Friday, 27 January 2012

The UIGEA, at last?

It sent shock waves through the industry. On 7 December, a jury in the US District Court of Boston found Todd Lyons guilty of illegal gambling offences under the Unlawful Internet Gambling Enforcement Act (UIGEA).

The jury was convinced Lyons ran the illegal gambling business Sports Offshore together with a number of co-defendants. Although Sports Offshore is based in Antigua, it was not licensed there and the business actively targeted and recruited customers throughout the US. Since Lyons acted as an 'on-the-ground agent' ­ collecting losses from US sports betters and shipping the proceeds back to Antigua ­ he was found guilty of 'acceptance of financial instruments for unlawful internet gambling', specifically stated under terms set out in the UIGEA. He was also convicted for racketeering under the Racketeer Influenced and Corruption Organisations Act (RICO) as well as violations of the Wire Act. 

And so it was official. The first conviction under the UIGEA ever was a fact. A historic moment? For the industry it certainly was. The conviction was hailed as a huge victory for those who oppose online gambling and the US Attorney for Massachusetts, Carmen M. Ortiz, said in a statement that the conviction of Lyons 'should serve as a message to those involved in illegal gambling schemes'. Really? This is a strong message from a government that has never convicted someone before under the UIGEA, even though the law has been in effect for more than five years. 

Lawyers and industry experts wonder what to make of this UIGEA verdict, and where to go from here. Before Lyons conviction, the Wire Act and RICO were as good as the only legal tools available to prosecute and convict persons involved in illegal gambling. 

So does this case mean a change of course? The answer is most likely no. The UIGEA conviction was merely possible because Lyons was physically collecting gambling proceeds within the United States, while practically all gambling businesses that even dare to offer their services to US customers stay well away from such practices. Money is transferred out of the country and collected in offshore jurisdictions far away, such as Barbados or Panama. 

So can we expect another UIGEA conviction soon? Probably not. Although since Black Friday it is clear that cracking down on online gambling activities in the US has become a priority for the US Department of Justice, the UIGEA's own terms limit the possibilities for prosecutors to crack down on online gambling businesses that attempt to take advantage of America's millions of poker players. 

In all likelihood, this conviction should be seen as a one-off event and prosecutors ought to celebrate the existence of the Wire Act and RICO if they wish to continue cracking down on online gambling in 2012.

Michiel Willems in WOGLR, December issue © 2011 CPP Publishing Ltd