For Immediate Release
Contact: Michael Waxman
(202) 872-0010 or (202) 872-4860
Bush Administration Moves Forward on Midnight Rulemaking to Force Banks to Ban Internet Gambling
NFL Lobbyist Turned Political Appointee Accused of Improper Involvement in
Rush to Issue Regulations
(Washington, D.C. - November 10, 2008) The Bush Administration is working to finalize
regulations to enforce a ban on Internet gambling despite concerns raised by leading
financial service companies that the regulations are ambiguous, burdensome and not
likely to stop millions of Americans from gambling online. It is expected that the
regulations, issued to implement the Unlawful Internet Gambling Enforcement Act of
2006 (UIGEA), will be finalized at the last minute before they can be stopped by the
Obama Administration – an orchestrated move being linked to a former National Football
League (NFL) lobbyist now working in the Bush Administration. The NFL has actively
campaigned against clarifying UIGEA and has opposed legislation introduced by Rep.
Barney Frank (D-Mass.) to regulate online gambling in order to protect consumers and
generate billions for critical State and Federal programs.
"At a time when the financial system is in crisis, it is irresponsible for the Bush
Administration to rush through a fundamentally flawed regulation that even
representatives of the Treasury Department and Federal Reserve have stated on record
is unworkable," said Jeffrey Sandman, spokesman for the Safe and Secure Internet
Gambling Initiative. "We are skeptical of the Administration's motivation to get this done
at the very last minute, especially given the apparent involvement of a NFL lobbyist
turned Bush appointee."
Last week, Rep. Steve Cohen (D-Tenn.) asked White House Counsel Fred Fielding to
detail what role Deputy Director of Public Liaison William Wichterman played in the
Treasury Department's decision to send the proposed rule to the Office of Management
and Budget for final review on October 20. In a November 7 letter to Mr. Fielding, Rep.
Cohen said he had been told that Mr. Wichterman "has been a source of considerable
political pressure to speed this regulation through.'' The letter further stated, "The
National Football League has been among the most vocal advocates for the proposed
rule and the underlying law. I am sure you will agree that, at a minimum, the
appearance of a conflict of interest is undeniable."
As recently as March 2008, Mr. Wichterman was a paid lobbyist for the NFL, which has
been a strong opponent of all forms of Internet gambling except for fantasy sports – an
activity that generates more than $1 billion a year in revenues. Mr. Wichterman recently
left the law firm of Covington and Burling, which represents the NFL, to serve as a
political appointee in the few remaining months of the Bush Administration.
Movement on UIGEA comes despite a commitment by the Bush Administration not to
issue final regulations after November 1, 2008 except in "extraordinary circumstances."
A delay in issuance of the final regulations was also expected given the September
passage of the Payment System Protection Act by the House Financial Services
Committee. The legislation would have delayed UIGEA implementation in order to
develop regulations that do not harm the payments system.
"The Bush Administration is setting a horrible precedent of pushing through flawed
regulations at the very last minute to deliberately circumvent the in-coming
administration,” added Sandman. “The special interests, including the NFL, are clearly
the big winners with this last minute maneuver, leaving already struggling banks and
financial companies to implement costly and poorly crafted regulations.”
A fundamental flaw in the proposed regulations to enforce UIGEA is that they leave U.S.
financial service companies to interpret ambiguous State and Federal gambling laws,
which do not clearly differentiate between legal and illegal Internet gambling activities or
transactions, according to a report issued by the Center for Regulatory Effectiveness.
Representatives of the Department of the Treasury and Federal Reserve System
acknowledged the challenges U.S. financial institutions will face in attempting to comply
with UIGEA in testimony before Congress in April. Since most payment systems are not
designed to comply with this law, "it will be very difficult to shut off payment systems for
use of Internet gambling transactions," said Ms. Louise Roseman, Director, Division of
Federal Reserve Bank Operations and Payment Systems, Board of Governors of the
Federal Reserve System. "The implementing statute will not be iron clad at all."
At the April hearing, representatives from the American Bankers Association, Financial
Services Roundtable, Wells Fargo & Co. and Credit Union National Association
unanimously opposed regulations proposed to implement UIGEA. They all questioned
the fundamental approach taken by Congress in enacting legislation that forces financial
institutions to implement unreasonable and costly solutions to achieve compliance.
"The UIGEA and the Proposed Rule do not provide a rational path towards halting
unlawful Internet gambling," said Wayne Abernathy, American Bankers Association's
executive vice president of financial institutions policy and regulatory affairs. "The path
leads to an increased cost and administrative burden to the banks and an erosion in the
performance of the payments system, but it will not result in stopping illegal Internet
gambling transactions. Imposing this enormous unfunded law enforcement mandate on
banks in place of the government's law enforcement agencies is not likely to be a
successful public policy."
Mr. Leigh Williams, president of the technology division of the Financial Services
Roundtable stated in his testimony concerns that enforcement of the proposed rules
"could impose significant compliance burdens on financial institutions by increasing their
role in policing illegal activities, determining whether a transaction is illegal, or by
imposing ambiguous compliance requirements that could be subject to wide variations in
interpretation by regulators and law enforcement agencies. We believe these functions
are more appropriate for law enforcement agencies."
The testimony supports over 200 comments submitted to the Department of the
Treasury and Federal Reserve System on the burden and ambiguity in the proposed
rules to implement UIGEA.
"The reality is that UIGEA is unclear, burdensome and doomed to fail," said Sandman.
"It simply does not make sense to impose more costs and burdens on financial
companies, while the activity they are expected to stop flourishes in an unregulated,
uncontrolled and underground marketplace. Congress should look to regulate Internet
gambling in order to protect consumers and collect billions of dollars that are being lost
to offshore Internet gambling operators."
The Internet Gambling Regulation and Enforcement Act of 2007 (H.R. 2046), introduced
by Rep. Frank, would establish an enforcement framework for licensed gambling
operators to accept bets and wagers from individuals in the U.S. It includes a number of
built-in consumer protections, including safeguards against compulsive and underage
gambling, money laundering, fraud and identity theft. A companion piece of legislation
that would ensure the collection of taxes on regulated Internet gambling activities, the
Internet Gambling Regulation and Tax Enforcement Act of 2008 (H.R. 5523) was
introduced by Congressman Jim McDermott (D-WA). According to a tax revenue
analysis prepared by PricewaterhouseCoopers, taxation of regulated Internet gambling
is expected to generate between $8.7 billion to $42.8 billion in federal revenues over its
first 10 years.
About Safe and Secure Internet Gambling Initiative
The Safe and Secure Internet Gambling Initiative promotes the freedom of individuals to gamble online with the proper safeguards to protect consumers and ensure the integrity of financial transactions. For more information on the Initiative, please visit www.safeandsecureig.org. The Web site provides a means by which individuals can register support for regulated Internet gambling with their elected representatives.
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