Illinois' Online Gambling May Meet UIGEA Resistance

Online gambling is now licensed in Illinois, but that doesn't mean the UIGEA won't interfere with payment processing in the state.

Now that Illinois has licensed three companies to operate online gambling sites in the state, the operators must beware the inadvertent influence of the UIGEA. Like state lotteries in New Hampshire and North Dakota, the perfectly legal online gambling may encounter payment difficulties, as credit card companies cautiously refuse all gambling payments to avoid penalties.

Illinois decided to license the operators to accept online betting on horse racing as a way to build revenues for both the state and its racing industry. The US Department of Justice says all online gambling is illegal, but has not interfered with domestic companies running very public Internet wagering.

The UIGEA, as defined by a recent decision by the US Third Circuit Court of Appeals, allows penalties against payment processors who aid in the transfers of money involved in illegal online gambling. However, the court found the UIGEA does not make any type of gambling illegal of itself, but merely enforces state laws existing against gaming.

Also, exceptions are clearly spelled out in the UIGEA for horse racing and state lotteries. But, with the confusing and contrary position of the DoJ, card companies have shown extreme reluctance to process legal transactions if they involve gambling.

The situation illustrates the need for the federal government to quit attempting to impose law on the states, allowing the states to make their own decisions on gambling, as they traditionally have.

In the meantime, Illinois may find its new revenue source choked off by another unforeseen nasty side effect of the problematic UIGEA.