The UIGEA Lives; H.R. 5767 Dies in Committee

A somewhat significant day on Wednesday in the ongoing sordid tale of the Unlawful Internet Gambling Enforcement Act of 2006. Bottom line: the beast that is the UIGEA has survived to torment us further.

We last left off this one back in April when House Rep. Barney Frank (D-MA) and Rep. Ron Paul (R-TX) jointly proposed H.R. 5767, a tersely-worded bill solely designed to prohibit the Federal Reserve and Treasury Dept. from finalizing and implementing the UIGEA regulations.

H.R. 5767 was proposed in the immediate wake of that April 2 hearing before the Subcommittee on Domestic and International Monetary Policy, Trade, and Technology, a subcommittee of the House Financial Services Committee. At that hearing, a couple of representatives from the Federal Reserve testified at length regarding the difficulties faced with actually enforcing the UIGEA. Several others from the American banking system likewise testified as to the impracticality of following the law’s directives. (Full summary of the April 2 hearing here.)

At the present moment, the UIGEA is technically an impotent law, although there does remain the potential for regulations to be finalized, thus introducing all sorts of new problems for online poker players. I say “technically” because the UIGEA has had a lot of influence on how Americans gamble online, despite never being enforced a single time. That April 2 hearing and swift proposal of H.R. 5767 provided hope to those of us wishing to make the UIGEA’s impotency permanent in a legal sense. And it would -- if passed, H.R. 5767 would make it impossible for the UIGEA ever to be enforced, since the feds would no longer be allowed to finalize the regs and pass them onto the banks.

So on Wednesday the House Financial Services Committee had a hearing regarding a few different bills, including H.R. 5767. This is how the legislative process works. A bill gets proposed, perhaps attracts co-sponsors, then gets considered by a House committee. If the committee gets behind it, then the bill gets forwarded along to the entire House, and if enough momentum is gathered it might be brought for a vote. If the House passes the bill, it goes to the Senate, and if they in turn pass it, the president has to sign it, too, and it becomes a law.

The purpose of the hearing (which can be viewed online here), then, was to get the committee to go ahead and vote on these bills, meaning if enough members were in favor of H.R. 5767, it would proceed on to the entire House of Representatives.

The Hearing

Frank began the part of the hearing devoted to H.R. 5767 with a brief overview of the political wrangling that resulted in the UIGEA being written and becoming law. He then referred back to that April 2 hearing and the feds’ testimony regarding the law’s inconsistencies and lack of feasibility. Alluding to the words of Louise Roseman of the Board of Governors of the Federal Reserve System, Frank said that while she “was very respectful, but as she honestly answered the questions it became clear that she thought that she had a job that was undoable.”

Rep. Jim Bachus (R-AL), a senior ranking member of the committee, then took ten minutes to pursue his thesis that “the fastest growing addiction in America is not drugs, it’s gambling.” Bachus referred to a study -- he offered no specific details regarding who conducted it -- that states “problem gambling doubles within ten miles of a gambling faciility,” using that alleged truism to support his argument that online gambling must be outlawed.

Bachus went on to refer to other arguments, including one of a colleague who had quoted a University of Illinois professor who believes “the internet is crack cocaine for gamblers. There are no needle marks. There is no alcohol on the breath. You just click the mouse and lose your house.” He concluded with a reference to another mind-boggling argument suggesting one-third of college students who have gambled on the internet have attempted suicide.

As Bachus has routinely done in all of this hearings, he spoke not in dialogue with others but simply broadcast his own moral arguments regarding online gambling. Indeed, H.R. 5767 has nothing whatsoever to do with the moral question; that law solely addresses the impracticality of having financial transaction providers monitor all clients’ transactions and forbid those with online sites deemed unlawful.

Indeed, I believe that in his heart of hearts Bachus is probably ambivalent over whether the UIGEA regulations ever get finalized and the law actually enforced. He triumphantly cited a University of Pennsylvania study that suggests the UIGEA has effectively reduced both “compulsive and problem gambling,” even though the law hasn’t ever been enforced a single time. “The 2006 law has had its intended effect,” said Bachus. And clearly, he wishes for it to continue to curb online gambling in the U.S., regardless of whether it ever actually gets enforced.

Rep. Peter King (R-NY) then came on to explain his proposed amendment to H.R. 5767, which he described as “not a gambling amendment, but a banking amendment.” As King explained, “we are requiring the banking community not just to enforce the law, but in effect to define what the terms of that law are.” Therefore, King’s amendment “withdraws those regulations and . . . calls for the Treasury and the Federal Reserve in consultation with the Department of Justice to jointly develop regulations to define the term ‘unlawful internet gambling.’”

In practical terms, King’s amendment appears nothing more than a directive to legislators to try again. Sure, says King, let’s pass H.R. 5767 and stop the process of finalizing the UIGEA regulations, but let’s not let it drop there. Though a much more coherent speaker and thinker than Bachus, King is likewise no fan of internet gambling. So he wants the feds to keep at it and define unlawful internet gambling and even to compile a list of forbidden sites, so down the road a UIGEA-like law could be passed and really (legally) enforced.

Frank came back on to clarify for the umpteenth time that this issue here isn’t the moral question, it is the practical one concerning legislators asking banks to do something they cannot do. Frank claimed that H.R. 5767 would not, in fact, do away with UIGEA -- technically true, but a bit disingenuous, I’d suggest.

Rep. Ron Paul (R-TX) then spoke briefly, reiterating his libertarian view that “individuals have a right to spend their money the way they want.” Rep. Mel Watt (D-NC) spoke in support of King’s amendment, saying it would give “the regulators an opportunity to go through a methodical process” and revisit the issue of defining unlawful internet gambling.

Finally, Bachus came back on to suggest that despite Frank’s protestations to the contrary, H.R. 5767 would in fact halt the process that began with the UIGEA’s passage into law in 2006. He pointed out that it isn’t unusual for Congress to pass a law, then have it take “eight or nine years” for that law to ever be enforced. “What we’re doing,” argued Bachus, “is stopping and starting all over again and that’s a bad thing.” Rep. Christopher Shays (R-CT) added his opinion that the bill being proposed by Frank and Paul was, in his view, “an attempt to gut the process.”

The Vote

Those members of the House Financial Services Committee who voted on Rep. King’s amendment to H.R. 5767 were evenly divided, with 32 voting for it and 32 against it. Not enough for the amendment to be added, and so the bill was then voted on in its original state.

That vote was conducted verbally, and this time a large majority voted against it. H.R. 5767 is no more.

As much as I disagree with Bachus and others waging the moral crusade against online gambling, it is easy to see in retrospect that H.R. 5767 had little chance of making it out of committee. The fact is, Frank and Paul’s bill was a much more overt example of the same sort of legislative short cut that got the UIGEA passed in the first place.

Might have worked had it been added to some other must-pass legislation just as Congress was closing shop for the winter. But a bill negating a previously passed law -- no matter how poorly-constructed that law might be -- couldn’t get that far on a Wednesday afternoon in the middle of the summer. That would mean getting legislators to admit in broad daylight they were once wrong. Sort of stuff just don’t happen.

The UIGEA lives, folks. And if those regulations ever do get finalized, we’re all going to be dealing with overblocking and a number of other headaches for a long time, I’m sure of it.