U.S. Congress passes Unlawful Gambling Enforcement Act – Implications and consequences for remote gambling

Rechtsanwalt Martin Arendts, M.B.L.-HSG

Arendts Rechtsanwälte
Perlacher Str. 68
D - 82031 Grünwald (bei München)
Last Friday, 29 September 2006, U.S. Congress passed the Unlawful Internet Gambling Enforcement Act whose draft had been introduced in 2005. The quick adoption was made possible by a procedural artifice. The bill was added as title VIII to the SAFE Port Act, a security act aimed at enhancing U.S. port security, by the Committee of Conference, hence passing the legislative procedure without changes or further amendments. The U.S. President is expected to sign the bill into law within the next days.

The new act is meant to hamper payments of U.S. citizens with regard to Internet gambling which is unlawful according to the U.S. legal conception. Such payments to gambling operators are supposed to be eliminated by massive threat of punishment (up to five years of imprisonment), by court orders and by massive supervisory measures.

The Act will amend Chapter 53 of the United States Code by subchapter IV (starting with § 5361). The preamble states that online gaming is mainly financed by credit card payments and wire transfers. In case of cross-border offering of gambling in particular, new enforcement and execution tools were necessary. Congress was obviously not satisfied with the possibilities of intervention permitted by the pre-Internet Wire Act.

The definition of “bet or wager” in § 5362 does not only cover sporting bets but also games of chance and lotteries. Securities governed by the Securities Exchange Act, commodity trading governed by the Commodity Exchange Act and derivative instruments as well as insurance contracts are exempt. Games of chance without the players staking or risking anything of value, games of knowledge and games of skill are exempt as well. Special exceptions are attributed to the gaming offers within a State as well as to the (very broad) gaming offer granted to the Indian tribes under the Indian Gaming Regulatory Act. Horse bets, falling under the Interstate Horseracing Act, are exempt as well.

Any payment with regard to unlawful remote gambling is prohibited in accordance with § 5363, which, following U.S. legal technique, specifies all sorts of payments such as payment by credit card, electronic fund transfer, cheque, bills of exchange etc.). Pursuant to § 5366 such offences are punishable with up to five years of imprisonment.

Under the terms of § 5364 the Federal Reserve System, in consultation with the Attorney General, shall prescribe further regulations to identify and prevent restricted transactions.

In accordance with § 5365 Federal Courts are given original and exclusive jurisdiction to prevent and restrain such payments. The Attorney General or any other appropriate state official of a state in which such a violation has occurred or will occur may institute proceedings to prevent or to restrain such a violation.

§ 5367 provides for extensive liability of all persons and companies involved. Companies may already be affected, if they are owned or controlled by any person accepting unlawful wagers or bets.


This act massively interferes with operational activities of all international gambling providers in the U.S. Accepting wagers or bets from U.S. customers has become an incalculable risk. Hence, several providers – especially the big listed companies – have already given notice of their complete withdrawal from the U.S. market. For companies with a large portion of U.S. customers this represents a further and considerable loss in market capitalisation. Widely reported arrests of board members of British gambling providers in U.S. airports had already caused massive exchange losses before.

The United States violates its obligation under international law by this unilateral action. Such obligations result particularly from the GATS (General Agreement on Trade in Services), a WTO (World Trade Organisation) agreement which was supposed to liberalise most services sectors (including gambling). Antigua, where numerous internet providers are based, brought a case against the U.S. a few years ago. The U.S. did not accept the judgement rendered against it in this case, though. The new act clearly discriminates foreign operators and manifestly intensifies the conflict. The U.S. policy in gambling keeps being not systematic and incoherent. Domestic operators, some of which have supported the draft massively, do not have to fear any action, whereas remote gambling offered by foreign providers is being criminalised.