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Dick Armey: Treasury Dept. should not overreact to Net gambling

An opinion article by the former House Majority Leader says the Bush administration is pushing last-minute regulations that could have "devastating consequences for privacy and e-commerce."

Occasionally we at CNET News will publish outside opinion articles, such as one on spam co-authored by Sen. Ron Wyden, and another on Net neutrality written by Diana DeGette. The background for this article is that the Treasury Department, in response to a 2006 law, is preparing a slew of anti-Internet gambling regulations that could be released at any time. Read below for a critique by Dick Armey, the economist and onetime House Majority Leader who's now heading the FreedomWorks advocacy group. --Declan McCullagh

The Midnight Regulation Rush is On!
By Dick Armey

While most of us are distracted watching the presidential election, the U.S. Treasury Department is quietly pushing through new rules that potentially will have devastating consequences for privacy and e-commerce.

It's an understatement to say the Internet has done more to shape society over the last 10 years than any other technological innovation, transforming communications, business, and entertainment. The benefits generated by the technological revolution easily parallel those of the earlier industrial revolution. What's important is that this explosion in growth occurred in an era relatively free of government interference. Unfortunately, that may not remain the case.

Dick Armey, who says that the Treasury Department should be cautious in its Internet gambling rules FreedomWorks

Regulatory incursions onto the Internet are becoming more frequent, threatening the open dynamic that has generated so much for consumers. Without vigilance, we face the prospect of turning the Internet into something akin to an electronic version of the Post Office rather than the engine of growth it has become.

This can be seen in Congress' attempt to eliminate unlawful Internet gambling. Not only does the Unlawful Internet Gambling Enforcement Act of 2006 raise serious questions about privacy, but its vague definitions and poorly defined goals force banks and payment centers into a tight position.

They're now required to serve as an arm of the government, monitoring private Internet transactions, and blocking those that are "illegal." The problem is that the legislation never defined "unlawful Internet gambling," leaving banks and payment centers to sort out that thorny issue for themselves. This generates a great deal of confusion, leaving consumers and Internet users facing the real prospect of perfectly legal activities being blocked simply due to uncertainty and caution on the part of banks and payment centers. For those processing these transactions, the ambiguity is compounded by compliance costs and the paperwork burden.

Despite the confusion surrounding the legislation, the Treasury Department is drafting a final rule it hopes to release in November to put the program in motion. But some in Congress are well aware of the burdens and complexities associated with this vague rule. Just last month, the House Financial Services Committee passed legislation introduced by Rep. Barney Frank (D-Mass.) that offers a simple solution.

The Payments System Protection Act makes clear that the law can be enforced against sports betting, which the courts already have said is illegal. But it also requires regulators to define exactly what "unlawful Internet gambling" is prior to issuing broader regulations. This would substantially reduce the uncertainty and compliance costs for banks and payment centers. The Senate recently followed suit with its own attempt to clarify the ambiguities in the 2006 Act.

Beyond correcting the economic burdens of the law, however, Americans ought to be concerned about the larger questions of the law's impact on privacy and Internet freedom for the future. Once the federal government begins implementing guidelines for various types of online transactions, what is to prevent it from becoming more involved in every activity on the Internet? The Founding Fathers took great care constructing a government that would protect our endowed rights and liberties, not restrict and monitor them. Americans don't want the government monitoring their private transactions, online or offline.

The Internet has proved to be a powerful and valuable force in our economy. Annual e-commerce retail sales in the United States reached $107 billion in 2006, a 22 percent jump over the previous year. Restrictive government mandates would only restrain such growth, not encourage it. Each new mandate also brings further government encroachment upon the rights and liberties guaranteed by the Constitution. It is precisely because it developed relatively free from government oversight that the Internet has become such a dynamic part of our economy.

Congress has acknowledged the potential downside of its foray onto the Internet with the 2006 Unlawful Internet Gambling Enforcement Act, and is working to correct its overreach. The Treasury Department should follow this lead, and not rush forward with sweeping government mandates that threaten the future growth and innovation on the Internet.

Dick Armey is the chairman of FreedomWorks, a national grassroots organization dedicated to lower taxes, less government, and more freedom.