to speak. The US banking industry will not be forced to regulate and control transactions if doing so will create an unfair burden on the industry.

This article will attempt to quickly summarize the effects the new law is likely to have on the industry.

• An important point that has been lost in much of the debate is that the legality of online gambling remains unchanged. Players will not be prosecuted for gambling online. The new bill only affects players' ability to fund their online gambling accounts.
• Players who play on some online casinos and poker rooms will be affected negatively initially. PartyGaming and 888 have now blocked US players as both companies are publicly listed on the UK Stock Exchange. Whether or not these sites will eventually re-allow US residents access to their services is unknown. There is speculation these public companies may sell their US businesses to 'private' companies, who will have no hang-ups about marketing in the US and providing online betting services in that market.
• Many of the world's largest online casinos and poker rooms have released statements expressing their intention to remain in the US market. These online casinos and poker rooms will pick up the customers lost by the online casinos which have withdrawn from the US.
• US banking institutions have already stated they will be largely unable to regulate transactions via checks and online checks. Credit card transactions are easily regulated, but it is likely the new law will be circumvented through other means of funding accounts. 3rd-party payment processors like NETeller have already stated they are committed to the US market and will continue to process online gambling transactions as they are not subject to US banking regulations.
• There will be short-term streamlining of the industry as some smaller online casinos and poker rooms choose to merge and/or sell out to the bigger players. How long the industry takes to regain the player numbers it enjoyed prior to this law will likely depend on how willing online gamblers are to stop using credit cards and start using NETeller. Many industry analysts feel that most online gamblers have already made the transition and the rest will follow shortly.
• The tiny island of Antigua has filed a complaint against the US with the World Trade Organization. The WTO has already ruled against the US attacks on the online gambling industry, labeling the policy as 'protectionist', and it is likely they will rule in Antigua's favor. It remains to be seen if the US will ignore the WTO on this issue, as they have invested a great deal already in the WTO, and may not see the online gambling industry as important enough to ruin their invested efforts with the World Trade Organization.
• Land-based casino groups are likely to push for regulation of the online gambling industry within the US to enable them to take advantage of the millions of US players who wish to gamble online. If a regulated online gambling industry is created, the US government will have no choice but to allow unfettered access to the US market from worldwide online casinos or risk running foul of the World Trade Organization.

The new US law may well end up making the industry even more unregulated than before. Large, respected companies such as PartyGaming and 888 will lose players to smaller, unknown companies who may not be as ethical or reliable when it comes to processing player withdrawals and resolving player disputes.

US residents that enjoyed a drink did not stop drinking during Prohibition in the 1930's and US residents that enjoy gambling online will not stop gambling online now. It is estimated that over 25 million Americans regularly play poker online and an even greater number enjoy gambling on online casino games such as blackjack or roulette.

The German historian Hegel said, "The only thing we learn from history is that we never learn from history." The US government appears to be a chronic offender in not learning from history. You cannot alter human nature – and you cannot tell your citizens how to spend their hard-earned wages. Where there is supply, there will always be demand. If you prevent respectable companies from providing that demand, you open the floodgates to less-than-respectable companies who have no problem with circumnavigating whatever restrictions the government attempts to place on the industry.

The industry has to be regulated.