Internet Gaming Bill Spurs Presidential Appointments Dispute

Published February 14, 2010

Sen. Jon Kyl (R-AZ) delayed several of President Obama’s top economic policy picks out of disagreement with the administration’s decision to suspend implementation of the Unlawful Internet Gaming Enforcement Act (UIGEA).

UIGEA was originally passed into law as a last-minute amendment to a 2006 port security bill. It imposes a wide range of new regulations on depository institutions and credit card transactions as a means of discouraging Internet gambling. Its proponents say it simply provides tools to enforce existing state and federal laws that prohibit online gambling.

“I oppose efforts to remove the tools that our state and federal authorities have long sought to help enforce existing laws prohibiting any form of online gambling,” said Kyl in a press statement.

Plenty of Opposition
Opponents of the law, however, say it creates an undue and unnecessary burden on an activity—gambling—that’s legal in 48 out of 50 states. With a few exceptions, state laws about gambling were written before the Internet became widely available and thus don’t speak directly to online gambling at all.

In addition to online gambling providers and gamers (particularly poker players) who see the law as a threat to their livelihoods, banks, credit unions, and the Small Business Administration’s advocacy office have all expressed concerns about the costs the new law might impose. A variety of free-market organizations including Americans for Tax Reform, The Heartland Institute, and FreedomWorks have also criticized the law.

In response, Rep. Barney Frank (D-MA) has pushed legislation that would replace UIEGA’s restrictive regime with a federal system for taxing and regulating online gaming.

Held Till June
The Obama administration has moved to delay implementation of UIGEA until at least June. That decision came after Frank and 17 other members of Congress—including prominent members of both major political parties–wrote to Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke asking for the delay.

Groups following the debate expressed disappointment with Kyl’s January actions.

“It is especially baffling given the bipartisan, bicameral and virtually consensus support from the financial services industry to delay these regulations,” said John Pappas, executive director of the anti-UIGEA Poker Players Alliance.

“We hope that Sen. Kyl will join this consensus and agree that the existing UIGEA regulations are badly flawed, and rather than putting holds on essential Treasury personnel during an economic crisis, focus on his goals of consumer protection by embracing licensing and regulation of Internet gambling, along with better and more specific enforcement against bad actors,” Pappas added

Hearings on Frank’s legislation are scheduled to take place later this year.

Eli Lehrer ([email protected]) is director of The Heartland Institute’s Center on Risk, Regulation, and Markets.