The US Treasury office has received a warning from Banking Lobbyists regarding the confusion surrounding the UIGEA banking laws.
Lobbyists claim that the current anti-gambling law regarding financial transactions is a “gray area” and makes it next to impossible for banks to comply. They say the Bush Administration needs to step in and clarify the law. The problem revolves around exactly what form of gambling the law considers to be “illegal online betting”.
The new banking rules were proposed after the UIGEA passed. These rules required US financial institutions to have policies in place which are designed to prevent any payment transactions to illegal gambling companies. Illegal online gambling, says the US Treasury is, “any bet or wager involving the internet that is illegal in the state in which the bet is made.”
The problem stems from not only the question of just what form of online betting is illegal, but if regulators will be able to enforce a law that requires banks and financial institutions to know the exact purpose and legality of payments made to an online gambling company. On the question of exactly what is considered illegal or legal, federal and state laws are often conflicting.
Many financial institutions, including banks, are represented by The Financial Services Roundtable. The Roundtable recently stated in public filings to the Treasury and Federal Reserve, “We are very concerned that adoption of the rules could impose significant and costly compliance burdens on banks. The statute and the proposed rule expand the role of financial institutions to police laws that are more appropriate for law enforcement agencies."
The Roundtable raised concerns about the online betting laws being unclear. Their question is whether banks are required to block payments to US based sites, such as those that take wagers on horse races.
Bank of America issued a statement regarding the proposed banking rules which said, “The US should provide a list of entities with whom banks are forbidden to take or make payments in the absence of an unambiguous definition of what is legal. Without a clear definition, financial institutions will be forced to block legitimate transactions in order to avoid the possibility of permitting an illegal transaction."
When the UIGEA went into effect last year, Legislators included a stipulation that horse race betting was excluded under the UIGEA laws. However, according to the Justice Department, “Interstate online horse race betting is illegal.”
So far, however, the Justice Department has chosen not to prosecute any of the online horse race wagering websites based in the US. Those representing the horse race sector, stand firm with their claim that wagering on horse races is legal, as individual state law overrules federal law.