Feds Issue UIGEA Regulations

by Lou on October 2, 2007

The Feds finally got around to promulgating regulations that will implement the Unlawful Internet Gaming Enforcement Act (UIGEA), a law that was enacted into law in the dead of night, with no discussion, and only after being tacked on to a “must pass” port security bill.

The Treasury Department and the Federal Reserve issued a joint rule a few days ago. According to a statement they released, the regs are “reasonably designed to prevent payments being made to gambling businesses in connection with unlawful Internet gambling.”

The US regulations make banks responsible for blocking credit and debit card payments for online gambling. It also bars online casinos and other bank customers from receiving Internet gambling proceeds. Barring online casinos is more show than go, however, since online casinos are all located offshore—beyond the law’s reach.

Monday’s regulations did not require US banks to block checks that are written to online casinos. When UIGEA was first passed, we predicted that ensuing regulations would be some sort of coding and blocking scheme that could easily be applied to electronic transactions, but which could not be applied to hand-written checks—at least not without requiring banks to hire oodles of staff to examine millions of checks by hand.

The banking industry was dead set against regulations that would have required them to block checks, and the proposed regulations address this concern. The Feds agreed that it was “not reasonably practical” for the banks to identify and block customers from sending checks and making some other types of transfers.

The Treasury Department and Federal Reserve set a December 12 deadline for public comments on their proposal. Following this public comment period, the Feds will issue final regulations.

The proposed rule is posted at
http://www.treas.gov/press/releases/reports/noticeofproposedrule.pdf

While the US has taken the position that any bets made in the United States—even those made at online casinos—violate the law, the United States’ action was challenged as an unfair trade practice at the World Trade Organization (WTO). The WTO ruled in favor of the complaint by Antigua, and that decision was upheld on appeal. You can read a lot more about that issue right here on this blog.

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