Top 10 Myths About the UIGEA

Myth: The US has no jurisdiction.

Fact: While most of the companies involved with online gaming are based beyond the borders of the US the second they transact in any way with a US resident (who is physically in the US) they have just made themselves subject to US law. This is a common misperception raised in the age of the internet but most courts have ruled that any transaction will occur in the state the seller is in as well as the state that the buyer is in. If Amazon wished to sell books to California residents it can’t simply ignore California consumer laws because it’s located in Washington.

Some have argued that jurisdiction also includes the ability to arrest so technically the US doesn’t have jurisdiction since it can’t go to the Isle of Man and arrest offenders. I think this is a incorrect and misguided definition. According to the American Heritage Dictionary, jurisdiction is the “right and power to interpret and apply the law.” The US can issue an arrest warrant and even convict without the person ever stepping foot in the US. I think those who are making this argument are confusing jurisdiction with the ability to force extradition. Many countries will refuse to extradite both their citizens as well as fugitive US citizens if their is a possibility for the death penalty. That does not mean that the US does not have jurisdiction over the case though.

Myth: As long as there’s demand for online gaming someone will supply it.

Fact: This is a slight misunderstanding of the rules of economics. People will only supply online gaming if they can do so at a price that rewards them appropriately. If the US government is able to raise the cost of providing online gaming to US residents above a certain threshold it may not be cost-effective for an online gaming company to offer gaming to US residents. It may still be profitable in a basic accounting sense but the profit may be so small that it is not worth the legal risk or the cost of playing a cat and mouse game with the US government.

Myth: Prohibition doesn’t work.

Fact: As with most things it depends on how you define success. No law or policy is ever going to be 100% effective so complete and total destruction of the US online gaming market is not a valid measure of success.

Most people who cite this argument point to the war on drugs and the prohibitionist era in the US as proof. Where this argument breaks down is when you do a side by side comparison between these two forms of prohibition and the US war on online gaming. During prohibition it was illegal to manufacture or sell alcoholic beverages. The war on drugs is also a complete ban on certain drugs.

The US laws against gaming only ban the online form. US residents are still free to visit licensed card clubs and play friendly games in their own home. There is no legal cocaine dealers in the US so the only way for people to enjoy cocaine is to do so illegally. Someone looking for a game of poker does not need to play online. Poker players have alternatives. Poker is a game that has been played and enjoyed for close to 150 years without the availability of the online format.

The ban on online gaming will not be 100% effective but it will be hugely effective in discouraging recreational and entertainment driven players. Without their money in the poker economy the games will lose much of the appeal that drove their popularity in the first place (e.g. an endless supply of soft games). Hard core players will set up proxy servers, open offshore bank accounts, and do whatever else is necessary to continue to enjoy their hobby/profession but if we are to assume that only 10% of poker players are lifetime winners those would be the core group willing to take such measures. The other 90% are much less likely so if the anti-gaming laws are effective in eliminating 80% of the current online gaming market then they can certainly be seen as having been successful.

Myth: ACH/EFT transactions are way too expensive/difficult to stop.

Fact: An EFT is an Electronic Funds Transfer. As the name implies the transfer takes place via electronic means. Funds are transferred between banks via a very regulated and tightly controlled network. All that is needed to completely block EFTmtransactions from gaming sites or to eWallets who deal with gaming sites is to add a single field to the existing electronic interface.

While software at thousands of banks would need to be upgraded across the US such upgrades are not rare and would not even make a blip in the normal operations of most banks. The expense and difficulty arguments are normally put forth by people who have absolutely no knowledge whatsoever of how banking systems work.

As we saw just recently with Neteller those changes don’t even need to be formalized in software code. ACH/EFT providers voluntarily cut off Neteller with almost no effort.

There will be a cat and mouse game as new payment processors set up shop overseas and try to get around US laws but the most likely outcome is that players will find that their funds are constantly at risk of being caught up in any shutoff.

Myth: Party, Everest, OnGame, Crypto, iPoker, Boss Media, Pacific Poker, Ladbrokes, B2B, and Paradise are all cowards for leaving the US market.

Fact: Several of these companies issued statements indicating that they believed that the biggest risk they faced was that funding options would be closed off to them. In light of their expectation that the US would follow through on their threat to shut off funding methods the risks associated with staying in the US market were greater than the expected rewards.

The sites who stayed in the US either did not expect the US to act as swiftly and effectively as they did and/or the risks did not outweigh the benefits. For a site that was almost all US facing prior to the passage of the UIGEA leaving the US market was the same as going out of business. As long as the founders were willing to take the criminal risk the business risk had infinite upside.

Myth: Democrats in office are good for online poker

Fact: Just because Republicans passed the UIGEA doesn’t mean that Democrats love gaming. Some of the biggest opponents to online gaming are powerful Democrats like Sen Dianne Feinstein of California who had this to say:

While the advent of the Internet has clearly been beneficial to American society, the same cannot be said for Internet-based gambling activity. Internet gambling is too easily accessible to minors, too subject to fraud and criminal misuse, and too evasive of state gambling laws. For these reasons, I have supported legislation aimed at curbing Internet gambling during my tenure in the Senate. For example, in the 108th Congress I co-sponsored the “Internet Gambling Funding Prohibition Act” (S. 627), which was introduced by Senator Jon Kyl (R-Ariz.). Unfortunately, this bill was not signed into law, however, I plan to continue to support limits on Internet gambling should any legislation be considered by the Senate in the 109th Congress.

This isn’t going to be a Democrat vs. Republican debate. Each legislator needs to be vetted individually.

Myth: The WTO ruling is going to save the day

Fact: The US government has and continues to show little or no regard for world bodies like the UN or the WTO when it doesn’t suit their purposes. While the WTO case may finally have to be dealt with substantially by the US government don’t expect them to just bend over. New laws that frustrate gaming interests could be introduced just to start the debate all over again. This one has been going on for years so don’t expect it to end anytime soon.

Myth: Poker is a game of skill

Fact: While the statement is sorta-kinda true most legal definitions of games of skill include the Dominant Factor test. Basically if luck predominates (e.g. 51% or more) in a contest then it is not a game of skill. As we all know, poker results are highly impacted by luck. I’ve been in hands as a 93% favorite and been sucked out on. As long as those kinds of results happen then poker will not be considered a game of skill based on the Dominant Factor test.

Myth: We have 270 days

Fact: The UIGEA went into effect the second President Bush signed it. The 270 days was for the Treasury to put together a plan (e.g. recommendations) for enforcing what was in it. And even then, the law said that the Treasury had to submit recommendations *within* 270 days.

Myth: Bill Rini is Mr. Doom and Gloom

Fact: I’m a realist. I find no value in pretending everything is going to be okay. I believe that the best decisions can be made when people have reliable information. All of the myths above have been put forth time and time again by people trying to downplay the seriousness of the UIGEA but they are just that, myths. Now you can call me a doom and gloomer because I happen to point them out for what they are but which one is going to help you make a better informed decision?

People should be frustrated and upset and angry about what’s happening but instead most would rather hear myths repeated so they can avoid facing the eventual demise of the game we love. It really saddens me that in Mexico people are willing to go to the street to protest price increases for tortillas but when some of your most basic rights are being stripped from you here in the US people want to sit back and smoke a big fat joint of hope.