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Lawmakers agree to provision exempting checks from internet gambling law

The banking industry will not have to police online gambling sites and checks will be exempt from a measure that sailed through Congress late Friday night while most of the internet gambling industry was sound asleep.

Some banking industry officials had worried that the new law would make them responsible for blocking payments by check as well as credit card payments - a requirement they had said would be unworkable.

But those concerns were allayed when lawmakers agreed to a provision allowing the Treasury and the Fed to exempt checks from the requirement.

Experts said the system would not be fool-proof, but would bar the vast majority of bettors.

The measure was past in both the House and Senate after being attached to a popular port security bill. Attempts to restrict online gambling have been tried every year except one since 1998. In the end, lawmakers settled for a much more watered down version of the bill that exempts horse racing, fantasy sports and state lotteries.

The Federal Reserve has nine months to draft regulations once the President signs this bill into law, which could happen as early as this Wednesday.

Government officials are expected to propose a "coding-and-blocking" system that will identify and stop payment to online gambling sites, experts said. Many banks and credit card companies already voluntarily block internet gambling transactions using such a system. In fact, most online sports betting websites now downplay credit cards on their deposit pages.

Fearing a crash of its shares, both PartyGaming and 888.com both announced plans to pull out of the US market. Both will lose more than 65% of their customer base with PartyGaming in a much worse position. Some estimates suggest that PartyGaming's US business made up nearly 80% of its overall business.

Noted Legal Professor, I. Nelson Rose told PokerNews "Would-be presidential candidate Sen. Bill Frist warped the law-making process to score a few points with his right-wing religious base," he stated in the opening of our conversation. Professor Rose quickly moved on to his analysis of the bill by remarking, "The new law will be difficult to enforce. It only applies to "unlawful" gaming, but does not expand the reach of the main federal anti-gaming statute, the Wire Act. So, there are still going to be arguments that Internet poker, for example, is not unlawful."

"The new crime on transferring money only applies to gambling businesses," he continued. "Payment processors are not covered, unless prosecutors want to use theories of aiding and abetting. Treasury will make new regulations to require money transferors to identify and block funds from gambling sites. Banks will thus not be required to read paper checks."