By Jessica Holzer
Posted: 04/14/08 06:30 PM [ET]
The banking industry is cheering a fresh assault on the 2006 federal crackdown on Internet gambling by an unlikely duo: House Financial Services panel Chairman Barney Frank (D-Mass.) and Rep. Ron Paul (R-Texas).
Frank has teamed up with the libertarian-minded Paul, who crusaded against big government during his recent White House bid, on legislation to block that law by forbidding federal officials from writing rules to implement it.
The pair introduced their bill on Friday, less than two weeks after federal officials testified to Frank’s committee that they were struggling to craft rules barring payments to illegal online gambling sites and banking industry representatives blasted the proposed rules as too onerous.
“I don’t know what can be done or will be done legislatively, but we certainly appreciate the interest,” said the top lobbyist for the American Bankers Association , Floyd Stoner, of the Frank-Paul legislation.
The bill could supplant legislation introduced by Frank last year to legalize and regulate online gambling. Though it has attracted 48 co-sponsors, that legislation has failed to gain steam in the House, which overwhelmingly supported the 2006 law to ban payments for online wagers deemed illegal under state laws.
Frank’s new legislation takes a different approach, however, by attacking the practical hurdles of the federal law, known as the Unlawful Internet Gambling Enforcement Act, rather than its legitimacy.
“While I do disagree with the underlying objective of the act, I believe that even those who agree with it ought to be concerned about the regulations’ impact,” Frank said in a statement.
He argued that the regulations proposed by the Federal Reserve and the Treasury were “impossible to implement without placing a significant burden on the payments system and financial institutions.”
Supporters of banning online gambling vowed to beat back the new effort to undo the law, just as they did Frank’s bill to legalize online gambling.
“Our office will vigorously oppose any efforts to repeal or water down any parts of the [federal law],” said Ryan Patmintra, a spokesman for Senate Minority Whip Jon Kyl (R-Ariz.), who was a chief sponsor of legislation to ban online gambling in the Senate.
“It’s another attempt to take apart a bill that was passed overwhelmingly by the House,” said Tom McClusky, the vice president for government affairs at the Family Research Council , which had pushed hard for the federal crackdown. He noted that 48 state attorneys general had pushed for the federal law to enforce their state bans.
Meanwhile, the National Football League and other professional and amateur sports organizations would “vigorously oppose” the Frank-Paul legislation, said Martin Gold, a lawyer at Covington & Burling and a longtime lobbyist for the NFL.
Federal law is murky on what constitutes illegal gambling online. Congress stopped short of defining it clearly in the 2006 law, directing the federal government instead to enforce state laws restricting such activities. It also excluded online horserace betting from the crackdown.
Now, writing rules to implement the law is bedeviling regulators. “The challenge we have is interpreting … federal laws that Congress itself isn’t sure what they mean,” Louise Roseman, a Fed official, testified on April 2 before Frank’s committee.
The banking industry has flooded the Treasury and the Fed with complaints about their proposed rules, arguing that it is too difficult for banks to sort out payments for legal wagers — such as on horse races — and those that are illegal.
“The banking system is just not set up to sort out whether one payment is a legal payment and one payment is not,” said the director of congressional affairs for the Independent Community Bankers of America , Steve Verdier. “We think the [Frank-Paul] bill would give everyone the chance to take a breath.”
Charles Rothfeld, a lawyer at Mayer Brown who has argued several cases before the U.S. Supreme Court, said that the Frank-Paul legislation is not likely to pose any constitutional problems. “Congress gets to say the way in which its legislation is implemented. If it wants to issue legislation to preclude the promulgation of regulation, it can do that,” he argued.
Aside from the banking industry, the Frank-Paul bill also has support from gambling aficionados and firms that stand to gain from regulated online gambling.
Michael Waxman, a representative from the Safe and Secure Internet Gambling Initiative, which represents firms poised to gain from regulation of online betting, applauded the bill.
“Our goal is to get regulation of the industry. But we do believe that this legislation that has been introduced is a step in the process to getting us there,” he said.
The American Gaming Association , which says its members do not include online gambling operators, has not taken a stance on the bill. It also remained neutral on the 2006 law.
However, the group supports a bill sponsored by Rep. Shelley Berkley (D-Nev.) to authorize a one-year study of online gambling by a third party.
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