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.

It’s Time to Fold: Frank & Co. Tell Feds to Cease “Sisyphean Task” of Finalizing UIGEA Regulations

Following the April 2 hearing of a subcommittee of the House Financial Services Committee, Rep. Barney Frank (D-MA) and Rep. Ron Paul (R-TX) jointly introduced a new bill, H.R. 5767, designed to prohibit the Federal Reserve and Treasury Dept. from finalizing and implementing the UIGEA regulations. At the hearing, representatives of the Board of Governors of the Federal Reserve System and the Treasury Department (the authors of the regulations) as well as the American banking systems overwhelmingly demonstrated how unworkable the regulations were in their present state, and together suggested strongly they could never be made to work, practically speaking.

The newly-proposed bill is still at the very beginning of the legislative process, having only been introduced and, at the moment, only having Frank and Paul as co-sponsors. (It would likely require many more co-sponsors before being scheduled for debate and a subsequent vote.) However, Frank, Paul, and two other House members have decided to go ahead and recommend the regulators stop their work of revising the regulations now.

Along with Luis Gutierrez (D-IL), chairman of the subcommittee that held the April 2 hearing, and Peter King (R-NY), Frank and Paul have written letters to the Secretary of the Treasury Department and the Chairman of the Board of Governors of the Federal Reserve System asking both to consider abandoning the business of finalizing the UIGEA regs in favor of other pressing matters. The press release and the letters can be found here. Both letters recognize how the respective groups “have been struggling to issue these regulations,” and to each the foursome suggest the following:

“[A]s the [April 2] hearing made clear, the underlying statute makes your job extremely difficult, if not impossible. Given the many other priorities that are pending at your agencies, including the mortgage crisis, HOEPA [the Home Ownership and Equity Protection Act], and UDAP [Unfair Deceptive Acts and Practices] rulewriting and many other issues, we believe it would be imprudent for you to devote additional agency resources to this Sisyphean task, especially as we intend to vigorously pursue legislation to prevent the implementation of these regulations.”

In other words, Frank, et al. are telling the feds to stop betting their thin draw and fold now. There’s very little hope you’re going to win, they say, so avoid increasing your already substantial loss of effort and expense and let the UIGEA go gentle into that good night.

Nobody likes to have their work characterized as “Sisyphean.” Except for masochists. And perhaps those who genuinely believe their work is not futile, but will actually bear fruit. The fact is, both of the federal representatives who spoke at the April 2 hearing did anything but suggest they believed their assigned task to be achievable. It would be difficult to imagine the feds not understanding the logic of the argument presented in these letters.

Doesn’t mean the work to finalize the regs won’t continue. But it does look like the big UIGEA ball might’ve rolled back down to the bottom of the Hill for now.

Anti-UIGEA Bills & the Presidential Veto

Been catching up on podcasts here lately. Speaking of, the second episode of the Hard-Boiled Poker Radio Show is in the works. Should see the light of day before too long. By the way, you can now subscribe via iTunes.

A couple of days ago I listened to the Pocket Fives podcast from last week (the April 10 episode) featuring a brief interview with Rep. Barney Frank (D-MA). Wanted to share a little of what he said there as it relates to H.R. 5767, the new bill he and Rep. Ron Paul (R-TX) proposed late last week “to prohibit the Secretary of the Treasury and the Board of Governors of the Federal Reserve System from proposing, prescribing, or implementing any regulation” pertaining to the Unlawful Internet Gambling Enforcement Act of 2006.

When asked about the April 2nd hearing before the House Judiciary Committee, Frank said he thought “hearing was very helpful” insofar as it illustrated quite comprehensively how the various entities comprising the American payments system do not see the UIGEA as workable. Thus, no matter one’s views on gambling per se, the fact that the banks, credit unions, and other financial transaction providers don’t see the UIGEA as practically enforceable itself constitutes “a good argument for getting rid of that part of the bill.”

Frank was then asked about the current status of his bill, the Internet Gambling Regulation and Enforcement Act (H.R. 2046), which he introduced just about one year ago. The interview was clearly conducted prior to Frank and Paul introducing H.R. 5767, and thus no references were made to the new legislation. I do think, however, Frank had this new UIGEA-blocking bill in mind when answering David Huber’s questions.

In response to a question about whether or not our being in an election year might hurt the chances of his IGREA from moving forward this year, Frank answered that “it does hurt our chances . . . not so much because of the politics, but particularly because of the time factor.” Since it is a presidential election year, Frank explained, Congress will be taking a couple of weeks off toward the end of the summer for the party conventions, and with the campaigning that will surely follow, he doesn’t believe they’ll even be in session after October 1.

“On the other hand, while I wasn’t too optimistic about some of the votes [for the IGREA], that hearing was very helpful. The hearing was so critical of this approach that was taken and so many members joined in the criticism, that I now think something might be possible,” Frank continued.

He then addressed the question I had posed last weekend about whether or not an anti-UIGEA bill would make it beyond the president’s desk. As Schoolhouse Rock taught us, any bill that makes through the House and Senate must also be signed by the president before it becomes a law.

“I doubt that we’ll get it all the way through and I think President Bush frankly has promised the right-wing . . . religious coalition that is so important to him that he would veto any change. But I think we can move. We can make some progress here so that next year we’ll be closer to being able to do it fairly quickly.”

Like I say, Frank is ostensibly referring to his IGREA here, but I think his words might also apply to the new H.R. 5767. The new bill may well have a chance, but only if it is not passed through the House and Senate before January 20, 2009.

And even then, the fate of H.R. 5767 will depend a lot who is sitting in that chair in the Oval Office.

Bill to Block Finalization of UIGEA Regs Proposed

Then again, the day some people might want to call one of the worst for online poker players may well turn out to have been one of yr better days, all things considered. Check this out . . . .

Yesterday we also learned that Rep. Barney Frank (D-MA) and Rep. Ron Paul (R-TX) together have introduced new legislation specifically designed to block the federal government from finalizing regulations for the Unlawful Internet Gambling Enforcement Act of 2006. The new bill, H.R. 5767, has but one, specific purpose, namely, to stop the Secretary of the Treasury and the Board of Governors of the Federal Reserve System from forcing banks to implement the UIGEA.

As yesterday’s press release from the House Financial Services Committee (which Frank chairs) puts it, the proposed bill forbids the feds “from proposing, prescribing, or implementing any regulation that requires the financial services industry to identify and block internet gambling transactions.” Says Frank, “These regulations are impossible to implement without placing a significant burden on the payments system and financial institutions, and while I do disagree with the underlying objective of the Act, I believe that even those who agree with it ought to be concerned about the regulations’ impact.”

That last point was demonstrated persuasively in last week’s House hearing, “Proposed UIGEA Regulations: Burden without Benefit?” That hearing ultimately provided an overwhelming, hard-to-refute argument against finalizing the UIGEA regs, and it is clear Frank and Paul’s bill has appeared as a response to the hearing.

The actual bill is wonderfully succinct. It’s no Gettysburg Address, but Frank and Paul get to the heart of the matter right away. I quote it in full:

“A BILL

To prohibit the Secretary of the Treasury and the Board of Governors of the Federal Reserve System from proposing, prescribing, or implementing any regulation under subchapter IV of chapter 53 of title 31, United States Code, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. PROHIBITION.
The Secretary of the Treasury and the Board of Governors of the Federal Reserve System, whether acting jointly or separately, may not propose, prescribe, or implement any regulation under subchapter IV of chapter 53 of title 31, United States Code, or otherwise give effect to such subchapter or any such regulation, including the proposed regulations published in the Federal Register on 6 October 4, 2007.”

And that is that. If H.R. 5767 were to pass through the House and Senate -- a possibility that seems much more real to me at this moment than does the idea of Frank’s IGREA or other bills working their way up the Congressional ladder -- it will be very interesting to see what happens once it lands on the President’s desk. Could a Bush or McCain veto the sucker? If not, the way would certainly be paved for the IGREA to be more seriously entertained. (Whether that is a good thing or not is another issue altogether.)

In any event, a mighty interesting little intersection of poker news here this morning.