UPDATE:US Rule Implements Unlawful Internet Gaming Law
The rules prohibit financial firms from processing any payments received connected to gambling Web sites, including credit card, electronic transfers and check transactions.
The Treasury and Fed finalized the rules in the face of considerable opposition from Democratic lawmakers, the banking sector, elements of the gambling industry and even a senior official at the Federal Reserve.
The rules stem from an unrelated ports security law that was passed in the dying days of the last period of Republican control of Congress in 2006.
They had not been implemented in the ensuing two years, but were put on the books Wednesday in the waning days of the Bush Administration.
Prominent Democratic lawmakers - primary among them Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, have been firmly opposed to the law.
Frank has called for the federal government to regulate online gambling rather than to attempt to stamp it out of existence. He introduced legislation to this effect earlier this year.
Just this week, Frank sent a letter to Treasury Secretary Henry Paulson urging him not to implement the regulations until Congress had an opportunity to review the law next year.
Speaking to Dow Jones Newswires, Frank called the move to finalize the rules "a disaster" and said he planned to continue fighting them.
He said he was disappointed the Federal Reserve signed off on the rules, when Fed officials had expressed disquiet about them.
The banking industry has warned that because of the vagueness of the proposed regulations - which doesn't appear to have been addressed in the final rules - they might opt to block all gambling related transactions, rather than just those intended to be covered by the law.
"It is a tremendous amount of effort and resources being spent when that effort would be bettered directed towards regulating the industry," said Jeff Modisett, the former attorney general of Indiana, and now the head of law firm Bryan Cave's Los Angeles office.
Modisett has represented several online-gambling related clients and testified before Congress about the issue.
He said that the move put the U.S. fundamentally out of synch with much of the rest of the world in its attitude toward online gambling.
The regulations don't define what constitutes an illegal gambling transaction, instead relying on existing state law on the matter.
Financial sector lobbyists, and Frank, questioned the appropriateness of asking banks to shoulder the burden of the changes at at time when the industry is reeling from the credit crisis and ailing U.S. housing market.
Opponents said the cost involved in setting up systems to prevent gambling-linked transactions from being allowed to proceed would be substantial, and one that should be deferred at least until the current economic downturn had concluded.
According to the final rules, firms will have until Dec. 1., 2009 to come into compliance.
Advocates of online poker, which had been one of the most rapidly growing segments of internet-based gambling, argued the game should be exempt from the law, saying it was a game of skill rather than chance.
In its final rule making, the Treasury rejected this claim, saying the intention of the law was to cover both games of skill and chance.
There are exemptions in the law including betting on horse racing online, web-based interstate lotteries, and wagering on fantasy sports over the Internet.
-By Corey Boles, Dow Jones Newswires; 202-862-6601; corey.boles@dowjones.com
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(END) Dow Jones Newswires
November 12, 2008 17:01 ET (22:01 GMT)
Publié le 12 novembre 2008 Copyright © 2008 Dowjones
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