A Bill Moves Ahead That Would Limit Scope of Online-Gambling Law

Congress is preoccupied with bailing out Wall Street and mortgage-loan holders, but a bill quietly passed the House Financial Services Committee last week that payment-industry interests hope will become law before the 110th Congress adjourns. That's H.R. 6870, “The Payments System Protection Act of 2008,” a measure that would clarify the controversial Unlawful Internet Gambling Enforcement Act of 2006. The bill, introduced by committee chairman Barney Frank, D-Mass., received a 30-19 endorsement Sept. 16 after panel members removed online sports gambling from its scope. But its fate is highly uncertain now that the Bush Administration's planned $700 billion bailout has lumbered onto center stage. H.R. 6870 still needs floor action in the House, and it doesn't yet have a Senate companion. “It's nowhere near a done deal yet,” acknowledges Wayne T. Brough, chief economist of FreedomWorks, a libertarian-leaning advocacy group chaired by former House majority leader Dick Armey whose mission includes monitoring what it sees as threats to an open and free Internet. FreedomWorks isn't alone in opposing the Unlawful Internet Gambling Enforcement Act. Banking and payment-industry groups criticize the law as unworkable, transferring the burden of identifying suspect online gambling activity from law enforcement onto them (Digital Transactions News, March 24). Online gambling already was illegal before the law passed two years ago. Gamblers, however, easily flouted the ban. The 2006 law aimed to cut off their lifeblood by prohibiting the processing of payment transactions for electronic bets. “It's almost as though the payment centers are being deputized to look at their transactions and flag those transactions,” says Brough. “They would be using their judgment.” Frank himself is a strong opponent of the Unlawful Internet Gambling Enforcement Act. In April, he and 20 co-sponsors introduced a bill to effectively kill the law by prohibiting the Secretary of the Treasury and the Federal Reserve from writing regulations to implement it. But that bill hasn't gone anywhere. “There is some concern that Treasury is moving with the current law” and developing rules, Brough says. H.R. 6870 attempts to influence that rule-making process by letting it proceed only with conditions. A hearing under the auspices of an administrative law judge or similar official would be required to define the term “unlawful Internet gambling,” according to the text of the bill. And “a full economic impact study of the proposed regulations” also would be required. “What it does do is put the onus on the [regulators],” says Brough. “It may slow down the process a bit.” Some of H.R. 6870's other supporters include the Financial Services Roundtable, the Credit Union National Association, and the U.S. Chamber of Commerce.