Indiscriminate UIGEA Blocking Threatens State Lottery Sales
Rick Wisler, executive director of the New Hampshire Lottery Commission, is blaming the credit card companies’ misguided reaction on the controversial Unlawful Internet Gambling Enforcement Act (UIGEA). The 2006 act penalizes banks and other financial institutions that process credit card payments for Internet gambling operators.
But Wisler points out state lotteries were among the entities that were exempted. In talks with representatives from Visa and MasterCard, the New Hampshire Lottery chief was told the companies were “overblocking’’ to guard against any potential legal trouble.
Head of the nation’s first lottery, launched in 1964, Wisler said he is weighing his options, legal and otherwise, to get the problem resolved. Still, the blocking of the lottery’s online sales have hit hard at a promising source of new revenue just as traditional ticket sales have plunged.
“I hope they understand we are a legal lottery,’’ Wisler told GamblingCompliance, “Simply overblocking us is not resolving their problems and it’s not addressed the UIGEA's intent of blocking illegal games.’’
The New Hampshire lottery’s problems are just the latest controversy surrounding the federal law that aims to cut off financial support for online gaming. The Congressional ban on Internet gambling payment processing was passed in October 2006 when Senate Republicans, led by then-Majority Leader Bill Frist, attached it to an unrelated port security bill at the end of the legislative session. Since then the banking industry, beset with mortgage problems and a credit crunch of huge proportions, has been struggling to make sense of its responsibilities, and the changes in the relationship with their customers that the Act would require.
The act has drawn mounting criticism, with US Rep. Barney Frank, chairman of the House Committee on Financial Services, arguing that on-line gambling should be regulated and legalized.
Other critics, including the American Bankers Association, have warned the act’s language is overly broad and ambiguous as to exactly what payments should be blocked.
Louise Roseman, head of the Federal Reserve's bank operations division told a meeting of the subcommittee on domestic and international monetary policy, trade, and technology last year, "It is very difficult without having more of a bright line about what is intended to be unlawful Internet gambling - the challenge we have is interpreting something, particularly federal laws, that Congress themselves isn't sure what they mean."
Wisler, head of the New Hampshire Lottery Commission, argues it is just this sort of confusion that may be the heart of the lottery’s current troubles.
Representatives of the credit card companies have told him that the banks they process payments for consider the lottery’s online tickets to be akin to poker chips at a casino, redeemable later for cash.
But Wisler argues nothing could be further from the truth. Lottery players are not purchasing actual tickets, but a ticket subscription service in which a certain number, for example, is automatically played on certain dates. The service, which covers Tri-State Megabucks and Powerball, costs anywhere from $26 to $104, depending on the number of draws.
The lottery’s problems began last fall when it noticed the transaction code used by the credit card companies to process lottery payments had changed. Previously payments to the lottery had fallen under a code used for governmental service organizations. Instead, the lottery found it had been given a much different merchant code as the credit card operators and banks scrambled to meet the provisions of UIGEA.
At about the same time, the credit card companies either started blocking payments or assessing extra fees to process them.
“Now we are lumped under the same (merchant) code as casinos and off-shore gambling,’’ Wisler said.
New Hampshire’s lottery chief is now weighing his options, from taking legal action to calling upon the state’s Congressional delegation for help, but early signs indicate that a change of administration in Washington DC may not provide an immediate repeal of the measures.
President-elect Barack Obama’s pick for the job of US Attorney General, Eric Holder, last week told a Senate confirmation hearing that the Department of Justice would, under his tenure, still seek strict enforcement of the UIGEA measures.
“We hope to resolve this simply, without taking legal action,’’ Wisler said. “The simplest way to do this is to return us to our prior merchant code.’’
For the New Hampshire lottery, the timing of its brush with the controversial federal Internet gambling ban is unfortunate. Hit hard by the economy, the state’s lottery, which typically generates $250m a year in revenue, has seen sales fall 9 percent over the last year.
“It is harmful to revenues raised by state lotteries,’’ he said.
But Wisler points out state lotteries were among the entities that were exempted. In talks with representatives from Visa and MasterCard, the New Hampshire Lottery chief was told the companies were “overblocking’’ to guard against any potential legal trouble.
Head of the nation’s first lottery, launched in 1964, Wisler said he is weighing his options, legal and otherwise, to get the problem resolved. Still, the blocking of the lottery’s online sales have hit hard at a promising source of new revenue just as traditional ticket sales have plunged.
“I hope they understand we are a legal lottery,’’ Wisler told GamblingCompliance, “Simply overblocking us is not resolving their problems and it’s not addressed the UIGEA's intent of blocking illegal games.’’
The New Hampshire lottery’s problems are just the latest controversy surrounding the federal law that aims to cut off financial support for online gaming. The Congressional ban on Internet gambling payment processing was passed in October 2006 when Senate Republicans, led by then-Majority Leader Bill Frist, attached it to an unrelated port security bill at the end of the legislative session. Since then the banking industry, beset with mortgage problems and a credit crunch of huge proportions, has been struggling to make sense of its responsibilities, and the changes in the relationship with their customers that the Act would require.
The act has drawn mounting criticism, with US Rep. Barney Frank, chairman of the House Committee on Financial Services, arguing that on-line gambling should be regulated and legalized.
Other critics, including the American Bankers Association, have warned the act’s language is overly broad and ambiguous as to exactly what payments should be blocked.
Louise Roseman, head of the Federal Reserve's bank operations division told a meeting of the subcommittee on domestic and international monetary policy, trade, and technology last year, "It is very difficult without having more of a bright line about what is intended to be unlawful Internet gambling - the challenge we have is interpreting something, particularly federal laws, that Congress themselves isn't sure what they mean."
Wisler, head of the New Hampshire Lottery Commission, argues it is just this sort of confusion that may be the heart of the lottery’s current troubles.
Representatives of the credit card companies have told him that the banks they process payments for consider the lottery’s online tickets to be akin to poker chips at a casino, redeemable later for cash.
But Wisler argues nothing could be further from the truth. Lottery players are not purchasing actual tickets, but a ticket subscription service in which a certain number, for example, is automatically played on certain dates. The service, which covers Tri-State Megabucks and Powerball, costs anywhere from $26 to $104, depending on the number of draws.
The lottery’s problems began last fall when it noticed the transaction code used by the credit card companies to process lottery payments had changed. Previously payments to the lottery had fallen under a code used for governmental service organizations. Instead, the lottery found it had been given a much different merchant code as the credit card operators and banks scrambled to meet the provisions of UIGEA.
At about the same time, the credit card companies either started blocking payments or assessing extra fees to process them.
“Now we are lumped under the same (merchant) code as casinos and off-shore gambling,’’ Wisler said.
New Hampshire’s lottery chief is now weighing his options, from taking legal action to calling upon the state’s Congressional delegation for help, but early signs indicate that a change of administration in Washington DC may not provide an immediate repeal of the measures.
President-elect Barack Obama’s pick for the job of US Attorney General, Eric Holder, last week told a Senate confirmation hearing that the Department of Justice would, under his tenure, still seek strict enforcement of the UIGEA measures.
“We hope to resolve this simply, without taking legal action,’’ Wisler said. “The simplest way to do this is to return us to our prior merchant code.’’
For the New Hampshire lottery, the timing of its brush with the controversial federal Internet gambling ban is unfortunate. Hit hard by the economy, the state’s lottery, which typically generates $250m a year in revenue, has seen sales fall 9 percent over the last year.
“It is harmful to revenues raised by state lotteries,’’ he said.
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