PHILADELPHIA – Despite recent movements by Congress to soften the Unlawful Internet Gambling Enforcement Act of 2006, a U.S. district court dealt a severe blow to efforts to overturn the law when it dismissed constitutional challenges Tuesday.The 3rd U.S. Circuit Court of Appeals disagreed with assertions the act not only is too vague, but also violates the privacy of citizens by restricting their activities within their own homes.

Enacted three years ago, the controversial law prohibits financial institutions from processing monies for online gamblers. The court challenge was initiated by the Interactive Media Entertainment and Gaming Association — a trade group of gamblers, marketers and online casinos — which based its privacy argument on the 2003 Supreme Court decision in Lawrence v. Texas. That case overturned a state law that had been used to prosecute gay men for having sex in their own bedrooms. The principle at work in the anti-gambling act, the association argued, was identical: Government’s authority to restrict the activities in which people engage behind closed doors should be severely limited.

“Here you have the government targeting something solely because it was on the internet,” said Joe Brennan Jr., chairman of the association. “Every right and civil liberty in the offline world should convey in the online world.”

The three-judge appellate panel found no similarities in the cases.

“As the Supreme Court explained in Lawrence, such laws ‘touch upon the most private human conduct, sexual behavior, and in the most private of places, the home,’” the panel wrote in its ruling. “Gambling, even in the home, simply does not involve any individual interests of the same constitutional magnitude. Accordingly, such conduct is not protected by any right to privacy under the Constitution.”

Intended as a bulwark for cross-border and virtual law enforcement in the digital age, the law never has been entirely effective. Despite the ban, offshore casinos and banks continue to accept wagers from and process funds for the estimated 10 million Americans who gamble online to the tune of about $6 billion annually, according to the Poker Player’s Alliance. The alliance’s executive director, John Pappas, compared online gambling to legal commodities trading on Wall Street: Both are forms of betting for or against an uncertain outcome.

“The idea that one area is now unlawful but the other activity is permissible and acceptable seems a bit inconsistent, especially when you consider the activity in the financial markets can have significant impact worldwide or nationwide,” Pappas told Wired.com.

The court’s decision may or may not impact current congressional discussions about proposed changes to the online gambling ban. Some members of Congress believe taxing the proceeds of internet gambling could fill gaps in federal and state budgets.

The Interactive Media Entertainment and Gaming Association has not decided whether it will appeal the 3rd Circuit’s decision.