David Gzesh, the Las Vegas-based online gaming specialist and founder of Gzesh Law, considers the suggestion that bitcoin-only operations might avoid violating some US internet gaming laws.
THE United States’ Unlawful Internet Gambling Enforcement Act prohibits persons “engaged in the business of betting or wagering” from accepting any transfer of funds “in connection with the participation of another person in unlawful internet gambling,” (31 U.S.C. § 5363 (2006)).
The Act would apply to most traditional payment transaction technologies, aside from cash, and covers also unlicensed gambling operations which are otherwise illegal in most US markets under state laws.
This article examines the argument1 that operation of an i-gaming “bitcoin-direct” business, located outside the US, which only accepts bitcoins and only directly from patrons, never accepts or sends any transfers of funds in any forms which are prohibited by UIGEA Section 5363. The topic is timely as a general readership subject matter because proposed budding “bitcoin games”, which may or may not involve gambling, are emerging from the entrepreneurial minds which gravitate toward emerging technologies and the effective peer-to-peer networks which disrupt predecessor institutions.
UIGEA Section 5363 prohibits the acceptance of four enumerated categories of financial instruments, none of which include bitcoins as such.
What is prohibited by the UIGEA is acceptance of one of the four enumerated types of payment. The US Court of Appeals for the Third Circuit has explained, “Simply put, a gambling business cannot knowingly accept the enumerated financial instruments in connection with a bet that is illegal under any federal or state law applicable in the jurisdiction in which the bet is initiated or received.” Thus, the Act “provide[s] a person of ordinary intelligence fair notice of what is prohibited.”2
Read the full article in the current issue of InterGaming Law.
