MORE POLITICAL COMPLAINTS ON UIGEA

1 August 2008

HR5767 may have failed, but the concerns lingers on...


The recent tied vote failure of Barney Frank's HR5767, which sought to halt the implementation of the UIGEA regulations pending proper definitions and drafting precision, has not stopped other Capitol Hill politicians from voicing their disquiet.

On July 25, four Republican representatives sent an open letter to the chiefs of the Federal Reserve Board and U.S. Treasury, calling for a more deliberative approach to crafting regulations for the implementation of the controversial Act, which seeks to disrupt U.S. financial transactions with online gambling companies, placing the burden of enforcement on the financial services industry.

The lack of precision and practicality in the regulations supporting the UIGEA has already attracted widespread criticism from both politicians and the financial industry itself.

In their letter, the four representatives particularly strongly urge that a formal definition of "unlawful internet gambling" itself be finalised before the regulations can usefully be implemented.

However, Representatives Judy Biggert (R-IL), Jim Gerlach (R-PA), Christopher Shays (R-CT) and Kevin McCarthy (R-CA) are no friends of the online gambling industry, and remain committed to the UIGEA. But they are concerned about the bill's "vague language" and undue regulatory burden on affected industries, especially small businesses.

They suggest that two additional steps are necessary in the drafting process: it needs to be a more formal project headed by an Administrative Law Judge, and there should be a Regulatory Flexibility Analysis on its financial impact on businesses charged with its enforcement.

The full colntent of the open letter is as follows:

Dear Secretary Paulson and Chairman Bernanke,

We are writing to request that you bring clarity to the Federal Reserve Board's (Board) and U.S. Department of the Treasury's (Treasury) proposed regulations to implement the Unlawful Internet Gambling Enforcement Act (UIGEA).

As proposed, these regulations do not provide clear guidance to the public, in particular those that engage in online skill games, or regulated industries regarding what constitutes "unlawful internet gambling." We believe that implementing such vague law and regulations, while holding the public and regulated industries liable for noncompliance, is an abdication of the federal government's responsibility to both the public and unregulated industries. In addition, vague UIGEA law and regulations could be unnecessarily burdensome and costly to the public and particularly small businesses.

Therefore, we urge the Board and Treasury to, before finalizing UIGEA regulations, clarify the specific activity that constitutes "unlawful internet gambling," providing guidance to both the public and the regulated industries that are tasked with blocking financial transactions related to "unlawful internet gambling." It is our understanding that the UIGEA intended to uphold state and federal laws regarding "unlawful internet gambling" that existed prior to UIGEA's date of enactment. Nevertheless, we encourage the Board and Treasury to confirm our understanding in its UIGEA regulations. To accomplish this, we request that you take the following actions.

First, transition the current rulemaking process to a formal rulemaking process involving an Administrative Law Judge (ALJ) or a similar official who can provide legal advice. This official should examine the various federal and state laws and determine precisely what constitutes "unlawful internet gambling" as well as which financial institutions a regulated industry is required to block under UIGEA law and regulations.

Second, we request that undertake Regulatory Flexibility Analysis to clearly evaluate the regulatory burden that would be imposed on businesses of all sizes but especially small businesses.

Simply put, we believe that it is possible that if UIGEA law and regulations are implemented with the vague language we described above, a judge may be eventually required to answer the question of "what is unlawful internet gambling." It makes fiscal sense to resolve this question before saddling the public, regulated industries, small businesses, and courts with uncertain UIGEA law and regulation.

We voted for UIGEA and support it now. As such, we have resisted legislative efforts which may have the effect of delaying interminably the implementation of UIGEA and its regulations. However, we are concerned about the legal and operational viability of a rule that leaves so much to interpretation and, accordingly, urge the Board and Treasury to take a more deliberative path to a workable rule as we have outlined in this letter.

Thank you for your consideration of our request. We look forward to your response.

Sincerely,

Judy Biggert
Jim Gerlach
Christopher Shays
Kevin McCarthy

Online Casino News courtesy of InfoPowa