UIGEA – Inevitable Repeal

Right now congress is holding hearings on UIGEA and is hearing testimony from the banking and financial services industry. UIGEA placed unfunded enforcement responsibilities on the banking industry and a myriad of Byzantine rules and regulations. The regulations, as written, could ensnare the innocent, and seriously interfere with e commerce, one of the fastest growing sectors of the global economy.

The House of Representatives Subcommittee on Domestic and International Monetary Policy, Trade and Technology heard from the US Treasury, Federal Reserve, the American Bankers Association, Financial Services Roundtable, Wells Fargo and Credit Union National Association, on the difficulties of implementing and enforcing these vague regulations.

Representatives of the banking industry have testified that the implementation of these regulations could seriously disrupt e commerce and consumers could be at risk of having innocent transactions blocked. Luis Gutierrez, Democratic representative from Illinois and chairman of the House of Representatives Subcommittee on Domestic and International Monetary Policy stated, “Consumers will be placed at risk of having lawful transactions blocked,’ said Luis Gutierrez, a Democrat Representative from Illinois and Chairman of the Subcommittee. Stated “It is easy to see how these regulations if implemented in their current form could wreak havoc on electronic commerce in the US. The regulations have been widely criticized as being vague and costly for financial institutions to implement. One of the most common complaints is that the proposed rules fail to sufficiently define key terms, leaving financial institutions with significant compliance difficulties. There is a risk that financial institutions would misclassify a payment as illegal and thus be exposed to liability,’ said Leigh Williams on behalf of the Financial Services Roundtable. We also believe that ‘monitoring of websites’ is inappropriate to include in a financial institution’s monitoring activity.”

Obviously UIGEA is seriously flawed in its present form. Several industry experts testified to the unenforceability of the act. A representative of the Safe and Secure Internet Gambling Initiative said “US banks and credit card companies, along with every other type of US company involved in payment systems, would be forced spend substantial resources to force compliance with a ban on internet gambling that can be easily circumvented by anyone in the US that wants to continue to gamble online.”

UIGEA was originally passed to pander to a tiny group of social ‘conservatives’ without much planning and since has had unintended consequences. The act wreaked havoc with gaming stocks on exchanges globally and thousands employed by the industry suddenly found themselves unemployed. Presently many members of congress are lining up behind a bill sponsored by Barney Frank of Massachusetts that would regulate and tax internet gaming.

Isolated pockets of opposition to legalized online gaming remain but are generally confined to isolated anti gambling extremists such as Paul Weyrich and James Dobson. Opponents cite faulty studies and statistics as they try to restrict the freedoms of average Americans. Opponents of legalized gaming conveniently ignore the dishonest way UIGEA was introduced and passed. They also ignore the burden without benefit that the financial industry will suffer under the current regulations.

It should be obvious to all rational members of congress that UIGEA is an idea whose time has passed. The law restricts the freedoms of otherwise law abiding citizens and is bad for business specifically e commerce. Fortunately the momentum seems to be towards regulation not outright prohibition.