Lawmaker Challenges Internet Gambling Law
4/12/08 - Financial Times
By Stephanie Kirchgaessner
Barney Frank, the powerful Democratic congressman, is pressing the Federal Reserve
and the US Treasury to drop controversial regulations that would force the banking
industry to identify and block internet gambling transactions.
The move represents the second time Mr Frank has challenged the enactment of the
Unlawful Internet Gambling Act of 2006, a law that wiped billions of dollars in value from
non-US gambling websites by barring credit card companies from accepting gambling
bets by US citizens.
Mr Frank, who chairs the House financial services committee, introduced a bill on Friday
that would forbid the Treasury and the Federal Reserve from finalising regulations that
would enact the law.
The proposal was unveiled just days after representatives from the banking industry
warned in a hearing on Capitol Hill that the regulations would be impossible to comply
with unless the Bush administration clarified its conflicting views on online betting.
The Financial Services Roundtable, among others, have expressed “deep concern” that
implementation of the rules could impose “significant” and costly compliance burdens on
banks by forcing them to know the purpose and legality of payments in an industry
where federal and state statutes often clash. For example, some state regulators have
blessed domestic horse betting websites even though federal regulators have deemed
them illegal.
“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 Mr Frank.
It is unclear whether Mr Frank will win enough support to pass the legislation. But one
industry lobbyist said the proposal would send a strong signal to federal regulators that
the proposed regulations ought to be reworked.
Louise Roseman, director of the division of reserve bank operations at the Fed,
acknowledged the complexity of the issue in recent testimony before Mr Frank’s
committee.
Ms Roseman pointed out that it could be “particularly difficult” to craft “workable
procedures” that bar people from making payments to foreign internet gambling sites,
because gambling is lawful in many countries where US banks have corresponding
relationships.
Mr Frank has separately proposed a law that would legalise, regulate and tax gambling websites, but the proposal has failed to gain significant traction on Capitol Hill.
