Op-Ed/Editorials: Gambling and the Law®: An Attempt To Gut The UIGEA


On April 10, 2008, a Congressional odd couple introduced a bill that would eviscerate the Unlawful Internet Gambling Enforcement Act (“UIGEA”).

Democrat Barney Frank, the first openly gay member of Congress, from Massachusetts, the most liberal and Democratic state, was joined by Ron Paul, from Texas, candidate for the Republican nomination for President.  The two are actually not that far apart.  They are both libertarians, who believe government should not be messing with individuals’ private affairs.

Their bill, H.R. 5767, is short but to the point: 
“The Secretary of the Treasury and the Board of Governors of the Federal Reserve System, whether acting jointly or separately, may not propose, prescribe, or implement any regulation” under the UIGEA, “including the proposed regulations published in the Federal Register on October 4, 2007.”

This would effectively eliminate the legal, if not the practical, impact of the UIGEA.  The UIGEA does only two things:

1)   It creates a new crime, that of being a gambling business that accepts money for illegal transactions, and
2)   It tells Treasury and the Federal Reserve (“the Agencies”) to make regulations requiring financial institutions to identify and block transmissions of money for illegal online gambling.

The first, the new crime, is almost meaningless, since it only applies to Internet operators who are already breaking other federal or state laws.  Now, the Frank-Paul bill would eliminate the second, because the Agencies would be barred from issuing any regulations.

Note the specific reference to the October 4, 2007 proposed regs.  The Agencies looked at the UIGEA and decided that it was too complicated for the federal government to determine whether transactions were unlawful.  So, it put the burden on the banks and credit card companies.

On April 2, 2008, Frank chaired a hearing titled: “Proposed UIGEA Regulations: Burden Without Benefit?”  Witness after witness joined the 217 written comments that had been submitted earlier in blasting the proposed regs as unworkable.

Many testified along the lines of, “How do you expect a bank employee to know when a transmission of funds is for illegal gambling, when even the federal government says it does not have the resources to know when an online bet is illegal?”

Banks don’t care about protecting their customers’ right to gambling.  But they are very concerned that they could be hit by big fines if they let through a transmission that the government later says they should have blocked.

And banks are mostly concerned with the cost.  They called it “an unfunded mandate,” meaning the federal government was requiring them to do something “that will cost the banks billions of dollars” without being reimbursed.

Do Frank and Paul think their bill will become law?  Possibly.  But the purpose may have been to tell the Agencies that a lot of people are unhappy with the proposed regs.  The goal may be to slow things down until after the election.  With a new President and Congress, the UIGEA could be undone, or at least amended.

Could the Frank-Paul bill pass?  Frank has the powerful position of Chair of the House Financial Services Committee and Paul is a senior member.  Online gamblers have very little influence.  But banks are powerful political players.  And no one, aside from the religious far right, is in favor of the UIGEA.

If it does pass Congress, Pres. George W. Bush is unlikely to veto it.  Why would he want to get into a political fight with banks over a complicated issue that he does not care about?

#2008-7 © Copyright 2008, all rights reserved worldwide.  Gambling and the Law® is a registered trademark of Professor I Nelson Rose, www.GAMBLINGANDTHELAW.com
Professor I Nelson Rose is recognized as one of the world’s leading experts on gambling law.  His latest books, INTERNET GAMING LAW and GAMING LAW: CASES AND MATERIALS, are available through his website,  www.GAMBLINGANDTHELAW.com.

One thought on “Op-Ed/Editorials: Gambling and the Law®: An Attempt To Gut The UIGEA

  1. Kathy R Reply

    I think Franks and Paul are right, although maybe for slightly different reasons than whether government has the right to intervene. I just don’t think it helps, and actually believe it just creates an even more dangerous and costly side business, the criminally minded always find a way to profit from another’s misery or addiction. Although it seems that great strides have been made in understanding the basis for addiction, maybe even the biological advantages (with addiction being the unintended side of effect of having plenty! or insufficient outlets for competition, aggression, hunting – I don’t know, whatever), most people seem uninformed and under the impression addictions are “moral” issues. The first thing I tell my clients when they talk about “mind over matter, will power or I will quit when I am ready” is that those statements are garbage.
    We don’t openly talk, discuss or teach children about addictions early on, either in our homes or our schools. We treat the issue of addiction as we do sex, which has achieved us almost 7 billion people, world domination (destruction), poverty, torture, injustice…..I think Ned Rollo (wrote Life w/o a Crutch) talked about natural needs and unnatural solutions. Fortunately, of all my bad habits, that one did not get its hooks into me. But maybe we should be researching and teaching early on regarding the “needs” and how to feed them before they find an addiction trough. Work on prevention, redirection and harm reduction.

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