UIGEA - Continued Controversy

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Congressmen Fight for Online Gambling

The Unlawful Internet Gambling Enforcement Act (UIGEA) continues to prevent transfer of money for online gambling, but unrest among politicians and law makers keeps hope in sight for poker players. Last year Barney Frank introduced the Internet Gambling Regulation and Enforcement Act, which aims to allow online gambling at a Federal level. Unfortunately, that bill is stuck in committee. However, this month Ron Paul, Barney Frank, Peter King, and Luis V. Gutierrez have all come together with a common cause - to pull the plug on the UIGEA once and for all.

Following an April 2 hearing on the proposed rules of the UIGEA, these Congressmen have sent letters to the US Treasury and Federal Reserve voicing their concerns about the Unlawful Internet Gambling Enforcement Act. As well, Frank and Paul have introduced a bi-partisan bill that, if passed, would thwart the UIGEA by prohibiting employees of the Federal Reserve System and Treasury Department from “proposing, prescribing, or implementing any regulation that requires the financial services industry to identify and block internet gambling transactions.”

Following is a copy of the Congressmen’s letter to the US Treasury and Federal Reserve:

As you know, on Wednesday, April 2, the Committee on Financial Services Subcommittee on Domestic and International and Monetary Policy held a hearing entitled, “Proposed UIGEA Regulations: Burden Without Benefit?” to examine the regulations issued last year by your agency and the Federal Reserve on the Unlawful Internet Gambling Enforcement Act (UIGEA). At that hearing, the testimony of your representatives and the industry made it clear that the regulations are unworkable. Subsequently, we introduced new legislation, H.R. 5767, which would prohibit their implementation.

The regulations, like the underlying legislation, fail to define the term “unlawful internet gambling,” leaving it to each financial institution to reconcile conflicting state and federal laws, court decisions and inconsistent Department of Justice interpretations, when determining whether to process a transaction. Furthermore, some of the information needed to make this determination would likely be unavailable to banks, because customers or financial institutions in foreign jurisdictions will likely be unwilling or unable to provide it. At the hearing, representatives from your agency and the Federal Reserve admitted that there are substantial problems in crafting regulations to implement the UIGEA in a manner that does not have a substantial adverse effect on the efficiency of the nation’s payment system.

Your agency and the Federal Reserve have been struggling to issue these regulations, but as the hearing made clear, the underlying statute makes your job extremely difficult, if not impossible. Given the many other priorities that are pending at your agencies, including the mortgage crisis, HOEPA, and UDAP rulewriting and many other issues, we believe it would be imprudent for you to devote additional agency resources to this Sisyphean task, especially as we intend to vigorously pursue legislation to prevent the implementation of these regulations