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13 Gaming L. Rev. & Econ. 1 (2009)

handle is hein.journals/gmglwr13 and id is 1 raw text is: GAMING LAW REVIEW AND ECONOMICS Volume 13, Number 1, 2009 DMary Ann Liebert, Inc. DOI: 10.1089/glre.2008.13101 Gambling and the Law® New UIGEA Regs Put Benefits and Burdens on States I. Nelson Rose FEDERAL AGENCIES HAVE now made it clear that state-run and state-licensed gaming on the In- ternet is legal. On the other hand, they say states must police Internet gambling, including tribal gam- ing licensees. What opportunities does this create for existing or expanding legal state gaming? For bolstering of faltering state budgets? How should state legislatures respond in these times of economic crises? The final regulations for the Unlawful Internet Gambling Enforcement Act (UIGEA) went into ef- fect on Jan. 19, 2009.2 They require that financial institutions and other payment processors conduct due diligence when creating a new relationship with a commercial customer. But the most impor- tant new provision creates something of a safe har- bor for operators and all that do business with them. The new due diligence standard is automatically met if the Internet gambling operator falls into certain categories: if it is a part of state government, has a state or tribal license, or has a reasoned legal opin- ion3 that it is not involved in restricted transactions. The regulations even tell the credit card companies to come up with new merchant codes for legal on- line gambling. The first category-being operated by a state- allows all state lotteries to sell their tickets online using payment processors and credit cards. North Dakota and New Hampshire were quite successful I. Nelson Rose is a Distinguished Senior Professor at Whittier Law School in Costa Mesa, Calif. His latest books are Gaming Law: Cases and Materials and Internet Gaming Law. Profes- sor Rose may be reached at his Web site at <http://www. GamblingAndTheLaw.com>. © Copyright 2009, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I. Nelson Rose, Encino, Calif. selling subscriptions over the Internet, until Visa changed the category of state lottery tickets from government services to 7995, gambling. The North American Association of State and Provincial Lot- teries is already meeting with Visa to get that changed. In times of severe budget deficits, other states may initiate or expand their Internet lottery sales. At the very least, state legislatures will reexamine whether it makes sense to continue the ban on credit card purchases of lottery tickets. At present, cus- tomers can use a credit card if the store will accept it and the store codes the purchase as groceries. Soon, the credit card companies will expressly per- mit their cards to be used for state lottery purchases, whenever the states allow. Having a state license means that all off-track bet- ting operations can also use credit cards and go on- line. More than 20 states have changed their laws to allow Advanced Deposit Wagering, where pa- trons deposit their money in advance to make bets on horse races. These pari-mutuel outlets were given licenses pursuant to the federal Interstate Horserac- ing Act. But many states also license pari-mutuel betting on dog races and jai alai, and allow bets to be placed by phone and computer. These also now are allowed under the UIGEA, even though there is no federal Interstate Dog Racing or Jai Alai Act. There are many possibilities for other state li- censes. Independent operators, approved by state racing commissions, handle big racing bets online. 1 Unlawful Internet Gambling Enforcement Act of 2006, 31 U.S.C. §§ 5361-5367. 2 Prohibition on Funding of Unlawful Internet Gambling, 73 Fed. Reg. 69,382 (Nov. 18, 2008) (to be codified at 12 C.F.R. pt. 233 and 31 C.F.R. pt. 132). 3 Id. at 69,386. 1

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