The Unlawful Internet Gambling Enforcement Act, otherwise known as the UIGEA, was an amendment which was signed into law as part of the SAFE Port Act (an unrelated national security-related piece of legislation) on October 13, 2006. It was done very hastily, added and steered through the process just minutes before the Senate adjourned for the 2006 election period, so much so that the final language was not even read by the most of the members who voted on it.
The UIGEA is designed to stop transactions that go from financial institutions to gaming-related sites (online casinos) on the internet and vice versa. Its intended effect is to cut off funding to online gaming operations and block ways that US players can sign up. The bill is supposed to affect banks, credit card companies, Western Union and other third-party entities where transfers of money can be initiated.
Exceptions for the lottery and horse racing exist, and there are allowances for “fantasy sports” games as well as free gambling-type games which includes most casino games to operate, with certain restrictions.
Quite a few online gaming operators have blocked their sites from participation from US players. Companies who are traded on public exchanges overseas (Europe, the UK, etc.) stopped dealing with American customers very quickly. There is no question that the aftershock has been felt throughout the industry.
The law requires compliance from banks, and the purpose is to identify gaming enterprises by using a certain merchant code. Banks and others involved in money transfers are ordered not to transfer money to businesses with that merchant code. They are also protected from litigation in the event they inadvertently blocked a customer transaction that was legal and legitimate, and that means they can act with more impunity, which can hurt customers.
Some logistical problems arise out of all this. One of those problems is that online 
gaming businesses who wanted to continue accepting US customers such as Rushmore Casino figured out ways to use different merchant codes so that banks could not recognize whether or not transactions were gaming related. On the other end, banks really dreaded being in a position where they have to monitor more customer transactions than they really have to in order to comply, and they don’t want to devote (the cost of) manpower and money required to track down the recipients of paper checks.
Some of these difficulties led to the bill not taking full effect as of yet. Ultimately it was to go into effect in December of 2009, but the industry bought some time, due to a great extent to the efforts of Rep. Barney Frank of Massachusetts, who has fought the bill and has introduced alternative legislation that would supersede the UIGEA while establishing regulatory guidelines for online casinos and poker rooms.
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