Update on House Financial Services Subcommittee Hearing

[The Judge]

Online Gambling Ban Regs Get Ripped Apart at House Hearing
By Bob Hartman
CasinoGamblingWeb.com

Closing the first part of the House Financial Services Subcommittee on Domestic and International Monetary Policy, Trade, and Technology Hearing on the proposed regs for the Unlawful Internet Gambling Enforcement Act (UIGEA), Rep. Luis V. Gutierrez, Head of the Sub-Committee, advised Ms. Louise Roseman from the Federal Reserve Bank, and Ms. Valerie Abend from the Department of Treasury, to tread very carefully in proceeding with instituting the proposed regulations. He remarked how there was more heated discussion, debate, and criticism of this topic than on any other his committee has seen in the year he has resided over the sub-committee, "So be careful," he said.

The main area of concern from the two witnesses was the ambiguity of the UIGEA, which makes it nearly impossible to determine what illegal online gambling actually is as defined by the 2006 law.

Ms. Roseman pointed out that one company who processes illegal Internet gambling transactions may also transact legitimate transfers which should not be blocked, thus making it almost impossible, or at least very difficult, to determine how to block illegal online gambling transactions.

Rep. Barney Frank, Head of the Financial Services Committee, also posed questions to Ms. Roseman that she could not give exact replies to. Ms. Roseman and Ms. Abend both were eager to point out how they are trying hard to comply with the law, but both were stumped on many questions as to how the banks could enforce it.

The one supporter of the proposed regs, Rep. Bachas, supplied a list of 45 State Attorneys General who opposed federal laws that overruled state laws. Rep. Frank pointed out that in his new law, the Internet Gambling Enforcement and Regulation Act, there is a stipulation that allows individual states to opt out of allowing Internet gambling, thus appeasing the Attorneys General concerns.

Also of great concern to at the members at the Hearing was the issue that the law was passed for moral reasons, yet it allowed for gambling via the Internet on horses. Rep. Frank pointed out to the committee, that betting on horses is also gambling, so it too should be considered immoral and thus banned.

For analysis and reports on the second panel portion of the Hearing, stay tuned to Casino Gambling Web. The second panel discussions will begin shortly and end later in the day.

[The Judge]

Feds Say Internet Gambling Law Ambiguous

By ERICA WERNER
Associated Press

WASHINGTON (AP) — Congress' ban on Internet gambling is so vague that implementing it is a struggle, say federal officials charged with the task.

"I think it is very difficult without having more of a bright line about what is intended to be unlawful Internet gambling," Louise Roseman, head of the Federal Reserve's bank operations division, told a House hearing Wednesday.

"The challenge we have is interpreting something, particularly federal laws, that Congress themselves isn't sure what they mean," she said.

Congress passed the ban with little notice in 2006 when Senate Republicans, pushed by then-Majority Leader Bill Frist, attached it to an unrelated port security bill in a rush of year-end legislation.

Internet gambling already was considered mostly illegal in the U.S., but the games are played by many U.S. residents on sites hosted overseas in a business worth more than $15.5 billion a year. U.S. bettors have been estimated to provide at least half that revenue.

The congressional ban sought to explicitly outlaw Internet gambling but didn't offer a clear definition everyone could agree on. It put the burden on financial institutions by prohibiting gamblers from using credit cards, checks and electronic fund transfers to settle their online wagers.

That's led to complaints from the financial services industry about the difficulty of determining where payments are going, especially because online betting businesses can disguise themselves with relative ease.

It "makes financial institutions the police, prosecutors, and judges in place of real law enforcement officers," Wayne Abernathy of the American Bankers Association told a House Financial Services subcommittee Wednesday.

Regulations proposed by the U.S. Treasury and the Federal Reserve last fall would apply to the gambling business' bank — generally not to the gambler's bank — and require it to use due diligence to ascertain the nature of its customer's business and ensure it is not processing illegal Internet gambling payments. The regulation doesn't attempt a definition of illegal online gambling, since Congress didn't give one.

The regulations have drawn numerous comments from agitated bankers, poker players, and others. Officials from Treasury and the Fed both testified Wednesday to challenges in finalizing the regulations.

Poker players contend they're not covered. Hose-racing was exempted by Congress, yet without settling definitively whether online wagering on races breaks the law.

"A rather bizarre piece of legislation," said House Financial Services Committee Chairman Barney Frank, D-Mass., who's introduced a bill to overturn it.

The law has caused international disputes, including an investigation launched earlier this month by the European Union after European betting companies complained that Washington's actions against them were infringing world trade rules. In the United Kingdom and some other countries, Internet gambling is largely legal.

Nevada's casino industry is neutral on the regulations, supporting a bill written by Rep. Shelley Berkley, D-Nev., that would require a study of online gambling.

[The Judge]

Regulators strugging with Internet gambling rules
Wed Apr 2, 2008
Reuters

WASHINGTON, April 2 (Reuters) - U.S. Federal Reserve and Treasury officials said on Wednesday they were struggling to craft rules to ban bank and credit card payments to illegal Internet gambling sites because federal law is unclear about what type of gambling is illegal online.
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"That is something we're really struggling with," Louise Roseman, the Fed's director of reserve bank operations and payment systems, told a House Financial Services subcommittee.

"The challenge we have is interpreting ... federal laws that Congress itself isn't sure what they mean," Roseman said.

Congress passed a bill in 2006, when Republicans were still in control of the Senate and the House of Representatives, that prohibits companies from accepting payments in connection with "unlawful Internet gambling."

It also instructed the Federal Reserve and the Treasury Department, in consultation with the Justice Department, to come up with rules to enforce the act.

But rather than define what types of gambling are illegal online, the Unlawful Internet Gambling Enforcement Act of 2006 relied on existing Federal and state laws to answer that question. It also still allowed any online horserace betting permissible under the Interstate Horseracing Act of 1978.

Now, both gambling and financial industry companies want to be told specifically which transactions should be blocked.

"Clarity on this point would permit them to design policies and procedures that they could be assured would meet the rule's requirements," Roseman said. "Still others, including some gambling businesses and many consumers, asked that the rule clarify that certain types of gambling, such as pari-mutuel betting or poker, are lawful."

The payment system that companies rely on to do business "isn't frankly well designed" to identify an illegal Internet gambling transaction from a legal one, which is another challenge to crafting a rule, Roseman said.

Valerie Abend, deputy assistant secretary of Treasury, said regulators were striving to craft a rule that comes as close as possible to what lawmakers intended.

But the question of which forms of Internet gambling are illegal is an issue regulators "are struggling with and trying to figure out what, if anything, we can do," Abend said.

The 2006 law has incurred the wrath of the European Union, which argues that it discriminates against European gambling operators. U.S. Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, has proposed legislation to repeal the ban.

Roseman told the subcommittee that Fed and Treasury staffs were pressing ahead with a final rule that provides "reasonably practical examples" of actions by banks and payment companies to comply with the existing law.

"Our objective is to craft a rule to implement the act as effectively as possible in a manner that does not have a substantial adverse effect on the efficiency of the nation's payment system," Roseman said.

After the hearing, Roseman said regulators hoped to issue a final rule before the end of 2008 but did not have a precise target date for finishing their work.

[THE Sports PROFIT]

Thanks judge, good news of sorts. hopefully the momentum can continue.