UIGEA regulations proposed

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ANTI-UIGEA CONGRESSMEN KEEP UP THE PRESSURE

Letter sent to senior government officials asks for a freeze on regulations

House Financial Services Committee chairman Barney Frank and other anti-UIGEA politicians kept up the pressure on federal officials this week following the introduction of their bill HR 5767, which seeks to prohibit the Treasury Department and Federal Reserve from proposing, prescribing or implementing any regulations related to UIGEA.

Several influential members of Congress joined Frank in a letter calling on the Treasury Department and Federal Reserve to halt the implementation of regulations related to the ban on Internet gambling, as required by the Unlawful Internet Gambling Enforcement Act (UIGEA).

"Given the many other priorities that are pending at your agencies...we believe it would be imprudent for you to devote additional agency resources to this Sisyphean task," wrote Reps. Frank, Luis V. Gutierrez (D-Ill.), Ron Paul (R-Texas) and Peter King (R-N.Y.) in letters to Treasury Secretary Henry M. Paulson, Jr. and Federal Reserve Chairman Ben S. Bernanke.

In Greek mythology Sisyphus was punished in Hades for his misdeeds in life by being condemned eternally to roll a heavy stone up a hill. As he neared the top, the stone rolled down again, so that his labour was everlasting and futile. It is an apt characterisation for the mammoth enforcement task that the UIGEA is trying to thrust upon a complaining financial services industry in the United States.

The members of Congress said they intend to "vigorously pursue" implementation of HR 5767 to new legislation to prohibit the Treasury Department and Federal Reserve from proposing, prescribing or implementing any regulations related to UIGEA.

Meanwhile, the Antigua government continues to closely monitor developments surrounding the UIGEA, a central issue in its successful World Trade Organisation wrangle with the United States. Minister of Finance and the Economy Dr. Errol Cort said that he has been following the discussions surrounding the United States' Unlawful Internet Gambling Enforcement Act, including the recent Congressional hearing on the proposed regulations that saw strong opposition from national banking and credit union bodies.

"I’m not surprised in terms of the position taken by the American Banking Association and other interest groups because the legislation seems to be quite onerous," Dr. Cort told the Antigua Sun newspaper this week. "It seems to put a lot of burden on the banking sector to be the policeman for Congress, and the banks are pushing back in respect of that particular situation," he said.

Dr. Cort again drew attention to the better option for the USA afforded by Congressman Frank's Internet Gambling Regulation and Enforcement Act (IGREA) which aims to regulate and license online gambling instead of effectively banning the pastime through financially disruptive tactics.

Antigua and Barbuda’s attorney at the World Trade Organisation, Mark Mendel said that he thought the recent developments are good, particularly since it is stimulating meaningful discourse on the issue.

"What we’re looking for is a change in attitude in the United States and an ultimate acceptance of regulated internet gamblers. It is a direction that the rest of the world has either already moved to or is moving to and I think this latest legislation by Barney Frank, and the testimony up on Capitol Hill, is doing a good job towards educating the American public on this issue and how completely unworkable a prohibition is… It works in our favour," Mendel said.

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THE IMPATIENT POLITICIAN

Passing an online gambling ban is one thing...implementing it is quite another

Online gambling's arch enemy, Senator Jon Kyl of Arizona, appears to have little regard for the practical difficulties surrounding the implementation of his Unlawful Internet Gambling Enforcement Act, judging by reported comments he made this week.

The UIGEA, tacked onto a totally unrelated security bill, was passed in a late night, pre-recess session of Congress in October 2006, with a requirement that federal bureaucrats draft supporting regulations within 270 days.

Despite causing costly withdrawals from the US market by online gambling companies, UIGEA remains unsupported by the essential regulations, which officials are struggling to draft. The financial industry which will be required to do government's job in enforcing the regulations has been highly critical of the impractical and vague proposals offered thus far, and the project has gone significantly over the Congressional deadline.

This week the Las Vegas Review-Journal quoted Kyl as saying that he is losing patience with the Federal Reserve and the Department of Treasury as they continue to wrestle with the complexities of crafting sensible regulations to enforce the UIGEA, which seeks to disrupt financial transactions with online gambling companies.

Kyl said the regulations are a year overdue, according to the 2006 prohibition statute. "The longer it goes the less certainty there is," said the Senator. "I mean, the people who are violating the law need to know that they're not going to be able the get away with it, and I think that the failure to get these regulations promulgated on time has perhaps given some hope, and it's given life even to an idea over in the House of Representatives to put a moratorium on the regulations."

Kyl was referring to a bill introduced April 11 by Congressmen Barney Frank, chairman of the House Financial Services Committee, and Ron Paul, a Texas Republican. The Frank-Paul HR 5767 bill is designed to block the Federal Reserve and Treasury Department from completing regulations to enforce the ban, and has already attrracted support from at least ten other politicians.

In a financial services subcommittee hearing April 2 (see previous InfoPowa reports) Federal Reserve and Treasury Department officials admitted the regulations are proving to be a serious problem, partly because the 2006 legislation does not define unlawful Internet gambling.

Louise Roseman, director of bank operations and payment systems for the Federal Reserve, testified that the prohibition of Internet gambling fiancial transactions cannot be "ironclad."

Kyl is probably also looking over his shoulder at another bill - HR 2046 - proposed by Congressman Frank and currently supported by 48 other Congressman. The Internet Gambling Regulation and Enforcement Act seeks to licence and regulate online gambling in the USA, and has the potential to dismantle the UIGEA further.

Kyl is apparently not worried by these proposals, saying: "I would be concerned if something like that were to be adopted by the House ... I'm not sure that the momentum is there to actually get it done."

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ANTI-UIGEA BILL HAS ALREADY ATTRACTED TEN CO-SPONSORS

Introduced on April 10, HR 5767 seeks to stop federal officials from implementing any supporting regulations

Introduced to the House by Congressmen Barney Frank and Ron Paul only on April 10, a bill seeking to halt the implementation of the notorious Unlawful Internet Gambling Enforcement Act has already attracted 10 co-sponsors, with more thought about to sign up.

HR 5767 targets the Treasury Department and U.S. Federal Reserve, enjoining them from continuing work on the regulations supporting the UIGEA, which have been heavily criticised for a lack of precision, and the impractcalities of enforcement through an already overworked US financial services industry.

Frank and Paul introduced the bill after a hearing conducted by the House Financial Services Subcommittee on Domestic and International Monetary Policy, Trade, and Technology that showed the weaknesses of and problems with the UIGEA (see previous InfoPowa reports).

The following congressmen have signed onto the new bill thus far:

Gary Ackerman (D-N.Y.)
Shelley Berkley (D-Nev.)
William Lacy Clay (D-Mo.)
Bob Filner (D-Calif.)
Luis Gutierrez (D-Ill.)
Michael Honda (D-Calif.)
Peter King (R-N.Y.)
James McGovern (D-Mass.)
James Moran (D-Va.)
Robert Wexler (D-Fla.)

All 10 supporters have also signed up as co-sponsors of Frank's IGREA bill that seeks to legalise and regulate online gambling. H.R. 2046, the Internet Gambling Regulation and Enforcement Act, has 48 cosponsors and is still making its way through committees in order to go to a vote on the House floor.

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CARVE-OUTS DON'T HELP HERE

Kentucky Derby could be impacted by UIGEA complications

U.S. horse racing companies comfortable with their specially exempted online betting status in US legislation have apparently discovered some inconvenient facets of the Unlawful Internet Gambling Enforcement Act which has so effectively reduced competition by offshore firms.

The Boston Herald quotes gaming and banking industry experts as saying that horse racing fans looking to place online bets for the 134th Kentucky Derby this weekend may find their transactions blocked by banks and credit card companies trying to avoid running afoul of unclear federal regulations.

"Unless the government takes the responsibility of telling the banks which merchants they shouldn’t deal with, and when banks take the position that they are not going to process these transactions without guidance, all heck will break loose," said Tony Cabot, an attorney with the Las Vegas firm Lewis and Roca, which represents the Nevada Pari-Mutuel Association.

The Herald notes that advocates for the banking and online gambling industries, legal scholars and several members of Congress are pushing the U.S. Treasury, the Federal Reserve and the Justice Department to clarify whether a regulatory exemption in the Unlawful Internet Gaming Enforcement Act that allows Internet gambling on horse racing could also mean that banks and credit card companies would be penalised for processing the money from those wagers.

Under the law, passed in 2006 as part of the SAFE Port Security Act, the nation’s banks and credit card companies are prohibited from accepting payments for some online bets or wagers. However, the financial institutions are largely left to figure out which gambling transactions are illegal and block payments.

Financial institutions say this unfairly puts them in the position of trying to decide what’s legal with little clear guidance from the federal agencies responsible for implementing the rule.

Until the federal agencies issue better guidance, some financial service companies may refuse to handle any online gambling transactions, said I. Nelson Rose, a law professor at Whittier College in Costa Mesa, California. "The problem is that in some states online gambling is legal, in others it is not and in still other cases the question depends on where the bettor is, where the gaming operator is and what form of gambling is taking place," Rose told the newspaper.

The Herald recaps recent Congressional hearings and requests from federal officials for comment on implementing regulations designed to underpin the UIGEA. Over 200 responses were received and are still being considered by federal drafters. On the hearings front, many witnesses across the spectrum of those involved in the process were sharply critical of the law, which they called vague and costly for financial institutions to implement.

One of the most common complaints is that the rules fail to sufficiently define key terms, leaving financial institutions to figure out how to comply, said Congressman Luis Gutierrez.

"For example, the regulation fails to adequately define what constitutes ‘unlawful Internet gambling’ or ‘restricted transaction,’ yet requires the financial institutions to make a determination on their own about what is lawful or unlawful," Gutierrez said.

Also noted by the Herald are the current IGREA legislative attempts led by Congressman Barney Frank to legalise and licence online gambling, and a more recent move in concert with Congressman Ron Paul to halt federal drafters from further work on the now long over deadline regulations.

House Judiciary Committee Chairman John Conyers and Rep. Chris Cannon took former Attorney General Alberto Gonzales to task in a letter last year for the UIGEA's ambiguity on which states should block online horse gambling transactions. They still await a definitive reply.

In response, Deputy Assistant Attorney General Brian Benczkowski said then (and the Department of Justice has since reiterated that) "...while the UIGEA requires that the regulations be issued ‘in consultation with the attorney general,’ the Department of the Treasury and the Federal Reserve have the primary responsibility for drafting the regulations, and therefore we would defer questions concerning the timing or the scope of the regulations to those parties."

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PPA REMINDS SEN. KYL OF UIGEA IMPERFECTIONS

One of the most egregious flaws in the bill is that it does not define "unlawful Internet gambling" clearly

Las week's report in the Las Vegas Review-Journal (see previous InfoPowa report) that Senator Jon Kyl was growing impatient with the protracted drafting process on regulations to support the Unlawful Internet Gambling Enforcement Act elicited a tart response this week from the Poker Players Association.

The Las Vegas director of the PPA, Ken Illgen minced no words in his letter to the LVRJ editor, saying: "Frankly, the confusion regulators are dealing with as they develop the regulations to enforce the law is a direct result of how this act was written and sneaked into a must-pass port security bill in the dead of night, allowing no time for review and debate."

Illgen goes on to point out that one of the most egregious flaws in the bill is that it does not define "unlawful Internet gambling" clearly - something that the legislators trying to make Internet gambling unlawful should have included.

"This law is clearly unworkable, as regulators, bankers and several members of Nevada's congressional delegation have publicly stated," Illgen concludes. "To truly place checks and balances on Internet gambling, Congress should look to existing legislation that would seek to regulate online gambling in order to protect children and problem gamblers and collect the billions of dollars in lost tax revenue from these transactions.

"Let's not blame regulators for struggling to enact this flawed and ambiguous bill, and [instead] start looking for workable solutions to truly regulate this growing online industry.