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Emily D. Swoboda

Where do they Stand? Skill Games and the UIGEA

22 November 2006

The passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) has brought many questions, not the least of which is how it will affect the skill games sector.

By definition, there exists a fine line between skill games and games of chance. A game of skill is a game where the outcome is determined mainly by mental and/or physical skill, rather than by pure chance; but a game of chance is a game whose outcome is strongly influenced by some randomizing device, and upon which contestants frequently wager money.

By legislation, there exists a blurred line, but attorney Martin Owens believes skill games are better off than ever.

Owens, who specializes in the problems of operating gambling businesses online, said skill gaming does not fit into the definition of gambling outlined in the bill.

"If you look at section 5362, it defines gambling as placing a wager on a contest of others," Owens said. "They try to help out the fantasy sports leagues, but that really is not going to affect them one bit, because even if this redefines fantasy sports leagues, the UIGEA itself goes against the operators by way of the bank. So, the first thing that would have to happen would be that the fantasy sports league, outside the definition of the various forms of gambling listed in section 5362, would have to be found breaking some state laws and there are only two states that have ever pronounced on them. And most of them just don't care."

Owens feels it is a huge mistake for a skill games company to pull out of the United States market at this time. He said he does not see much of a threat to the industry, especially the skill games sector. He echoed the sentiments of an industry executive with whom he shared the stage at this year's Global Gaming Expo (G2E) in Las Vegas.

"The head of Wager Works said, 'anybody who got out of online gaming now, a year from now they're going to wonder what the hell ever possessed them to do that,' because this law has not done anything bad against skill games, and I doubt that it's going to hurt online gaming itself."

Regulations coinciding with the law are expected to be written within nine months of the bill's passage. However, Owens isn't confident the U.S. will see those regulations in that time frame. He opines that since the power has shifted in Congress and is now led by lawmakers who opposed the ban, they may not be so eager to see the ban come to fruition.

Despite arguments to the contrary, one company felt it better to be safe than sorry. U.K.-based GameAccount announced on Sunday that it has closed access to U.S. resident real money players.

"It is extremely hard to argue that games of skill, such as those provided by leading skill games operators, have zero element of chance influencing the outcome of real money tournaments," said GameAccount CEO Kevin Dale. "Closing access to U.S. resident real money players was a hard decision, but a sensible one."

The reality in the U.K., according to Dale, is that Barclay's Bank, one of the largest financial providers in the country, required GameAccount to sign a form agreeing not to take U.S. bets.

He said the company is now running into difficulty with transferring money back to U.S. customer accounts, but they are working that out.

"As much as we'd like to keep taking U.S. play, we can't do so because of the payment providers," Dale said. "To some extent the decision has been made for us as the source of fund transfers from the U.S. dries up," Dale said.

Dale also expressed concern over the U.S. justice system.

"There's also a very fine line between games such as gin rummy, Bejeweled and poker – and it's an orange suit and manacles that you can look forward to if you decide to test the DOJ's interpretation of skill vs. chance gaming."

GameAccount only garnered 10 percent of its revenues from the U.S., Dale said. So, making up for lost revenue won't be that great a challenge. Dale said the company is focusing on sports betting through its partner companies such as Paddy Power, Sportingbet and SkyBet.

Toronto-based skill games provider Fun Technologies announced on Oct. 6 that its Fun Games and Fun Sports divisions would continue to operate in the U.S. market, despite the legal frenzy caused by the UIGEA.

The company stands by its position that the legislation includes a carve-out for fantasy sports competitions and games of skill.

"We're still operating in the 37 states which legally allow skill games and will continue to do so," said Allison Rynak, director of corporate communications for Fun Technologies. "We believe the law does not change anything. We continue to work with the appropriate legal parties. We work with in-house and outside legal counsel to ensure we continually operate in compliance with U.S. law, but we believe skill games are still legal."

Where do they Stand? Skill Games and the UIGEA is republished from
Emily D. Swoboda
Emily D. Swoboda