Feds issue rule aimed at banning Internet gambling

WASHINGTON -- The Bush administration issued a final regulation Wednesday aimed at banning Internet gambling, drawing criticism from Democrats who said it would burden financial companies.

The rule from the Treasury Department and Federal Reserve requires those companies to establish procedures to prevent payments in connection with unlawful Internet gambling. They would be expected to comply by Dec. 1, 2009.

The chairman of the House Financial Services Committee, Rep. Barney Frank, D-Mass., had asked the Treasury this week not to move ahead now, saying it would "burden the financial services industry at a time of economic crisis."

The rule does not define "unlawful Internet gambling." That has been an issue since Republicans pushed through the law that the new rule puts in place, by attaching it to a port security bill in 2006.

Rep. Shelley Berkley, D-Nev., also blasted the regulations, saying the payment restrictions will not stop people from placing bets online.

But at the same time, she said, they will weigh down financial services firms struggling through the economic crisis.

"These rules place an unfair burden on banks and other businesses that will now be forced to play the role of law enforcement," said Berkley, who had been among the lawmakers seeking to postpone the rules through more study.

"Instead of making the situation better, these regulations will only create chaos, huge headaches and high costs for all those involved," she said.

The law sought to curb online gambling by prohibiting financial institutions from accepting payments from credit cards, checks or electronic fund transfers to settle online wagers. But the law did not offer a clear definition of Internet gambling, instead referring to existing federal and state laws, which themselves provoke differing interpretations.

Banks and other financial institutions complained they were being forced into a law enforcement role when Congress could not even define what conduct it was trying to prevent. Payments are difficult to track anyway and online gambling companies can disguise themselves with relative ease.

Franks' committee passed a bill this year seeking to block the rule from taking effect and first defining what was illegal online gambling. The measure did not pass the House.

Stephens Media Washington Bureau chief Steve Tetreault contributed to this report.