On October 1, the Board of Governors of the Federal Reserve System and the US Treasury (collectively, the Agencies) jointly issued for comment a proposed rule that would implement the relevant provisions of the Unlawful Internet Gambling Enforcement Act of 2006 (the Act). Pursuant to the Act, “unlawful Internet gambling” is defined as “placing, receiving, or otherwise knowingly transmitting a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received or otherwise made.”

The proposed rule: (i) defines relevant terms, including the payment systems that could use the Internet unlawfully to effect gambling wagers in violation of the Act; (ii) requires participants in the payment systems industry subject to the Act to establish policies and procedures to block prohibited transactions; (iii) exempts certain participants from the Act because the Agencies do not believe it is “reasonably practical for those participants to identify and block, or otherwise prevent or prohibit, unlawful Internet gambling transactions restricted by the Act”; and (iv) includes examples of appropriate policies and procedures that could be adopted by entities included within the Act to comply with the Act. According to the accompanying press release, the Agencies “desire to achieve the purpose of the Act as soon as is practical, while also providing designated payment systems and their participants sufficient time to adapt their policies and practices as needed to comply with the regulation.”

Comments on the proposed rule are due December 12.

 http://www.federalreserve.gov/newsevents/press/bcreg/20071001a.htm