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Poker News | Gambling and the Law

UIGEA Compliance Delayed Six Months by Bernanke and Geithner

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The deadline was coming so close that the poker industry, normally a cool and collected bunch, was getting nervous. The Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 was on the verge of its December 1st compliance date that would require all United States financial institutions to enforce the complicated and convoluted law that makes it illegal to fund online gaming activities. But a request to the Chairman of the Federal Reserve System and Secretary of the Treasury was being considered, and on November 27, it was officially announced that the two powerhouses authorized a six month delay for UIGEA implementation.

The entire situation is complicated, but the basics begin with Rep. Barney Frank and two bills he introduced in May of 2009. The main piece of legislation was H.R. 2267, the Internet Gambling Regulation, Consumer Protection & Enforcement Act of 2009, which proposes to overturn the UIGEA by legalizing online gaming while also providing for licensing of gaming operators, regulation by the U.S. government, and taxation in order to monopolize on the tens of billions of dollars worth of revenue possible through the process. The other bill, though it seemed less important at the time, was H.R. 2266, the Reasonable Prudence in Regulation Act of 2009, which was simple and to-the-point as it requested that the UIGEA implementation be postponed for one year from December 1, 2009.

As the months progressed, it became clear that Frank’s bills would not receive the consideration they deserved, as America’s financial crisis and health care reform took precedence over anything regarding online gaming. Despite the fact that the billions in potential revenue from its legalization and regulation could provide some assistance to the deeply indebted U.S. government, the time for hearings and debate was simply not available. And as the December 1st deadline began to approach, many legislators saw the impending consequences of allowing the UIGEA to go into effect. Thus, a group of Congresspersons joined together to submit a letter to Secretary of the Treasury Timothy Geithner and Chairman of the Federal Reserve System Ben Bernanke to request an official extension of the UIGEA compliance deadline, essentially using their executive powers to implement their own version of Frank’s H.R. 2266. The letter was signed by Frank and Peter King, Luis Gutierrez, Ron Paul, Melvin Watt, Judy Biggert, Gary Ackerman, Leonard Lance, Michael Capuano, William Clay, Paul Hodes, Ron Klein, Ed Perlmutter, Bill Foster, Andre Carson, Walt Minnick, Steve Driehaus, Jim Himes, and Dan Maffei, and a corresponding petition was sent by organizations including the Poker Players Alliance, American Greyhound Track Operators Association, and National Thoroughbred Racing Association.

As the deadline approached, word came on November 25 that Geithner and Bernanke granted a six-month reprieve, but official notice was not released until November 27. The Department of the Treasury and the Federal Reserve Board jointly ruled to extend the UIGEA implementation until June 1, 2010.

The Federal Register released the notice, which read, in part:

“The Agencies have received letters in support of the petition from regulated financial institutions, associations representing regulated financial institutions, and members of Congress. Some of the commenters assert that the compliance date of December 1, 2009 will not be achievable for many regulated entities despite their goodfaith efforts to achieve full compliance… While the final regulation affords regulated entities maximum flexibility in establishing and implementing policies and procedures that are reasonably designed to prevent or prohibit unlawful Internet gambling transactions restricted by the Act, the Agencies acknowledge some of the challenges regulated entities are experiencing with the Act’s definition of ‘unlawful Internet gambling.’ Moreover, as noted above, several members of congress have indicated interest in revising the Act. The Agencies are thus persuaded that a limited extension of the compliance date for regulated entities is appropriate.”

The notice did acknowledge that a one-year extension was requested, but stated, “The Agencies believe that a six month extension is sufficient for regulated entities to address issues related to the definition of ‘unlawful Internet gambling.’”

Not only does this give the poker industry an extra six months before the reigns are tightened on its online poker players, but it gives Rep. Frank more of an opportunity to push for Congressional hearings on H.R. 2267, which would overturn the UIGEA and pave the way for responsible government intervention into the online gaming industry. In fact, Frank has tentatively scheduled the first of said hearings for the week beginning November 30, just as Congress returns from its Thanksgiving holiday recess.

The granting of the delay by the Department of the Treasury and Federal Reserve System was promptly hailed by online gaming lobbying organizations and representatives of the poker community. The Safe and Secure Internet Gambling Initiative released a statement from spokesperson Michael Waxman, which read, “We see this move by the Obama Administration as a decision to halt implementation of UIGEA in order to give Congress time to enact an alternative approach of regulating Internet gambling instead of prohibiting it. This decision is the latest evidence that momentum is building for a shift in policy and a rewrite of the U.S. Internet gambling laws to provide for regulation and taxation instead of prohibition. Over the next six months, Congress should act to create a framework that regulates Internet gambling to protect consumers and collect billions in much-needed revenue for critical federal and state government programs.”

The Poker Players Alliance (PPA) was also quick to respond with a statement from Chairman and former Senator Alfonse D’Amato: “The PPA is extremely pleased with the decision by the Federal Reserve and Treasury to grant the six month extension. This is a great victory for poker, but an even greater victory for advocates of good and fair public policy. These additional months are critical to provide legislators time to clarify UIGEA and pass legislation to license and regulate poker early next year. It is our hope that another extension would be granted should the deadline approach before these pieces of legislation can be passed.”

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