The 3rd Circuit decision on our UIGEA challenge came back this morning. They upheld the law, but as indicated by questions during oral arguments, they seem to be saying - "if the state where the bet is placed says internet gambling is illegal, then processing that payment is illegal"...meaning that it is not illegal if the state doesn't have a law saying internet gambling is illegal.

Also, they clarified that the Act does not make internet gambling illegal.

Important passage:

"To the extent that Interactive's hypothetical raises a vagueness problem, it is not with the Act, but with underlying state law. It bears repeating that the Act itself does not make any gambling activity illegal. Whether the the transaction... constitutes unlawful Internet gambling turns on how the law of the state from which the bettor initiates the bet would treat that bet, i.e. if it is illegal under that state's law, it constitutes "unlawful internet gambling" under the act." p6., iMEGA v. Holder, US 3rd Circuit decision

Also key:

The Act prohibits a gambling business from knowlingly accepting certain financial instruments...if such gambling is illegal where the business is located or from which the individual initiates the bet (note: the state where the bettor is), p6., iMEGA v. Holder, US 3rd Circuit decision


So, we lose, but in a way, we have some measure of a victory here. Arguably six (6) states make it illegal to engage in internet gambling. Forty-four (44) do not. UIGEA does not make internet gambling or processing transactions for internet gambling illegal in those forty-four states.

Here's the decision: http://www.imega.org/wp-content/uplo...r_decision.pdf

We'll have analysis and a statement later today.

Joe@iMEGA

I'm not a lawyer, but from the sounds of it this is about the best we could have hoped for. I know this has been posted elsewhere, but what are those six states again?

I know its been talked about before but I don't know which or where.

Can someone give a breakdown of these arguable six states, and also some states of the other 44 where its most likely gambling is/will be legal online.

Gambling-law-US lists seven states that have an express prohibition against Internet gambling: Illinois, Indiana, Montana, Nevada, Oregon, South Dakota, and Washington. I don't know how current Chuck Humphrey's analysis is.

-- Russ Fox

Well the PDF specifically mentions Hawaii and Oregon as two examples.

They also assert that gambling in the home is not a constitutionally protected right.

I have not yet read the decision. However, I'll admit I'm confused. Does this mean that banks in a state that does not expressly prohibit online gambling do not have to follow the UIGEA? If so, then this is great for online poker. OTOH, does this mean that some party has to sue in each state to establish whether the UIGEA applies in that state. Also, how clearly must the state law prohibit online gambling for the UIGEA to apply in that state?

Maybe I'll know more after I read the decision, but from the G911 summary, I doubt it. I'll post more thoughts after I read the decision.

Also, in those states that do have some vague question about the legality of online gambling(Not only Poker :-) ) is it the State's job to administer the law, or is the Federal government going to take it upon themselves to enforce the state law?? Does this decision now mean that the case against the Canadian payment processor is dead?? What does this mean for Sports Betting??

I don't see how this changes anything or helps us. We already knew that the UIGEA applies only to Internet gambling that is unlawful under state or federal law. The financial institutions still will overblock and they still won't go into the business of determining what laws do or do not apply and where. I don't see this as any sort of win for us. If we could sue financial institutions for blocking transactions that shouldn't be, this decision would help us. But the UIGEA gives them protection from such suits.

I doubt it. Note that the decision talks about where the bet is initiated, not where the money transaction is initiated:

Banks won't be able to predict where the depositor is going to bet from, so they have to block every transaction.

The exact text that seems most relevant to your question is listed below. The issue of banks are not addressed here, but it does address the issue of companys knowingly accepting a wager ("certain financial instruments ") from a state where online gambling is illegal. From my reading I would assume that the location of the bank is not at issue, the location of the wager as well as the location of the business accepting the wager determines the legality.

From my reading the problem still remains for the banking industry which must now either determine the legality of each individual wager placed using a financial instruments initiated by the bank, or the bank can instead chose to block all transactions as a measure to assure compliance.

My thanks goes out to Joe and all at iMEGA for sharing the results with 2+2'ers first.

Joe - can you please comment on the statement above, your insight on how this in some ways removes the teeth of the UEGIA in 44 states would be very helpful.

This is the way I read the ruling but it also raises an interesting ?. If the bills are passed that are currently in congress and some states opt-out Then the banks will be faced with them same problem. The banks will have no-way of knowing the place the wager or bet was made only the location the bank is in or maybe the residence of the person trying to cash the check. I wonder even if legislation is passed unless the UIGEA overturned then the banks may still over block transactions if they have no-way to tell the location the bet is made in.

Additionally, does the ruling call into question any of the DOJ's actions so far??

Of course not. There would have been absolutely no reason for them to do so in this case.

Well the DOJ's actions require that the wire act covers internet gambling. Perhaps one could argue that by stating that the legality of online poker depends on state law, the court is saying that online poker is not illegal under federal law (ie., the wire act).

Ok, I read the decision. Sorry Joe, but you can't put any positive spin on this decision.

First, the court clearly states that because some states expressly prohibit online gambling, then the UIGEA is not vague. It cites a 1982 SCOTUS case ruling that a statute must be vague in all its applications to be vague. This was not the standard when I went to law school at Duke University, but I graduated in 1980. This weakening of the vagueness standard to uselessness does not surprise me.

Second, this does not mean that if a state does not specifically prohibit online gambling, then the UIGEA does not apply to its resident banks, other firms or individuals. It depends on whether the bet is illegal under state law. Thus, the court is requiring litigation to determine whether a bet is illegal to determine whether the UIGEA applies to it. I can argue that unless a state specifically makes a bet in Internet gambling illegal, then it is legal. However, I can also argue that a state that permits B&M gambling cannot prohibit Internet gambling. These issues do not make the statute too vague under SCOTUS case law because at least two states prohibit all Internet gambling. The problem is the SCOTUS 1982 decision on the standard of vagueness; not this court.

Thirdly, it is sad that US courts no longer view the right to conduct commercial transactions to be worthy of constitutional protection. This decision expressly states that commercial rights are not constitution worthy like private ones like sex. Skall, you were right about this issue. This view of the courts is why we no longer have much freedom in the US. Without commercial rights and freedom, no freedom can exist.

For all you lawyers out there who wonder why the public hates the legal profession so much, then just read this decision. It is lawyers whether acting as legislators, prosecutors or judges that have so expanded the scope and power of government at the expense of individual rights and freedom. Funny, I missed the part in the US Constitution that states that property rights are not really important and do not require protection from the government like personal, non-property rights. I hated the liberal concept of so-called fundamental rights (like some rights in the US Constitution aren't fundamental and can be ignored) in law school and hate it now. IMO, all rights under the US Constitution are equally fundamental and should be protected from any government interference unless bodily harm may result without government restriction. But that is true freedom which I fear is permanently lost in the US.

So what now. My advise is to challenge the regulations on the grounds that by not defining UIG and by not creating a list of entities that accept UIG bets, the regulations have expanded the scope of the law beyond its legislative intent. Further appeal of this case is useless.

Except that even under the regulations, the UIGEA does not cover player withdrawals. So, under the UIGEA and its regulations, the bank has no duty to block deposits from online gambling sites to players. However, nothing can prevent banks from being over cautious and deciding that it wants nothing to do with Internet gambling.

I live in one of those states (Oregon) that apparently has banned online gambling. Does this mean the sites will block me completely or that I just can't deposit?

So does this mean Party poker and others will be able to take customers again in those 44 states?

lol sick life I live in Indiana

French lick or Hanover?

What does this mean for any so called regulations?? Does this clarification add a level of complexity not defined before the creation of the regulations that are to be put into effect in December??

Wow. I could be way off, but to me this sounds inconsequential at worst, a huge win for us at best, and most likely somewhere in between -- very positive.

Having read the decision, it is clear to me that JP and PX are correct; there is no positive spin to be put on it.

From a PR perspective, I guess it could be helpful to have the 3rd Circuit saying repeatedly that UIGEA did not make internet gambling illegal. But everybody who is even a little informed already knows that, and I don't see how we can get the word out to the wholly uninformed.

But the case certainly does not stand for the idea that Internet Gambling is legal unless a state has written a law expressly stating that internet gambling is illegal. So we cannot say that there are 44 or 43 states where gambling is legal; all we can say is that we know with certainty that in 6 or 7 states, it is clearly illegal. In all of the other states, it may or may not be legal, depending on the exact wording of the gambling laws in each of those states.

A state does NOT need to have a law expressly stating that internet gambling is illegal for that to be the case. If the state law prohibits placing a bet from within the state, that is probably sufficient reason to assume that internet gambling in that state is illegal. Nothing in this opinion changes anything in that regard.

People need to not get confused by this. IMEGA went into court and said "UIGEA is unconstitutional because it is vague," and the 3rd Circuit said, "nope; it is not vague." NOTHING else has changed.