As poker players gathered around their kitchen tables across the United States last week for a meal packed with friends, family, food, and football, officials from the U.S. Treasury and Federal Reserve were hard at work. The result was a seven-page breakdown outlining a six-month delay in compliance with the regulations of the Unlawful Internet Gambling Enforcement Act (UIGEA), which were scheduled to go into effect on December 1st. Now, the financial services industry has until mid-2010 to fall into line with the 2006 law.

Released to the general public last week was a lengthy discussion of why compliance with the regulations of the UIGEA, which were approved as midnight rules by the Bush administration, should be pushed back. Before announcing the delay, the Treasury and Federal Reserve noted that the agencies consulted with the Department of Justice.
Very simply, the UIGEA “requires non-exempt participants in designated payment systems to establish policies and procedures reasonably designed to identify and block or otherwise prevent or prohibit unlawful internet gambling transactions restricted by the Act,” according to the government entities. However, as online poker players are well aware, no definition of “unlawful internet gambling” was ever given. Instead, financial institutions were tasked with interpreting a contradicting web of state and federal laws.

In mid-September, the Poker Players Alliance (PPA) teamed up with two horse racing organizations asking for a 12-month extension in the enforcement of the UIGEA regulations. The three groups, according to the Treasury and Federal Reserve, “cite the possibility of confusion regarding the term unlawful internet gambling.” The confusion could allegedly result in overblocking, the now-common term that first cropped up when credit card companies trying to comply with the UIGEA were denying legal online lottery transactions in New Hampshire and North Dakota. Rather than tediously examine every transaction, companies like Visa and MasterCard simply prohibited anything that resembled unlawful internet gambling.

Several financial institutions added their two cents, including Wells Fargo, the American Bankers Association, the Credit Union National Association, the Independent Community Bankers of America, and the National Association of Federal Credit Unions. In the beginning of October, Congressman Barney Frank (D-MA, pictured at right) was one of 19 lawmakers to urge a delay in regulation enforcement. The Treasury and Federal Reserve explained, “Several of these members of Congress stated that there is considerable interest in Congress in clarifying the laws underlying internet gambling, and that it would be prudent to defer the compliance date until Congress has had time to act.”

Senator Jon Kyl (R-AZ) and Congressman Spencer Bachus (R-AL, pictured at left) issued a letter of their own on November 3rd calling for the December 1st, 2009 compliance date to stand. Given the “speculative nature of the problems raised by petitioners,” Kyl and Bachus unsuccessfully argued that no delay should be granted. Both are staunch internet gambling opponents, with the latter serving as the Ranking Member of the House Financial Services Committee. Kyl was one of the main figures involved in passing the UIGEA three years ago; the bill was attached to an unrelated port security measure and not debated in the Senate.

At the end of the day, the extension became a reality: “The Agencies are thus persuaded that a limited extension of the compliance date for regulated entities is appropriate.” Although “neither petitioners nor commenters supporting the petition have provided the Agencies with sufficient data or documentation to justify a twelve-month extension of the compliance date,” a six-month reprieve was given. In the interim, sensible internet gambling legislation may be debated and ultimately passed.

On Thursday, the House Financial Services Committee, of which Frank is the Chair, will hear discussion of HR 2266 and HR 2267. The former, dubbed the Reasonable Prudence in Regulation Act, delays mandatory compliance with UIGEA regulations to December 1st, 2010 and is likely moot given last week’s extension. HR 2267, the Internet Gambling Regulation, Consumer Protection, and Enforcement Act, outlines a framework for licensed online gaming companies to solicit U.S. customers. Frank introduced both bills on May 6th.

Read the entire Treasury and Federal Reserve UIGEA decision.