Digital Wallets: Legal Loopholes To UIGEA

Digital Wallets: Legal Loopholes To UIGEA

The UIGEA prevents US banks from processing transactions to online gambling operators. For the longest time, depositing funds into a player account required either the use of money orders or written checks. However, US state-regulated online gambling sites have recently begun accepting two previously renowned digital wallets – Skrill and NeTeller.

New Jersey is the first state to welcome digital wallets back into its arms, as the state of New Jersey has sanctioned the use of eWallets for online gambling purposes. NJ now benefits from utilizing both Skrill and NeTeller digital wallets to collect and transfer personal liquid assets into gambling accounts to be used at NJ online casinos. By all technicality, New Jersey demonstrates a legal loophole to the banking ban by utilizing secure and encrypted wallets as a third-party payment “processor”.

Accepted deposit methods for state-sanctioned New Jersey online casinos include ACH, Credit Card deposits, Debit Card deposits, Prepaid Visa Cards, Cash at the physical venue hosting online games, Direct Bank Transfer, Bank Wire, and PayNearMe. Other U.S. states with regulated domestic online casinos and poker sites have yet to begin utilizing digital wallets again but will most certainly as digital wallets gain widespread adoption as it is a much safer option over using Bank Wires, ACHs, Bank Transfers, and Debit Cards to fund accounts. Financial institutions are always worried that they’ll accidentally process a gambling transaction and be in violation of the UIGEA and other banking regulations that pertain to gambling, therefore, they are always on the lookout for suspicious transactions.

However, this simply creates a cat and mouse game between the online operators and banking institutions where the casino uses an indiscernible code and unrelated name for the transaction to appear as on the user’s bank statement which then leads banks to attempt to find the pattern and freeze processing over those transactions, the casino then simply changes the code for their transaction statement and continues the cycle. Therefore, the use of digital wallets can help online operators and banks circumvent issues with one another and allow each another the ability to do their business in peace. Digital wallets are not directly prohibited under the UIGEA nor any other law; once eWallets were popular within the United States gaming market due to their security and processing approval rate, however, many bogus eWallets surfaced and tainted the reputation of digital wallet brands. This issue was mainly the product eWallets lacking proper regulation and it has been a slow process to regain trust for eWallets ever since.

However, when state online gambling sites, banks, and digital wallets brands come together in agreement they can enable one another to get along and facilitate smooth business transactions. Still, if one or more of these factors cause friction then inefficiencies occur on the backend and are clearly noticeable on the player-end as well. With the use of digital wallets, players will not have to experience the backend’s frustration with payment processing because of how smooth payments are processed using eWallets. As online gambling expands, which should occur more rapidly now that sports betting is federally acceptable and legalized on a state by state basis, states will turn toward digital wallets to utilize their seamless transaction processing for regulated online gaming.

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