September 12, 2008 (InfoPowa News) — Online gambling in the United States is in the headlines again as the week closes, with a new political initiative by House Committee on Financial Services Chairman Barney Frank (Democrat of Massachusetts). His Payments System Protection Act of 2008, just introduced, seeks to push federal authorities on a more precise definition of exactly what constitutes “illegal” Internet gambling in terms of the Unlawful Internet Gambling Enforcement Act (UIGEA) and supporting regulations — a long-standing bone of contention for the congressman.
The Bill asks Congress to direct the Department of the Treasury and Federal Reserve System, in consultation with the U.S. Attorney General, to create “a formal process” to define what types of online gambling are unlawful in order to assist the U.S. financial services industry to comply with the burden of policing the UIGEA which Congress thrust upon it back in 2006.
The controversial regulations thus far drafted by federal officials have been widely criticised for a lack of precision, and placing too heavy a burden on the financial services industry charged with enforcing it. (It’s also been a hot topic of debate here at CAP.)
Frank wants federal regulators to appoint a special Administrative Law Judge to define unlawful Internet gambling activities and conduct an economic impact study on the likely high costs to the industry for ensuring compliance.
The Safe and Secure Internet Gambling Initiative political pressure group that supports regulation of the U.S. online gambling market is in favor of the measure.
“Chairman Frank is doing the right thing by saying it is unfair to burden U.S. financial service companies with the job of Internet gambling police at a time when their undivided attention ought to be on the economy,” said Jeffrey Sandman, spokesperson for the group.
“The reality is that UIGEA is dangerous to the payments system and unlikely to stop anyone from using the Internet to play poker, bet on horses, or engage in other types of wagering.”
Frank’s latest proposal started life as HR5767, introduced mid-year by Texas Republican Representative Ron Paul and himself on concerns about the ambiguity of the UIGEA regulations. It sought to have drafting suspended until the lack of precision and economic impact of the UIGEA had been properly addressed. In a hotly contested debate, the proposal was defeated in the House Committee on Financial Services.
At the time, Frank (who chairs that committee) told his colleagues that Congress is putting the U.S. financial services industry at risk by not clarifying the regulations to enforce UIGEA and defining unlawful Internet gambling activities.
“Hijacking the financial payment system at a time when it is under major stress and giving them the job of carrying out an unclear mandate doesn’t make sense,” he said. He was backed by spokesmen for the U.S. financial services industry, including the Chamber of Commerce, the Financial Services Roundtable, Credit Union National Association, and National Association of Federal Credit Unions, all of whom pledged their support for the original version of the Payments System Protection Act and the King amendment in letters to Rep. Frank and members of the Financial Services Committee.
“I wish to be clear that we do not support the notion that financial services companies should be ‘deputized’ to police gambling activity in any form or function,” wrote Steve Barlett, president and CEO of the Financial Services Roundtable on June 23, 2008. “While we would support the passage of H.R. 5767 as introduced, I agree that the King Amendment makes essential improvements to a deeply flawed law and therefore support its inclusion.”
Representatives Frank and Paul additionally communicated with Treasury Secretary Henry Paulson in a widely distributed letter that claimed the UIGEA regulations, and indeed the underlying legislation, failed to define the term ‘unlawful internet gambling,’ leaving it to each financial institution to reconcile confusing and often conflicting state and federal laws, court decisions, and inconsistent Department of Justice determinations when deciding whether to process a transaction.
Concerns about the impact of UIGEA were also raised by the Americans for Tax Reform and Competitive Enterprise Institute in a letter to members of the Committee on Financial Services dated June 23, 2008, which said that “if implemented as proposed in current regulations, UIGEA would have a number of serious, negative consequences for the nation’s economy.”
In April this year, more than 200 comments were submitted by interested parties to a congressional hearing titled “Proposed UIGEA Regulations: Burden without Benefit?” At the hearing, representatives of the Department of the Treasury and Federal Reserve System acknowledged the challenges U.S. financial institutions will face in attempting to comply with UIGEA.
Congressman Frank has more legislation pending, aimed at regulating and licensing online gambling in the USA. His Internet Gambling Regulation and Enforcement Act of 2007 (H.R. 2046) includes a number of built-in consumer protections, including safeguards against compulsive and underage gambling, money laundering, fraud, and identity theft. The bill, which has yet to be introduced, has thus far garnered bipartisan support from more than 40 congressional representatives.