Friday, March 14, 2008

The Good, the Bad, and the UIGEA

There were a couple of Unlawful Internet Gambling Enforcement Act-related items in the news during the past week or so. This stuff hums along in background like your refrigerator, and only every now and then do you hear that clunk of the ice machine reminding you it’s there.

Although neither item to which I’m referring seemed to garner that much attention this week, both seemed to be taken (by some) as victories in the struggle to keep the UIGEA from getting any closer to being enforced. That’s how this background stuff usually goes -- you hear that clunk, remember fleetingly there’s a machine making ice over there, and take it for granted everything is working as it should.

But take a closer look. Neither of these developments sound all that great to me.

The Dismissal of the iMEGA Case

Remember that lawsuit brought by the Interactive Gaming Media Entertainment and Gaming Association (iMEGA) against the U.S. government? Last July, iMEGA brought an action against (then) U.S. Attorney General Alberto Gonzales in which the group challenged the enforceability of the UIGEA. Among its charges, iMEGA argued that the UIGEA was unconstitutional, and therefore they requested an injunction against its implementation so that matter could be sorted out in a court of law.

After a number of delays, the case was eventually heard and last week dismissed by U.S. District Judge Mary L. Cooper. That means all of the points raised by iMEGA -- about the law’s selective prohibitions, about constitutionality, about inconsistencies with regard to individual state’s laws -- were considered and rejected. The silver lining here was that Judge Cooper did say that iMEGA had “legal standing” to represent the interests of online gambling going forward, meaning the group can continue to fight the UIGEA, although it looks as though they’ll have to come up with a different plan of attack.

On their website, iMEGA expressed excitement about the fact that they’re being allowed to continue the fight. However, I think they get a little carried away when they claim that by recognizing iMEGA’s right to fight, “Judge Cooper found that banks, credit card companies and other payment system instruments are exempt from criminal sanctions under UIGEA.” A tip of the fedora to cheer_dad for pointing this out earlier in the week. As cheer_dad says, there’s not much in the opinion that actually indicates what iMEGA is saying here. My impression is that iMEGA is taking the mere fact of being recognized as having “legal standing” as perhaps suggesting their case against the UIGEA indeed has merit.

PokerNews did the best job reporting this one, although some other folks took iMEGA at their word and passed along (inaccurately) that the UIGEA had somehow been officially, legally made impotent as the banks, credit card companies, and other “financial transaction providers” no longer had to worry about penalties for non-compliance. Not so.

American Banking Association Comments on UIGEA Regulations

Back in October, the feds issued the proposed regulations for the UIGEA and invited comment. That comment period ended in mid-December, and this week the American Banking Association’s 11-page response was made public over on PokerNews. (See also the Kick Ass Poker blog for the full text of the ABA’s comments.)

Now this is good news insofar as it confirms what a lot of folks had been suspecting all along, namely, that the banks have no interest in sorting through all of our transactions to decide which are with online gambling sites and which are not. The ABA’s statement includes several, hard-to-refute arguments for why doing so would not only be impractical, but detrimental to the U.S. banking industry. As the ABA puts it, “the UIGEA will in the end catch more banks in a compliance trap and do greater damage to the competitiveness of the American payments system, than it will stop gambling enterprises from profiting on illegal wagering.”

The publication of the ABA’s complaints echoes similar objections made in late February by U.S. senators John Sununu (R-NH) and Pete Domenici (R-NM) in their letter to the Secretary of the U.S. Dept. of the Treasury and the Chairman of the Board of Governors of the Federal Reserve System regarding the impracticality of enforcing the UIGEA (discussed here). The ABA is politically powerful, and thus one would think its objections should carry even more weight than would the objections of the senators.

As I say, all good. But there’s something else to worry about here.

The ABA offers nine different points in its comments, one of which concerns the old “overblocking” problem we’ve discussed here before. Since the proposed regulations don’t define what unlawful Internet gambling transactions exactly are, banks may choose to “overblock” any suspect-seeming transaction. That notion had been bandied about before. Indeed, in her testimony before the senate last November, Annie Duke pointed out that the banks would likely pursue such a course of action if the UIGEA regs were finalized without any added clarification regarding prohibited transactions.

The discussion of “overblocking” in the ABA’s comments on the regs confirm that strategy. It’s the third point they make, labeled “Preservation of the ‘over-blocking’ provisions of the Prohibition is essential to workability for financial institutions.” At the end of that section, the “ABA requests that the text [of the pertinent section of the UIGEA] be amended to include an explicit statement affirming the ability of payments systems and their participants to refuse to process any gambling transactions for their own business reasons or discretion.”

Not good. Not good at all. I’m not saying I know what we (online poker players) do want in terms of regulation or whatever, but I know for certain we do not want that particular amendment made to the law before it is finalized.

Damn, we need to call a repairman or somethin’.

(EDIT [added 9:30 p.m.]: For a summary of other comments to the UIGEA regs, see Jason Kirk's PokerListings article [dated tomorrow] titled “Stakeholders sound off on UIGEA regulations)

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Blogger Random Table Draw said...

You come through again sir! Truly you are the sleuth gumshoe of the poker blogging world.

3/14/2008 4:53 PM  
Blogger Short-Stacked Shamus said...

Haley (of PN & the KAP) and cheer_dad the real sleuths here.

3/14/2008 9:34 PM  
Blogger Haley said...

Thank you for the compliment, Shamus. It's nice to be able to sink one's writer's teeth into a story that most people have overlooked. One good measure is how quickly and how widespread the story gets picked up by other outlets, and this one did make the rounds.

See ya this summer.

3/26/2008 1:22 AM  

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