Sixteen members of the U.S. House of Representatives, all Republican, signed a letter to Treasury Secretary Henry Paulson and Federal Reserve Board of Governors Chairman Ben Bernanke, urging them to tighten up the proposed rules for the enforcement of the UIGEA.
They express the same concerns many have, stating that the rules place too much of a burden on the financial companies who would have to enforce them.Additionally, because illegal internet gambling is not clearly defined in the regulations, too wide of a net would have to cast, likely scooping up many legal transactions from legitimate companies.
The letter, reprinted in its entirety below, focuses solely on the rules proposals, not on the arguments for or against online gambling.
Dear Secretary Paulson and Chairman Bernanke:
As Members of Congress who are interested in the accurate and faithful application of our nation's laws, we understand the important role that clear and consistent federal regulations play in fostering economic growth and marketplace competition. At their best, federal regulations provide explicit guidance to a regulated community while also providing important consumer protections.
However, when regulatory guidance is vague, an unintended consequence is often the suppression of legitimate commerce through an abundance of caution exercised by an unsure regulated community. We are writing to ensure that this does not become the case regarding the Notice of Proposed Rulemaking pursuant to the Unlawful Internet Gambling Enforcement Act, issued by your two agencies on October 1,2007.
Notwithstanding the policy disagreements surrounding the underlying issue of internet gaming, we agree that it is always the federal government's responsibility to encourage clear regulatory guidance. It appears to us that in this case, the proposed rule governing this area of law is overly broad and does not provide the regulated industry with sufficiently clear and consistent guidance.
Specifically, we are concerned that in the proposed rulemaking, your agencies could do more to clarify what constitutes an "unlawful Internet gambling" transaction and how regulated communities are expected to comply with the "blocking, preventing, and prohibiting restricted transactions" mandates referenced throughout the rule.
As you know, the statute and the proposed rule require financial institutions and payment systems to take steps to block certain unlawful Internet wagers, and exempt from the statute's effect certain classes of wagers, such as wagers accepted in compliance with the Interstate Horseracing Act, and intrastate wagers accepted by state-licensed entities.
However, the proposed rule does not seem to designate precisely what sorts of transactions must be blocked by financial institutions and payment systems. The preamble to the regulation cites the difficulty of evaluating every federal and state law with respect to every possible form of gambling as the reason not to do this; nevertheless, the proposed rule would instead lay that exact burden on the general counsel of every bank, credit union, credit card network and money-transmitting business in the country.
We believe that the unintended consequence of this lack of clarity will be for many financial institutions to block broadly anything which may in any way resemble gambling, be it legal or illegal. Indeed, it has come to our attention that the providers of online skill games are already having difficulty with payment processing, as banks have already begun to exercise an abundance of caution to avoid potentially violating either the law or the unclear regulation.
Mr. Secretary and Mr. Chairman, we believe that, under both the Administrative Procedures Act and the Paperwork Reduction Act, your agencies could still do more to provide clarity to the regulated community in this instance. We therefore urge that, prior to issuing a final rule, your agencies undertake additional efforts to determine, on a state-by-state basis, precisely what transactions payment systems are required to block.
We thank you for all of your efforts in this matter and for your service to our country. If you have any further questions regarding this issue, please feel free to contact Josh Saltzman, Deputy Chief of Staff for Congressman Pete Sessions, at J0sh.Salt2man@mail.h0use.gov or 202.225.2231.