Murky language is Frank’s trump card in overturning Internet gambling ban

House Financial Services Chairman Barney Frank (D-Mass.) held a hearing Wednesday on a controversial Internet gambling ban, betting that airing the law’s murky language may help him overturn it altogether.

Frank’s committee heard Federal Reserve and Treasury officials complain that the law is so vaguely written that they are struggling to implement it.

{mosads}“I think it is very difficult without having a bright line about what is intended to be unlawful Internet gambling,” Louise Roseman, head of the Federal Reserve’s bank operations division, told lawmakers Wednesday.

“The challenge we have is interpreting something, particularly federal laws, that Congress themselves isn’t sure what they mean,” she said.

The responses played into Frank’s hand. He is trying to strike the law that Congress tucked into an unrelated ports measure in 2006 and passed in an end-of-the-year rush. The law bars banks and credit companies from releasing money to illegal Internet gambling sites, with the notable exceptions of fantasy sports, online lotteries and horse racing venues.

Poker players, banks and other financial institutions have joined forces to push Frank’s bill, arguing that the public enjoys online gambling and that Congress has placed unfair burdens on bank and credit card companies by requiring them to flag online gambling activity.

Lobbyist groups such as the Poker Players’ Alliance and the American Bankers Association have spent millions of dollars fighting to repeal the law.

The day before the hearing, the opponents’ lobbyists teamed up with Reason, a libertarian organization, and held a poker night that included a brief panel discussion with two players hailed as the best in the game.

The invitation poked fun at the law, as well as other efforts to crack down on poker games: “What’s behind its massive recent surge in popularity? Why did Congress ban online poker? Why are local governments sending in SWAT teams to bust up private games?”

Their trump card, opponents of the law argue, is that the legislation has caused an international backlash and the online gaming prohibition could end up leading to more piracy of U.S. CDs and DVDs.

The World Trade Organization ruled in December that the U.S. must pay the island nation of Antigua $21 million for violating trade rules because of this law, a fine the U.S. is unlikely to pay. Antigua has threatened to make up the $21 million by allowing the pirating of DVDs and CDs.

Economic hard times, the restructuring of the Federal Reserve and the country’s monetary policy are only adding fuel to opponents’ fire. Frank said the Financial Services Committee as well as the banks and the Federal Reserve should be more focused on predatory lending right now instead of trying to crack down on people’s personal habits.

“Almost every sector affected by the law complains about it,” said Frank, who argued the law turns banks into “gambling cops.”

Frank also said the law’s arbitrary exclusion for horse racing didn’t make any sense to him.

“I thought it was gambling; perhaps it’s animal husbandry,” Frank quipped.

Ted Kitada from Wells Fargo said that his company is involved in 30 million transactions a day. Figuring out which of those could be related to Internet gambling is not only cumbersome, but it could lead to mistakes that annoy customers, especially because Internet gambling sites could disguise themselves.

The law makes financial institutions “the police, prosecutors, and judges in place of real law enforcement officers,” Wayne Abernathy of the American Bankers Association told the committee.

Rep. Spencer Bachus (R-Ala.) appeared to be the only lawmaker aggressively defending the law he helped write. He cited a letter signed by 24 U.S. attorneys who support the law and have asked that it not be overturned.

“Illegal Internet gambling is a scourge on our society that leads to addiction and gambling addicts then turn to crime to support their habit,” Bachus said.

Bachus told the tale of a college student at Lehigh University who robbed a bank to pay off debt accumulated through online gambling.

Bachus also asserted that banks have no problem working with law enforcement in ferreting out money-laundering and terrorist financing.

“In all of these cases and 12 others you do it,” he said.

The Justice Department could have provided better answers to a lot of the questions being asked at the hearing, Bachus said. He had asked that they be invited to testify three times, to no avail.

Rep. Luis Gutierrez (D-Ill.), who chairs the Domestic and International Monetary Policy, Trade, and Technology Subcommittee subcommittee, assured Bachus that he would consider inviting Justice Department officials in the future.

When written, the bill instructed the Federal Reserve and the Treasury Department to come up with rules to enforce the online gambling ban. But Congress did not define what types of gambling are illegal online, relying instead on federal and state laws prior definitions.