US Regulation The hearing on Tuesday to discuss proposed regulations to the Unlawful Internet Gambling Enforcement Act (UIGEA) were glaring example of the inadequacy of our government at work. I am surprised that the hearing was not on April Fools Day. The entire hearing was an exercise in futility. The regulators kept saying that we are still studying this but STILL over 16 months after its passing, there is no regulation in effect for the UIGEA. It is hard to imagine that amount of time and money that has already been expended on a law where a troubled banking industry becomes the regulators of Internet gambling! What’s next….make the Department of Health and Human Services responsible for terrorism? The usual suspects were all present on Wednesday. Rep Barney Frank (D-MA), Rep Bob Wexler (D-FL), Rep Spencer Bachus (R-AL) and a new face in Committee chairman, Congressman Louis Guiterrez (D-Il). As expected opening statements took shots at the bill from one camp and at gambling from the other camp. Barney Frank looked for the government to find “another way to enforce it [illegal gambling]”. Not surprisingly, Rep Bachus dusted off the letter from the sports leagues (NFL, NHL, MLB, NBA and the NCAA) from nearly a year ago and reminded us that they opposed gambling. Gambling? This was supposed to be a hearing on banking regulations. The guests took the stage and wasted no time in letting the panel know that the bank should not be “the police, judge and jury”, on Internet gambling. Regarding the UIGEA, regulator Louise Roseman stated that “the most prominent concern was the lack of clarity as to what forms of Internet gambling are unlawful and therefore what payments need to be blocked.” Banks and processors commented during the regulatory process that their ability to stop illegal gambling transactions would be compromised by the ambiguity in the underlying substantive federal and state laws. Roseman added that ”the State laws are not well settled and they’re subject to varying interpretation ”, meaning gray areas exist in state law. Both Roseman and regulator Valerie Abend spent the reminder of their time either defending their skepticism over this new law or letting the esteemed panel know that they are not the justice department – they cannot answer if Poker is OK or why horse racing has an exemption. Roseman took the bulk of the questions and stated over and over again in various language that “Congress itself is not sure what they mean [by illegal gambling].” “It is not clear what illegal Internet gambling is”….but again there is this law called the Unlawful Internet Gambling Enforcement Act. The spokesman for the American Banking Association, Wayne Abernathy, stated that the law has “no prospect of success.” He went on to say that this law could compromise the ACH and checking and wire systems “without achieving success in stopping illegal gambling.” Yet, Rep. Bachus hammered away at the regulators asking the same question several different ways, “If the Fed can block transactions for 17 other statues, why can’t it do it in this case?” A frustrated Roseman, attempted to explain to the Representative that in the other cases there is a list and clearly defined set of rules on exactly what is illegal. The law certainly does not give any clarity to exactly what transactions are unlawful. The ambguity was certainly a tool used to get this contested legislation rushed through at the last minute…. I also got the feeling that both Roseman and Abend understand that these operators offshore are not stupid. If Processor “A” suddenly shows up on the prohibited list and banks throughout the US block any transactions from the listed processor, the operators will simply go to Processor “B”. In fact, many outfits use several processors now for similar reasons. If the big “Hit List’ becomes the tool that is used to identify illegal gambling transactions, gambling operators already have processors C, D, E and F ready to go. One thing to note it that Roseman said more than one time that the “US Justice department views all Internet gambling as Illegal”. I guess the DOJ never bet on the Derby at YouBet, TVG or MagnaBet. No one in the entire justice system has played Powerball….Come on!! ALL Internet gambling is illegal? This is simply not the case. And thus, the confusion. What are regulators to do with an ambiguous and unpopular law? When Rep Wexler addressed Roseman he said “ You didn’t pass it”. He went on to emote that the Congress should “undo the UIGEA in it’s entirety”. A shining example of the US government! A law that should never have been passed now is unenforceable. BUT, unless it is repealed, there must be some type of regulations and enforcement. This is where we are - at the corner of Walk/Don’t Walk.... Waiting for the sign to change. Act Now. Affect Change. Write your Representative and urge him or her to follow the lead of Frank, Wexler and Guiterrez. Repeal the UIGEA. You can view the hearing in its entirety here. 2009 OSGA, LLC |