Enforcement delayed on Internet gambling ban
Credit card-wielding gamblers, regulators have 6 more months
By Martin Merzer | Published: November 29, 2009
With a regulatory deadline hanging over their heads, credit-card issuers and others in the banking industry have been granted a reprieve -- an additional six months to comply with new rules intended to ban online gambling.
The Federal Reserve and the Treasury Department announced Friday that the controversial and somewhat ambiguous new rules, which had been scheduled to take effect on Dec. 1, won't be enforced until June 1.
And maybe not even then.
Rep. Barney Frank, D-Mass., a leading critic of the new rules, said the delay would permit legislators to press ahead with new legislation that would largely overturn the widely criticized Unlawful Internet Gambling Enforcement Act, passed in 2006.
That law, which rode to passage with little discussion when tacked onto another bill, essentially banned U.S.-based firms from conducting or assisting online gambling operations. In practice, credit card accounts are the financial vehicles used most often by gamblers to place their bets, pay their losses and collect their winnings.
The bill generally prohibited transfers of money from U.S. financial institutions to gambling sites, but it required banks and credit card networks to navigate a thicket of confusing and often contradictory definitions and rules. Among other things, it never got around to defining the term "illegal Internet gambling."
'Midnight regulations' criticized
"The Department of the Treasury and the Federal Reserve Board of Governors deserve a great deal of credit for suspending these midnight regulations promulgated by the Bush administration, which would curtail the freedom of Americans to use the internet as they choose and which would pose unrealistic burdens on the entire financial community," Frank said in response to Friday's action.
"This will give us a chance to act in an unhurried manner on my legislation to undo this regulatory excess by the Bush administration and to undo this ill-advised law," he said.
Frank's bill, called the Internet Gambling Regulation, Consumer Protection and Enforcement Act, would establish a federal framework under which Internet gambling operators could obtain licenses to accept bets from residents of the United States.
His bill mandates thorough investigations of potential licensees and it requires technological barriers to deter underage gambling, fraud, money laundering and tax avoidance.
Quite a lot of money is at stake. Even amid all the controversy, Internet gambling remains a $10 billion-$12 billion per year industry in the United States, according to Congressional testimony and various industry experts.
Banks also seek delay
In announcing the delay Friday, the federal agencies said they were acting in response to requests from Frank, as well as from Wells Fargo, the American Bankers Association, the Credit Union National Association and a wide range of groups associated with the gambling industry.
"The agencies acknowledge some of the challenges regulated entities are experiencing with the act's definition of 'unlawful Internet gambling," the Federal Reserve and the Treasury Department said in a joint statement. "Moreover ..., several members of Congress have indicated interest in revising the Act.
"The agencies are thus persuaded that a limited extension of the compliance date for regulated entities is appropriate," the statement said.
The action was cheered by a variety of gambling interests, including the Poker Players Alliance, a group that claims more than 1 million members and has lobbied hard to overturn the Unlawful Internet Gambling Enforcement Act.
"This is a great victory for poker, but an even greater victory for advocates of good and fair public policy," said Alfonse D'Amato, the group's president and a former U.S. senator from New York in a release. "These additional months are critical to provide legislators time to clarify UIGEA and pass legislation to license and regulate poker early next year. It is our hope that another extension would be granted should the [June 1] deadline approach before these pieces of legislation can be passed."
Simply delaying the compliance date serves no interest except that of the Internet gambling enterprises that have long evaded American gambling laws ...
Rep. Spencer Bachus, Sen. Jon Kyl
Proponents of Internet gambling ban
Some Republican lawmakers, however, were less pleased. They sponsored the 2006 law and have consistently defended it.
"Simply delaying the compliance date serves no interest except that of the Internet gambling enterprises that have long evaded American gambling laws and will continue to do so until effective enforcement is in place," Rep. Spencer Bachus, R-Ala., and Sen. Jon Kyl, R-Ariz., said earlier this month in a letter to Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke.
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