Throughout the current economic woes facing the USA, many lawmakers have considered legalized online gaming as a way to make up both Federal and State budget deficits. At present, the offshore gaming industry is rumored to make roughly $16 Billion USD annually, although this is a rough estimate and not based on hard figures. Most online casinos do not disclose how much they make to the public, except those based in Europe where gaming is regulated.

The iMega group (Interactive Media Entertainment and Gaming Association) recently challenged the legality of the 2006 UIGEA act (Unlawful Internet Gambling Enforcement Act), which was passed as a tag-along legislative measure to the US port security act under the Bush Administration.

IMega faced off with the US Department of Justice in the 3rd U.S. Circuit Court of Appeals over a its New Jersey case, asserting that current UIGEA legislation is vague and violates privacy rights. Unfortunately, the Justices upheld the UIGEA act and largely dismissed iMega’s claims. On the bright side, the judges on panel did clarify that UIGEA was not a “Federal Blanket Ban” on internet gambling, but instead deferred the legality of internet gambling to that state from which a gambling transaction originates.

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This decision is generally a repeat of most other attempts to repeal the UIGEA on the Federal Level. Moreover, Courts have traditionally left gambling legality matters to the state level, so that local constituencies can either advocate for or against gambling in their area. Nevada, for example, is a perfect example of this case law: gaming was made legal years ago and taxed at the State level, which give rise to what we now know as Las Vegas, the gaming Mecca of North America.

Another case involving legalized single game sports betting in Delaware is tangentially related to iMega’s case, in part because iMega does represent some offshore sportsbooks. A Federal panel of judges recently denied Delaware’s bid to legalize sports betting, in order to make up huge state budget deficits, stating that the prevailing 1992 Federal legislation which forbids gambling on sporting events would be violated if Delaware went ahead with its plans. In the wake of this decision, Delaware is moving ahead with a “sports lottery” style parlay betting scheme, legal only because the state was granted an exception in 1976 when initial Federal law was being passed regarding sports betting.

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What does this mean for Online Casinos?

For the time being, iMega’s defeat in New Jersey is a disappointment, but not a setback. IMega may have to begin working state-by-state to legalize internet gaming, which is definitely on the back burner of many state governments desperate for income.

As a result, the status quo remains untouched: there are still online casinos that welcome USA customers (whether legal by state or not), and these casinos will continue to be in business regardless of any USA legislation, state or federal. In fact, offshore casinos may be safer in terms of online casino market share with the current legal status of online gaming in the USA. If online poker and online casinos gambling are ever legalized in the USA, casino industry giants like Harrahs are already poised to throw their hat in the ring. Competition from these venerable gaming corporations would eventually drive many smaller offshore gaming companies out of business.

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Meanwhile, Barney Frank, D Massachusetts and Chair of the House Banking committee, has set forth a bill that would regulate and tax online gaming, based either in the USA or offshore. This would effectively give online casinos that want to re-enter the USA market the green light, as long as they submit to USA government regulation and pay taxes. Such concessions, at present, seem somewhat amenable to offshore casinos, although many argue that the USA can’t legally levy taxes on corporate entities that take bets on servers located outside the USA. Frank’s proposed bill would stipulate that the wager’s place of origin would determine which government and what law would apply; which he asserts should be the United States.

This might be the happy medium that online casinos will have to settle for. No doubt, if Frank has his way and online gaming is legalized, there will still be a few online casinos that do not submit to USA regulation, but still market to USA customers in attempts to clandestinely gain their valuable business. At this time, there are no provisions for dealing with such operations; only that legal online gaming businesses will eventually crowd out smaller rogue businesses by virtue of market presence.

Ultimately, iMega should begin to clarify where it stands on each respective type of online gaming. If iMega includes sportsbooks, for example, its plight in the USA courts may not last long. If, however, it only advocates for online casinos and poker rooms, it could be more successful given Frank’s bill and the general sentiment that state governments are in drastic need of other sources of income.

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For the time being, if you’re just a guy or gal who wants to gamble online, you’re still able to do so, regardless of any pending legislation or court cases. As always, recommends that you consult the laws of your local jurisdiction before gambling online, just to be sure that your wagers are legal.

Otherwise, aside from iMega’s court case, the state of online gambling largely remains the same, if not slightly bolstered by the court’s clarification that the UIGEA act does not outright ban internet gaming on the Federal level.

As a result, as the September NFL betting season warms up, and people head indoors as temperatures cool down, offshore online casinos and sportsbooks will continue to operate, happy to take all comers looking to have a little fun from the comfort of their own living room without a flight and hotel stay in Las Vegas, Reno, Atlantic City, or elsewhere.

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