Chapter 4 - How UIGEA Changed Online Casinos Forever
- Narcis Gavrilescu
- Sep 11
- 5 min read
Updated: Oct 15
The UIGEA (Unlawful Internet Gambling Enforcement Act) of 2006 shook the online casino industry to its core, especially in the United States.
The law didn’t ban online gambling, but it did severely restrict payment processing. This forced big changes in the industry and reshuffled the deck in terms of iGaming strategies worldwide.
UIGEA: what the Law really did
The UIGEA, signed in October 2006, made it a criminal offense for financial institutions to accept payments to or from online casinos considered illegal by the United States.
It targeted banks and payment processors. It didn’t actually criminalize online gambling activity, but it criminalized how those bets got funded and how winnings got paid out. The most important things to remember about UIGEA are that:
It shifted focus from gambling to payment processing: credit card networks, payment platforms and banks were not allowed to facilitate transactions to online gambling sites unless approved by US law.
Sites licensed by US states or territories were an exception, setting the stage for future state regulated online casinos.
Two critical exemptions were allowed:
Horse racing: betting on horses remained legal online under certain federal laws, so wagering platforms continued largely unaffected.
Fantasy sports: a special exemption was made to daily fantasy sports and casino operators like DraftKings and FanDuel built businesses by following UIGEA rules.
The immediate impact: 2006-2007
Global operators exit US market:
When the UIGEA kicked in, major online global casinos like PartyGaming, 888, and Paradise Poker withdrew from the US to avoid both the legal trouble and the financial uncertainty that came with it. UIGEA rattled what was a flourishing US online poker scene. Liquidity dried up quickly for poker rooms, forcing both sites and players out of the market.
Offshore sites made a killing:Â while global brands were leaving, various sites operating in permissive jurisdictions like Antigua, Isle of Man or Gibraltar continued to accept US players. Some argue that this is the first time in iGaming history when third party payment providers appeared. They, along with e-wallet workarounds kept the money moving.
Player risk increased:Â there were small, unregulated sites that would close shop overnight. taking Player balances? Gone. Legal uncertainty or banking blockades made it difficult for these businesses to work.
The stock market fallout:
Publicly traded online gambling companies suffered sharp drops in market cap.
PartyGaming will forever be known the most affected company at the time: it lost almost 60% of its stock value in 24 hours (approximately 2,4 billion sterling) and it was moved from the FTSE 100 Index to FTSE 250 within less than 2 weeks.
888 Holdings, whose flagship brand was 888poker (and others), also lost ~$400 million of its market value immediately after the UIGEA release. Like PartyGaming, 888 Holdings was attracting 50% of its business from US consumers.
Sportingbet, a UK based sports betting operator, lost $1 billion of its market value and 64% of its share value (497 million sterling) by the end of the first trading day. Sportingbet plc atually sold its US operations for $1, taking a £200 million ($373 million) charge in the process.
BetonSports was also a very public case since the company faced criminal charges. It used to be listed on the London Stock Exchange's Alternative Investment Market, shares plunged 24% and then trading was suspended entirely. BetonSports plc was forced to shut down 85% of its website and stopped accepting wagers from US.
Other major companies affected:
Fairground Gaming plc - was liquidated.
CryptoLogic Holdings Inc - was forced to stop US users.
GigaMedia Limited - this was a Taiwan based software solution that was also affected.
Playtech plc - although primarily a software provider, it was affected since its clients exited the US.
iGaming survival and evolution: (2007-2010)
A shift to European and global regulation:
Now that the US was largely off-limits, online gambling operators turned their attention to Europe, Asia, wherever they money could come from, really.
Many companies sought licenses with trustworthy regulatory bodies like Malta Gaming Authority and the UK Gambling Commission to serve non US players and avoid legal risks.
When payment solutions were interesting:
Operators and players got very creative about bypassing UIGEA restrictions:
E-wallets became a must have. If you ever wonder why Skrill and Neteller are such well known names in the industry, this is why: they routed funds through international networks outside US oversight, allowing US citizens to deposit and withdraw funds.
New technologies were aways explored, just as they are today, but each new solution became a cat and mouse game since US authorities eventually caught up and shut down every loophole they found.
Poker's black market era:
Poker continued underground for US players, with a handful of offshore poker rooms dominating, namely PokerStars and Full Tilt. Player liquidity shrank, tournament sizes grew smaller and smaller, an end to a glorious era.
This particular section deserves its own article which can be found here (will attach soon).
Industry market and statistics (2006-2010)
Despite US regulatory threat, the global online iGaming industry was showing no signs of slowing down:
Global online gambling revenue more than doubled from $12 billion in 2005 to ~$29.3 billion by 2010.
The player base was growing, especially in Europe and Asia.
Technological innovation kept coming:Â live dealer games debuted, mobile gaming was rearing its head for the first time and casino software was becoming more and more sophisticated.
Regulatory lessons and market legacy:
A fragmented US market:
UIGEA drove a fragmented state by state approach to legalization. While states like New Jersey and Nevada were quietly exploring regulated iGaming policies, others grew only more adamant in their restrictive approaches.
Global compliance, AML and player safety:
The pressure to comply with anti money laundering (AML) and KYC rules (know your customer) became an industry wide issue. Major brands started investing in regulatory compliance, player verification, and responsible gaming measures as the standard was lifted.
Black market problems:
There were more and more unlicensed operators willing to risk getting into the US, but player protection was an afterthought. Customer recourse? Absent. Dispute resolution? A miracle if ever acted upon. Deposit theft and fraud became common complaints for unlucky players.
Summary table: UIGEA's immediate effects
Conclusion:
UIGEA was basically the Great Schism of iGaming.
The law forced out many of the biggest market players, made payments a logistical nightmare for offshore operators, and pushed the US market into a gray zone limbo. Some segments were devastated, but it also forced online casinos to become more creative as they looked abroad for opportunity.
Ultimately, UIGEA has a legacy of disruption but also adaptation. It was the birth of an international market governed by regulations. And we will also see how it influenced today's era of regulated, tech-driven online casino gaming.
Continue to Chapter 5 - iGaming's Secret Boom.