Tie vote curtails online gambling amendment

In a tie vote June 25, 2008, the U.S. House of Representatives' Committee on Financial Services defeated an amendment that proponents said would have provided clarity and guidelines for implementation of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA).

Rep. Peter King, R-N.Y., introduced the amendment to the Payments System Protection Act (HR 5767), which would have required the U.S. Department of the Treasury and the Federal Reserve to develop regulations for UIGEA's implementation so as not to overburden financial institutions (FIs) in the payments industry.

The UIGEA, passed into law as part of the Security and Accountability For Every Port Act of 2006 (SAFE Port Act), was designed to cut off the flow of funds from U.S. residents to online gambling Web sites by prohibiting FIs from processing online gambling funds transfers.

But detractors think the UIGEA, as written, is unworkable. It would impose the burden "of policing illegal Internet gambling activity on FIs," said Michael Waxman, Spokesperson for the Safe and Secure Internet Gambling Initiative. "Yet, at the same time, none of these companies have been told what is actually illegal," he added.

According to Waxman, the King amendment to HR 5767 would give FIs "direction" by making explicit what their responsibilities are in regard to Internet gambling.

"And direction would be defining what is unlawful Internet gambling activity," Waxman said.

Players weigh in

Several financial services organizations, including the U.S. Chamber of Commerce, Credit Union National Association and the American Bankers Association, supported HR 5767 and the King amendment in letters to Rep. Barney Frank, D-Mass., Chairman of the Financial Services committee.

A November 2007 advisory, published by Atlanta-based law firm Alston & Bird LLP, stated that the UIGEA would add more regulation to the payments industry without curtailing the ability of U.S. residents to gamble online. (For more information, see "It's thumbs down for proposed illegal Internet gambling regs," The Green Sheet, Nov. 12, 2007, issue 07:11:01).

In a statement following the 32-32 vote, Rep. Spencer Bachus, R-Ala., an opponent of the amendment, said, "After this long campaign by offshore gambling interests to block or repeal the law, what Congress needs to do now is urge the Treasury Department and Federal Reserve to swiftly finalize their proposed rules to implement UIGEA. The regulations are long overdue, and our young people need this protection now."

Same goal

Waxman agrees that online gambling needs to be regulated "because right now, nobody's protected. … We've got millions of people that are gambling online in the U.S., and it's in a totally underground, uncontrolled marketplace."

To effectively regulate online gambling, Safe and Secure supports the Internet Gambling Regulation and Enforcement Act of 2007 (HR 2046) introduced by Frank, which the initiative believes creates a regulatory framework for the licensing of operators that provide Internet gambling services.

For the collection of taxes on regulated Internet gambling, Rep. James McDermott, D-Wash., has sponsored the Internet Gambling Regulation and Tax Enforcement Act of 2008 (HR 5523), a companion bill to HR 2046.

Safe and Secure quotes a tax revenue analysis prepared by PricewaterhouseCoopers that predicts $8.7 billion to $42.8 billion in federal taxes would be generated in the first 10 years by regulating the online gambling industry.

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