Abstract
The geographical transcendence of the Internet presents challenges for government regulation of activities such as Internet gambling, which are legally proscribed in some jurisdictions and allowed in others. The Unlawful Internet Gambling Enforcement Act (UIGEA) enacted in October 2006 provides one approach to regulating Internet gambling by focusing on financing, rather than the conduct of individual gamblers. Though this approach will generally protect the privacy rights of individuals and preserve free access to the Internet, it will impose costs on the business community. This article provides an analysis of the UIGEA and its effects on Internet gambling firms and firms that provide transactional services. Financial markets suggest this legislation has reduced Internet gambling in publicly traded firms, even before enabling regulations have been enacted. However, this law may also have the effect of enhancing investment capital flows for online gambling firms, due to clarification of the legal status for firms who are not targeting U.S. residents in violation of UIGEA. The ultimate result may depend on whether other nations follow suit in targeting extraterritorial business with domestic gambling patrons.