Bankers Applaud New Attack To Block UIGEA Implementation

Washington DC Congressional newspaper The Hill reports that the "banking industry is cheering a fresh assault on the 2006 federal crackdown on Internet gambling by an unlikely duo: House Financial Services panel Chairman Barney Frank (D-Mass.) and Rep. Ron Paul (R-Texas)", who recently introduced a bill to prevent UIGEA from blocking online poker and online gambling transactions to US residents.

Not that the two are new to opposing the Unlawful Internet Gambling Act (UIGEA), since they have strongly objected to the law from its passage. Last year Frank introduced H.R. 2046 to regulate and legalize online gambling. Called the Internet Gambling Regulation and Enforcement Act (IGREA), it now has 48 congressional signatures, including Rep. Paul, but it has been slow to progress in the House, and many fear it may be losing steam.

Now Frank has teamed up with the libertarian-minded Paul, who crusaded against big government during his recent presidential bid, and introduced legislation to block the UIGEA by forbidding federal officials from writing rules to implement it.

"The legislation introduced April 10, H.R. 5767, will forbid the Secretary of the Treasury and the Board of Governors of the Federal Reserve System from proposing, prescribing, or implementing any regulation that requires the financial services industry to identify and block internet gambling transactions" states a recent press release from the House Financial Services Committee.

REPLACE BILL TO LEGALIZE & REGULATE ONLINE GAMBLING?

Thus the bill attacks implementation of UIGEA versus the legitamcy of the ruling itself, so could supplant the earlier IGREA bill to leaglize and regulate online gambling.

The online gambling industry has yet to absorb the full implication that the new bill may replace efforts behind the earlier online gambling regulation bill.

The pair introduced their bill less than two weeks after federal officials testified to Frank's committee that they were struggling to craft rules barring payments to illegal online gambling sites and banking industry representatives blasted the proposed rules as too onerous.

"I don't know what can be done or will be done legislatively, but we certainly appreciate the interest," said the top lobbyist for the American Bankers Association , Floyd Stoner, of the Frank-Paul legislation.

"While I do disagree with the underlying objective of the act, I believe that even those who agree with it ought to be concerned about the regulations' impact," Frank said in a statement. He argued that the regulations proposed by the Federal Reserve and the Treasury were "impossible to implement without placing a significant burden on the payments system and financial institutions."

OPPOSITION REPLIES QUICKLY

Supporters of banning online gambling quickly replied to the Frank-Paul effort, vowing to beat back the new effort to undo the law, just as they did Frank's bill to legalize online gambling.

"Our office will vigorously oppose any efforts to repeal or water down any parts of the [federal law]," said Ryan Patmintra, a spokesman for Senate Minority Whip Jon Kyl (R-Ariz.), who was a chief sponsor of legislation to ban online gambling in the Senate.

Referring to the Safe Port Act into which UIGEA was slipped at the last moment, Tom McClusky, the vice president for government affairs at the Family Research Council said, "It's another attempt to take apart a bill that was passed overwhelmingly by the House." The Council has been a vocal supporter for the federal crackdown on online gambling. He noted that 48 state attorneys general had pushed for the federal law to enforce their state bans.

Meantime, the National Football League and other professional and amateur sports organizations would "vigorously oppose" the Frank-Paul legislation, said Martin Gold, a lawyer at Covington & Burling and a longtime lobbyist for the NFL.

WHO KNOWS WHAT IS ILLEGAL?

Federal law is murky on what constitutes illegal gambling online. Congress stopped short of defining it clearly in the 2006 law, directing the federal government instead to enforce state laws restricting such activities.

While it didn't clarify what was illegal, UIGEA did legalize forms of online gambling by excluding them from its effect. Besides fantasy sports and lotteries, a key exclusion was online horserace betting, which has been the center of ongoing World Trade Organization controversy initiated by the suit brought against the USA by the dual Caribbean island nation of Antigua-Barbuda, and the subsequent WTO ruling against the USA saying they cannot continue protectionist practices against foreign online gambling operators.

Now, writing rules to implement the law is bedeviling regulators. "The challenge we have is interpreting .. federal laws that Congress itself isn't sure what they mean," Louise Roseman, a Fed official, testified on April 2 before Frank's committee.

The banking industry has flooded the Treasury and the Fed with complaints about their proposed rules, arguing that it is too difficult for banks to sort out payments for legal wagers, such as on horse races, and those that are illegal.

"The banking system is just not set up to sort out whether one payment is a legal payment and one payment is not," said the director of congressional affairs for the Independent Community Bankers of America , Steve Verdier. "We think the [Frank-Paul] bill would give everyone the chance to take a breath."

NEW BILL HAS NO PROBLEM WITH CONSTITUTION

Charles Rothfeld, a lawyer at Mayer Brown who has argued several cases before the U.S. Supreme Court, said that the Frank-Paul legislation is not likely to pose any constitutional problems. "Congress gets to say the way in which its legislation is implemented. If it wants to issue legislation to preclude the promulgation of regulation, it can do that," he argued.

OTHER SUPPORT FOR THE BILL TO STOP UIGEA IMPLEMENTATION

The Hill also reported that in addition to the banking industry, gambling aficionados and firms that stand to gain from regulated online gambling support the Frank-Paul bill.

Michael Waxman, a representative from the Safe and Secure Internet Gambling Initiative, which represents firms poised to gain from regulation of online betting, applauded the bill.

"Our goal is to get regulation of the industry. But we do believe that this legislation that has been introduced is a step in the process to getting us there," he said.

The American Gaming Association (AGA), whose members principally include land-based casinos and related services, recently denied that they are lukewarm to online gambling. In a letter replying to an op-ed piece in the Las Vegas Review Journal, AGA President and Chief Executive Officer, Frank Fahrenkopf stressed that, "In fact, some of our member companies have been vocal about their interest in getting into this sector of the business should it be legalized" (click here for related article).

But the Hill reports that AGA has not yet taken a stance on the new bill. The Hill did note that AGA supports the Internet Gambling Study Act introduced by Reps. Shelley Berkley and Jon Porter of Nevada last spring which authorizes a one-year study of online gambling by a third party.

Read Related Articles: