In the early 2000s, online poker rooms and real-money casino sites – as well as real-money sports betting sites – were taking off in a big way. The Internet had gone mainstream, and millions of people were starting to use the new communications platform for all kinds of commerce. Of course, Uncle Sam wasn’t getting his cut, so the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) was tucked away as a rider to the unrelated SAFE Port Act, where it was voted on without review and signed into law by King George II (R).
Since the Wire Act (1961) plainly didn’t cover “games of chance” like casino and card games, the UIGEA was deemed necessary to stem the tide of unregulated gambling that was taking place all over the Internet. The operative portion of the UIGEA reads as follows:
“The Act prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law...
“The rule requires certain participants [i.e. banks] in the designated payment systems to establish policies and procedures that are reasonably designed to identify and block or otherwise prevent or prohibit restricted transactions.”
With the UIGEA, the government believed it was cutting off the head of the serpent by going after the banks, clearing houses, card systems, check collection systems, money order systems, and wire transfer systems that Internet sportsbooks used for both receiving deposits from and paying out their customers. It didn’t work.
Despite going after the money side of things (which is usually effective when regulation is the goal), the feds once again failed to criminalize the betting public for participation in their grievous vice. Thus, given an avenue to continue betting – i.e. the UIGEA loophole – these millions of customers simply continued with their sports betting ways.
However, most betting shops fled the US in response to the UIGEA, which further pushed the domestic financial boon of sports betting overseas (something that had been started with the passage of PASPA in 1992). As for the money-transfer companies themselves, the UIGEA had an out built right into the first paragraph of the text:
“The Act also requires Treasury and the Federal Reserve Board...to promulgate regulations requiring certain participants in payment systems that could be used for unlawful Internet gambling to have policies and procedures reasonably designed to identify and block or otherwise prevent or prohibit the processing of restricted transactions.”
In other words, all the banks and other financial service providers had to do to comply with the UIGEA was make a few automated checklist systems and then process their payments as usual. After all, it would be unreasonable to scrutinize every single monetary transaction to divine out any gambling origin, and the cracks such transfers could slip through could be as big as the banks et al. pleased. Since these companies like getting paid, those cracks were huge.
The effect of the UIGEA on MLB betting, like all other federal anti-gambling laws, has been minimal. It neither stopped nor curtailed this activity (or any other sports betting pursuit), and betting on MLB action has significantly increased in both participation and handle since the law has been in effect.
That said, the UIGEA did have one measurable effect, as it made payouts take a bit longer to process. MLB bettors now have to wait upwards of two weeks to receive their payouts, and occasional card deposits at legal online sportsbooks are declined, forcing sports wagering enthusiasts to load up their accounts via money order, bank wire, or personal check.
As an aside, the UIGEA may have had one very important sociopolitical ramification, as there is compelling evidence that this assault on financial institutions (as effectively toothless as it is) may have led directly to the research, creation, and propagation of cryptocurrencies like Bitcoin and all the other altcoins on the market today. Decentralized, unregulated payment platforms are the future of commerce, much to the chagrin of global governments everywhere. A more delightful irony there surely is not.
The effect of the Wire Act on MLB betting has been appreciably nil. Since the law never actually did what it purported to do (i.e. stop interstate sports betting), the most bet-on sport in the land (at the time) continued to dominate the public consciousness. To be sure, many mafia families “went legit” and invested heavily in a strong Las Vegas presence, but the infrastructure for interstate sports betting was hardly altered, and betting on MLB baseball continued to wreak non-havoc on the sport.
Now that most MLB betting has moved offshore, it’s clear that attempting to limit such a popular pastime as sports betting has ended up costing the US government a substantial bit of regulatory income. With legal online sportsbooks accepting thousands of new MLB bettors every day, there is no end in sight for the failures of the Wire Act to correct themselves without comprehensive legislative or judicial restructuring.
Depending on what happens with PASPA at the Supreme Court, the future of the UIGEA for MLB betting (and all other sports wagering) is bleak. Should states finally be allowed to implement their own sports betting regulations and systems, the Unlawful Internet Gambling Enforcement Act of 2006 will have to be annulled or revised to exempt online sports betting on a state-by-state basis.
The Wire Act may still prevent interstate MLB betting, but – as is currently the case in Nevada – in-state Internet sports betting would be an absolute necessity should any state be able to actually implement its own sports betting industrial framework. For all intents and purposes, at least in terms of betting on MLB action, the UIGEA goes as PASPA goes. Right down the drain.