Lawmakers: Rounders on the Hill

The US government is no stranger to ridiculousness. As Eli pointed out in his recent study on dumb product bans, the logic (I use the word loosely here) employed by legislators to decide what to regulate can often perplex regular joes. Just as confusing as what they regulate, are the ways they choose to regulate certain things. Take, for example, the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). Not only was this law passed in a roundabout way (attached to the must pass Safe Port Act the night before congress adjourned for mid-session elections) but it doesn’t regulate gambling at all. As Eli and I note in our op-ed published in the American Spectator UIGEA is, primarily, a banking regulation.

…the Act imposes an obligation on banking institutions to block transactions “related” to illegal online gambling…Rather than trying to force all online gambling sites out of business directly or penalize people who play a few hands of poker online, the law — a brainchild of recently unseated Iowa Republican Jim Leach — simply threatens to cut off the money that makes gambling possible.

In her March 4th article in the Washington Post, Cindy Skrzycki claimed that the act was unenforceable due to its ambiguous language:

Republican Sens. John E. Sununu (N.H.) and Pete V. Domenici (N.M.) asked regulators to come up with a list of restricted transactions.

Otherwise, they predicted, “Risk-averse financial institutions will simply choose to block every transaction” that could resemble gambling, “whether legal or not.”

But even if it were enforceable, I find it more offensive that regulators even presumed that they have a right to make these demands of financial institutions at all.

The Act obligates banks to act as the government’s secret police, presuming (in similar fashion to the know-your-customer mandates stemming from the Bank Secrecy Act) that all transactions are “dirty” until proven clean. If there is reason for the government to suspect that someone has committed a crime, then the government should start an investigation and the government should find the proof to prosecute that one person. The UIGEA makes everyone transferring funds guilty and puts the burden of proving innocence onto financial institutions.

In this scenario the only winner is the US government, which can continue restricting gambling to the venues it can tax, without having to spend money on enforcement, or extend energy in figuring out if enforcement is even possible in reality.

Maybe they thought nobody would notice their making banks the proxy enforcers of a gambling ban the public would never tolerate; maybe they thought we’d be fooled if they pushed regulation through in the dead of night.

I’m calling their bluff and calling for a repeal of a law that is just plain bad.