Court Of Appeals Upholds UIGEA

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The landmark case between iMEGA and the Department of Justice over the legality of UIGEA was heard by the US 3rd Circuit Court of Appeals in Philadelphia July this year. From the questions asked by the three judge bench it was evident that the decision would go against iMEGA. The judges have now released their order and have unanimously rejected the arguments of iMEGA in a 3-0 ruling.

The two main planks on which the arguments of iMEGA arrested were that the provisions of UIGEA were vague and that the law intruded on individual privacy rights. The court held that the requirement in the UIGEA that made it mandatory for financial services providers stop handling payments related to illegal online gambling operations was not vague. In this context the court applied the "reasonable man" test and concluded that the law could be understood by a person of normal intelligence.

In order to support its argument of violation of privacy iMEGA had cited two cases involving private sexual conduct. Judge Dolores Sloviter turned down those arguments outright. She explained that there could be no comparison between sexual conduct between consenting adults in the privacy of their homes and online gambling. She said, "Gambling, even in the home, simply does not involve any individual interests of the same constitutional magnitude. Accordingly, such conduct is not protected by any right to privacy under the constitution."

However the judgment was not a total loss to the online gambling industry. The judges made it abundantly clear that the UIGEA was not applicable across the country. They said that the UIGEA did not make online gambling illegal. The legality or otherwise of online gambling could be determined only by the laws of the state in which the bettor was located. If a particular state allowed online gambling then there was no provision in the UIGEA to ban it. Judge Dolores Sloviter wrote, "It bears repeating that the Act itself does not make any gambling activity illegal. Whether 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."

Joe Brennan Jr., the chairman of iMEGA, saw this as a silver lining. He said, "The court made it clear - gambling on the Internet is unlawful where state law says so. But there are only a half-dozen states which have laws against Internet gambling, leaving 44 states where it is potentially lawful. It's not perfect, but it's a good start." In the short run iMEGA would be reviewing the ruling and examining whether it is worthwhile appealing against the judgment. However the more important focus would be turning attention to individual states. The idea would be to ensure that online gambling is not merely legal in those states because it is not illegal. The idea would be to encourage states to legalize and regulate online gambling and simultaneously generate the much needed tax revenue.

Buffalo State business law professor Joe Kelly, who had been following the case, opined that challenging an act of Congress will always be an uphill task. According to him iMEGA put up the best arguments possible, but there was little hope of success to start with.

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