WASHINGTON (Reuters) - The Federal Reserve is carefully considering all comments received on rules for a law banning bank and credit card payments to illegal Internet gambling sites, a Fed official said on Wednesday.


Louise Roseman, the Fed's director of reserve bank operations and payment systems, told a House Financial Services subcommittee that the biggest subject of comments on the Fed's proposed rule is the lack of clarity on what constitutes unlawful online gambling.

Roseman said gambling and financial industry commentators wanted to be told specifically which transactions should be blocked.

"Clarity on this point would permit them to design policies and procedures that they could be assured would meet the rule's requirements," she said. "Still others, including some gambling businesses and many consumers, asked that the rule clarify that certain types of gambling, such as pari-mutuel betting or poker, are lawful."

Critics of the Unlawful Internet Gambling Enforcement Act, passed in 2006 by a Republican-dominated Congress, say it constitutes a de facto ban on all Internet gambling. The law does not specify examples of illegal Internet gambling payments that should be blocked, but instead relies on existing underlying federal and state gambling laws.

The proposal has incurred the wrath of the European Union, which argues that it discriminates against European gambling operators. U.S. Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, has proposed legislation to repeal the ban.

Roseman told the subcommittee that Fed and Treasury staffs were pressing ahead with a final rule that provides "reasonably practical examples" of actions by banks and payment firms to comply with the existing law.

"Our objective is to craft a rule to implement the act as effectively as possible in a manner that does not have a substantial adverse effect on the efficiency of the nation's payment system," Roseman said.

(Reporting by David Lawder; Editing by Jonathan Oatis)
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