(April 21, 2008) Implementation of the controversial Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) would be prohibited under new legislation introduced in the U.S. House of Representatives earlier this month.

The UIGEA bans gaming sites from accepting money transfers of any kind for bets deemed to be unlawful gambling. It also directs the U.S. Treasury Department and the Federal Reserve Board to create regulations that would require banks and processors to block payments to those sites.

Two critics of the UIGEA, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, and Rep. Ron Paul, R-Texas, senior committee member, on April 10 introduced H.R. 5767, which would prohibit the Fed and Treasury Department from implementing the regulations called for in the UIGEA. The bill was referred to the House Committee on Financial Services.

Banks, processors, the Fed, and the Treasury Department have said the regulations are unworkable and will hurt the financial industry while having little impact on illegal online gambling. “These regulations are impossible to implement without placing a significant burden on the payments system and financial institutions,” Frank said in a statement. “While I do disagree with the underlying objective of the Act, I believe even those who agree with it ought to be concerned about the regulations’ impact.”

The regulations and the UIGEA “force financial institutions to act as law-enforcement officers,” Paul said in a statement. “This is another pernicious trend that has accelerated in the aftermath of the Patriot Act, the deputization of private businesses to perform the intrusive enforcement and surveillance functions that the federal government is unwilling to perform on its own.”

Critics of UIGEA say the regulations fail to define what constitutes unlawful Internet gambling, leaving it to each financial institution to reconcile conflicting state and federal laws and court decisions, as well as inconsistent Department of Justice interpretations, when determining whether to process a transaction. In addition, some of the information needed to determine whether a transaction is illegal is unavailable to banks.

“Frankly, I don’t know what can be done legislatively, but we’re appreciative of their efforts to at least look at it,” a spokesman for the American Bankers Association says of H.R. 5767.

The ABA told Congress that regulations implementing the UIGEA needed to be both workable and not burdensome, the spokesperson says. “As it turned out, the regulations that have been drafted are both unworkable and burdensome for banks,” he says.