U.S. House Financial Services Committee Chairman Barney Frank, D-Mass., wrote to U.S. Treasury Secretary Henry Paulson and Federal Reserve Board of Governors Chairman Ben Bernanke on Nov. 10, 2008, asking them to postpone issuing regulations pursuant to the Unlawful Internet Gambling Enforcement Act of 2006.
"I am deeply disappointed to hear that your agency is proceeding with what I consider to be unseemly haste in issuing regulations implementing the [UIGEA]," Frank said. "This midnight rulemaking will tie the hands of the new administration, burden the financial services industry at a time of economic crisis and contradict the stated intent of the Financial Services Committee."
The UIGEA was passed into law in 2006 as part of the Security and Accountability For Every Port Act of 2006 (SAFE Port Act) and was designed to cut off the flow of funds from U.S. residents to online gambling Web sites by prohibiting financial institutions from processing online gambling funds transfers.
According to Frank, the UIGEA fails to define what "unlawful Internet gambling" entails, thereby leaving it up to financial institutions to reconcile conflicting state and federal laws, court decisions and inconsistent U.S. Department of Justice interpretations when determining whether to process a particular transaction.
If the law is implemented in haste, financial institutions will have to identify transactions they consider unlawful and then report them to federal agencies, becoming, in short, the Internet gambling police.
"This is an example of the special interest groups and friends of Bush getting their way and deciding what is going to be done at the very last minute here," said Michael Waxman, spokesman for the Safe and Secure Internet Gambling Initiative.
"The Bush administration has decided that they are going to ignore the concerns and cries for help from the financial services sector, leaving them on their own to decide how they are going to handle this situation."
Basically the Fed is punting the responsibility to [financial institutions], and it is likely that court cases and class-action complaints are going to ultimately determine what is an unlawful activity," he said.
However, in June 2008, the U.S. House of Representatives' Committee on Financial Services defeated an amendment that proponents said would have provided clarity for UIGEA's implementation. In an attempt to remedy the defeat, Frank and Rep. Peter King, D-N.Y., introduced HR 6870, the Payments System Protection Act, in September 2008.
If this amendment is passed, it would create a formal process to clarify what types of online gambling are illegal. It would also require the appointment of a special administrative law judge to define specific unlawful gambling activities and conduct an economic impact study on the costs for compliance.
"From our perspective, we think that focusing on implementing the UIGEA is a waste of time," Waxman said. "People will always find a way to gamble online, but there are much better solutions to regulate that activity.
"And we do feel that the Payment System Protection Act does provide some direction to the financial services sector and gives them a better chance to actually implement this law."
The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.
Prev Next
