Washington, DC - House Financial Services Committee Chairman Barney Frank (D-MA) and senior Financial Services Committee member Ron Paul (R-TX) have introduced legislation to prohibit the federal government from issuing regulations called for in the called for in the Unlawful Internet Gambling Enforcement Act of 2006.  The legislation, 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.

“These regulations are impossible to implement without placing a significant burden on the payments system and financial institutions, and 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,” said Rep. Frank.

"The ban on Internet gambling infringes upon two freedoms that are important to many Americans: the ability to do with their money as they see fit, and the freedom from government interference with the Internet. The regulations and underlying bill also force financial institutions to act as law enforcement officers. This is another pernicious trend that has accelerated in the aftermath of the Patriot Act, the deputization of private businesses to perform intrusive enforcement and surveillance functions that the federal government is unwilling to perform on its own," said Rep. Paul.

Specifically, at issue is the fact that the regulations, like the underlying legislation, fail to define the term “unlawful internet gambling,” leaving it to each financial institution to reconcile conflicting state and federal laws, court decisions and inconsistent Department of Justice interpretation, when determining whether to process a transaction.  Furthermore, some of the information needed to make this determination would likely be unavailable to banks, either because customers or financial institutions in foreign jurisdictions are unwilling or unable to provide it.  At the hearing, the regulators themselves admitted that there are substantial problems in crafting regulations to implement the UIGEA that does not have a substantial adverse effect on the efficiency of the nation’s payment system. 

Chairman Frank and Congressman Paul opposed the UIGEA, and the two have been working on legislation, H.R. 2046 that would license and regulate online gaming.  However, it was clear at the hearing that the regulations are unworkable for the financial services industry, and this bill would, therefore prohibit their implementation. 

On Wednesday, April 2, the DIMP Subcommittee held a hearing “Proposed UIGEA Regulations: Burden Without Benefit?” to examine the regulations issued last year by the Federal Reserve and Treasury on the Unlawful Internet Gambling Enforcement Act, which garnered more than 200 comment letters.

This is a Press release from the House Comittee on Financial  Services. To view the original release, click here.