The Bush administration issued a final regulation Nov. 12 aimed at banning Internet gambling, drawing criticism from Democrats who said it would burden financial companies.
The rule from the Treasury Department and Federal Reserve requires those companies to establish procedures to prevent payments in connection with unlawful Internet gambling. They would be expected to comply by Dec. 1, 2009.
The chairman of the House Financial Services Committee, Democratic Rep. Barney Frank of Massachusetts, had asked the Treasury Department not to move ahead now, saying it would “burden the financial services industry at a time of economic crisis.”
The rule does not define “unlawful Internet gambling.” That has been an issue since Republicans pushed through the law that the new rule puts in place, by attaching it to a port security bill in 2006.
The law sought to curb online gambling by prohibiting financial institutions from accepting payments from credit cards, checks, or electronic fund transfers to settle online wagers. But the law did not offer a clear definition of Internet gambling, instead referring to existing federal and state laws, which themselves provoke differing interpretations.
Under the Unlawful Internet Gambling Enforcement Act, pari-mutuel wagering on horse racing is covered under the Interstate Horseracing Act, which contains a provision authorizing account wagering.
Banks and other financial institutions complained they were being forced into a law enforcement role when Congress could not even define what conduct it was trying to prevent. Payments are difficult to track, and online gambling companies can disguise themselves with relative ease.
Frank’s committee passed a bill this year seeking to block the rule from taking effect and first defining illegal online gambling. The measure did not pass the House.
United States bettors have been estimated to supply at least half the revenue of the $16-billion Internet gambling industry, which is largely hosted at offshore locations.