There was one item Duke mentioned about which I remain a bit uncertain -- this business of banks’ potentially “overblocking” clients’ transactions. A troubling issue, I think. Let me explain what “overblocking” is -- at least as I understand it -- and why I think it might turn into a big ol’ messy fly in the ointment here for us Americans who play online poker.
Early in the show, Duke noted how the new regulations (issued by the Board of Governors of the Federal Reserve System back on October 1st) don’t bother to define what unlawful Internet gambling transactions exactly are, leaving it instead to the states to make such definitions. She’s correct. The authors of the regs state up front they do not presume to “specify which gambling activities or transactions are legal or illegal because the Act itself defers to underlying State and Federal gambling laws in that regard.”
I’ve said before that I think the UIGEA does in fact make a half-hearted attempt to identify what an unlawful Internet gambling transaction is (when it offers to define “bet or wager”), but it is true that the Act also instructs the feds to defer authority in this regard to the district courts, states, and “Indian lands” (in section §5365, “Civil remedies”).
Folks have another week or so to submit comments on the regulations, after which we’re probably looking at 180 days of reevaluation before the regs are finalized. Just to be clear, the regulations are supposed be providing instructions to the banks, credit card companies, and other “payment system providers” for keeping themselves in line with the UIGEA -- and thus avoiding the stiff criminal penalties (e.g., five years in prison) for failing to do so.
The problem, of course, is that these here instructions don’t really instruct much at all. In effect, the lawmakers are essentially leaving it up to the banks to figure out whether their clients’ are trying to cash a check issued from an “unlawful” entity. Or to send funds to such a place. Or whatever.
According to Duke, “the banks have already made it very clear that in this case they are going to do what is called ‘overblocking,’ which means that banks, being conservative institutions, if you don’t define for [them] what an illegal activity is [they]’re just going to assume that any gaming at all is an illegal activity.” She went on to say how MasterCard and Visa have both already begun blocking transactions to and from online bridge sites.
Now I’m as happy as anyone about all the recent optimism regarding the IGREA (Barney Frank’s bill) and the other PPA-endorsed bills. But we all must understand that despite what Barry Greenstein says, there’s very little chance the UIGEA is going to be disappearing anytime prior to the 2008 elections (if then). In other words, if the banks do indeed start “overblocking,” we Americans might still be facing an uncomfortable, headachy stretch here with regard to cashing out and/or funding our online poker accounts.
The regulations speak directly to this issue of banks overstepping their bounds and indiscriminately blocking all suspect-seeming transactions. In section D of the regulations (“Processing of Restricted Transactions Prohibited”), there comes a reference to “the Act’s requirement that the Agencies [i.e., the Board of Governors of the Federal Reserve System and Departmental Offices & the Treasury Dept.] ensure that transactions in connection with any activity excluded from the Act’s definition of unlawful Internet gambling are not blocked or otherwise prevented or prohibited by the regulations (the ‘overblocking’ provision).”
Reading further, the regulations’ authors show they are aware that “Some payment system operators have indicated that, for business reasons, they have decided to avoid processing any gambling transactions, even if lawful, because, among other things, they believe that these transactions are not sufficiently profitable to warrant the higher risk they believe these transactions pose.” In other words -- just as Duke said -- some banks and credit card companies have already made it clear that if they decide it is too risky to allow a questionable-looking transaction to occur, they’ll stop it.
The “Agencies” go on to plead their own impotence here, saying that while they (meaning the feds) don’t think the banks should block legal transactions, they can’t very well be expected to tell ’em how to conduct their business: “the Act does not provide the Agencies with the authority to require designated payment systems or participants in these systems to process any gambling transactions, including those transactions excluded from the Act’s definition of unlawful Internet gambling, if a system or participant decides for business reasons not to process such transactions.” The discussion concludes with the request for further comment on the “Act’s overblocking provision.”
If you think about it, what we’re witnessing here really amounts to a complicated, multi-part bluff. The sort of thing Jamie Gold tries two or three times a week on High Stakes Poker. We’ve got three “players” here -- the feds, the banks, and Americans who want to gamble online. We have the feds beat, and we know it. The problem is the feds are trying to use their position to prod the banks into knocking us out of the hand. And when the banks call, we know we can’t beat ’em. What are you going to do when your bank says it won’t honor that check you’re trying to deposit?
That’s right. Fold. And perhaps sit out a few rounds until the players change.
Now I could be wrong here. I know there was discussion of “overblocking” at the House Judiciary Committee’s hearing, and it could very well be that comments to the regs and/or the finalizing process might change the situation in a way that makes it less simple for banks to block transactions that haven’t been expressly designated to be unlawful.
Can’t say I care too much for how the hand is shaping up at the moment, though.
Labels: *the rumble