An open letter written by four Republican Congressman to the heads of the Federal Reserve Board and U.S. Treasury calls for a more "deliberative" approach for crafting regulations for the implementation of the Unlawful Internet Gambling Enforcement Act (UIGEA) and strongly urges that a formal definition of "unlawful internet gambling" itself be finalized before the law's required rules are placed into effect.
In the July 25th letter, addressed to Henry M. Paulson, Secretary of the Treasury, and Ben S. Bernanke, Chairman of the Board of Governors of the Federal Reserve System, the four Republican Congressman — Judy Biggert (R-IL), Jim Gerlach (R-PA), Christopher Shays (R-CT) and Kevin McCarthy (R-CA) – proclaim their continuing support for UIGEA but assail the bill's "vague language" and undue regulatory burden on affected industries, especially small businesses. Along with asking for a formal definition of "unlawful internet gambling," the four ask for two additional steps in the UIGEA process: to transition the current rulemaking endeavor to a formal process headed by an Administrative Law Judge; and to conduct Regulatory Flexibility Analysis on the UIGEA's true financial burden upon affected businesses. The initial fiscal numbers quoted by UIGEA's backers regarding the true cost of implementation and regulation have been shown to have little connection to the bill's projected impact on the banking industry and other business sectors.
The letter also represents the first open Republican split regarding implementation of the UIGEA. Previous efforts to overturn or undo the UIGEA's language had, with only minimal exceptions, been driven by Democratic interests. Votes on these measures, including the bill championed by Barney Frank, had produced splits largely along party lines.
The body of the letter by the four Congressmen follows:
Dear Secretary Paulson and Chairman Bernanke,
We are writing to request that you bring clarity to the Federal Reserve Board's (Board) and U.S. Department of the Treasury's (Treasury) proposed regulations to implement the Unlawful Internet Gambling Enforcement Act (UIGEA).
As proposed, these regulations do not provide clear guidance to the public, in particular those that engage in online skill games, or regulated industries regarding what constitutes "unlawful internet gambling." We believe that implementing such vague law and regulations, while holding the public and regulated industries liable for noncompliance, is an abdication of the federal government's responsibility to both the public and unregulated industries. In addition, vague UIGEA law and regulations could be unnecessarily burdensome and costly to the public and particularly small businesses.
Therefore, we urge the Board and Treasury to, before finalizing UIGEA regulations, clarify the specific activity that constitutes "unlawful internet gambling," providing guidance to both the public and the regulated industries that are tasked with blocking financial transactions related to "unlawful internet gambling." It is our understanding that the UIGEA intended to uphold state and federal laws regarding "unlawful internet gambling" that existed prior to UIGEA's date of enactment. Nevertheless, we encourage the Board and Treasury to confirm our understanding in its UIGEA regulations. To accomplish this, we request that you take the following actions.
First, transition the current rulemaking process to a formal rulemaking process involving an Administrative Law Judge (ALJ) or a similar official who can provide legal advice. This official should examine the various federal and state laws and determine precisely what constitutes "unlawful internet gambling" as well as which financial institutions a regulated industry is required to block under UIGEA law and regulations.
Second, we request that undertake Regulatory Flexibility Analysis to clearly evaluate the regulatory burden that would be imposed on businesses of all sizes but especially small businesses.
Simply put, we believe that it is possible that if UIGEA law and regulations are implemented with the vague language we described above, a judge may be eventually required to answer the question of "what is unlawful internet gambling." It makes fiscal sense to resolve this question before saddling the public, regulated industries, small businesses, and courts with uncertain UIGEA law and regulation.
We voted for UIGEA and support it now. As such, we have resisted legislative efforts which may have the effect of delaying interminably the implementation of UIGEA and its regulations. However, we are concerned about the legal and operational viability of a rule that leaves so much to interpretation and, accordingly, urge the Board and Treasury to take a more deliberative path to a workable rule as we have outlined in this letter.
Thank you for your consideration of our request. We look forward to your response.