Last week, the U.S. Treasury and Federal Reserve announced that mandatory compliance with the regulations of the Unlawful Internet Gambling Enforcement Act (UIGEA) had been delayed until June 1st, 2010. Let’s take a look at the agencies’ reasoning.
The seven-page document issued by the Treasury and Federal Reserve on Wednesday begins with an overview of the UIGEA and states that the two government agencies consulted with the U.S. Department of Justice prior to delaying the compliance date. The final regulations of the UIGEA were published on January 19th as so-called “midnight rules” by the outgoing Bush administration. One day later, sitting President Barack Obama assumed office.
The document gives a brief timeline of events since then, noting that on September 18th, the Poker Players Alliance (PPA), National Thoroughbred Racing Association, and American Greyhound Track Owners Association submitted a joint letter calling for compliance with the UIGEA regulations to be delayed by one year to December 1st, 2010. The two agencies explained, “Petitioners assert that many small regulated entities do not have the resources necessary to develop and implement appropriate policies and procedures by the December 1, 2009 compliance date and cite the possibility of confusion regarding the term unlawful internet gambling.” The latter three-word phrase was not defined in the UIGEA, which instead deferred to a muddled slate of state, federal, and tribal laws.
In October and November, members of Congress led by Barney Frank (D-MA) also asked for a delay, as did several organizations, including the American Bankers Association, Wells Fargo, the Credit Union National Association, and the National Association of Federal Credit Unions. On November 9th, other lawmakers including Senate Majority Leader Harry Reid (D-NV), whose home state serves as the epicenter for brick-and-mortar gambling in the United States, authored a letter purportedly expressing “an intent to consider legislation that would allow problematic aspects of the Act to be addressed.”
Meanwhile, Senator Jon Kyl (R-AZ) and Congressman Spencer Bachus (R-AL) weighed in, calling the reasons for a delay “speculative” in a November 3rd plea to the Treasury and Federal Reserve. Many of the groups clamoring for an extension feared overblocking, which could result in the denial of legal online wagering. In New Hampshire and North Dakota, credit card companies like Visa and MasterCard disallowed online lottery transactions, which received a carve out from the UIGEA. In Kentucky, horse racing outfits feared that internet bets on the sport would come to a screeching halt. Several weeks ago, Churchill Downs Incorporated purchased YouBet, further complicating the matter.
In the end, the two government entities asserted, “Neither petitioners nor commenters supporting the petition have provided the Agencies with sufficient data or documentation to justify a twelve-month extension of the compliance date. The Agencies believe that a six-month extension is sufficient for regulated entities to address issues related to the definition of unlawful internet gambling.” The agencies added that documentation provided by merchants to banks and other financial institutions should be sufficient to comply with the UIGEA.
The Treasury and Federal Reserve ultimately settled on using the Administrative Procedure Act to serve the delay on the grounds that the existing UIGEA rules are “impracticable, unnecessary, or contrary to the public interest.” Other pieces of law addressed were Executive Order 12866, the Regulatory Flexibility Act, and the Unfunded Mandates Reform Act. The document added, “The Agencies also believe that regulated entities need to be informed as soon as possible of the extension and its length in order to plan and adjust their implementation process accordingly.”
On Thursday, the House Financial Services Committee will discuss HR 2266 and HR 2267. No markup will occur during the informational hearing, which will be held in Room 2128 of the Rayburn House Office Building at 10:00am ET. HR 2267 establishes a comprehensive framework for regulating the internet gambling industry in the United States and, if passed, may mark the beginning of explicitly legal online poker in the North American country.
