The Board and the Treasury are required by the Act to develop a joint rule in consultation with the Department of Justice. The final rule requires U.S. financial firms that participate in designated payment systems to establish and implement policies and procedures that are reasonably designed to prevent payments to gambling businesses in connection with unlawful Internet gambling. The rule provides non-exclusive examples of such policies and procedures and sets out the regulatory enforcement framework. For purposes of the rule, unlawful Internet gambling generally would cover the making of a bet or wager that involves use of the Internet and that is unlawful under any applicable federal or state law in the jurisdiction where the bet or wager is initiated, received, or otherwise made.

Compliance with the rule is required by December 1, 2009. Rep. Barney Frank, D-Mass., has said he will seek to overturn the law, pointing out that even the most ardent fans of the regulations have said they will be difficult to interpret and enforce.

Part of the problem is to define “unlawful Internet gambling.” For instance, the National Football League’s “Fantasy Football” is exempted from the legislation, because the NFL claims the game is skill-based and not a game of chance and, thus, not gambling.

Opponents of the legislation complained earlier this week before the Treasury Department and the Federal Reserve Bank issued new regulations describing the legislation. The opponents argued that a former NFL lobbyist was working in the White House and represented a conflict of interest. A White House spokesperson said the lobbyist, William Wichterman, was in compliance with ethics rules.

The legislation, HR 4411, was originally sponsored by Republican Rep. Jim Leach, R-Iowa, and it had the strong and influential backing of then-Sen. Bill Frist, R-Tenn. After 30 years in the House, Leach was narrowly defeated in the 2006 election. This summer Leach threw his support to Barack Obama to the consternation of many Republicans, and this week Obama named Leach and former Secretary of State Madeleine Albright as his representatives to an international economic summit in Washington.

William Wichterman, who with others at the Covington & Burling law firm earned $2.8 million lobbying for the NFL against Internet gaming and on other matters from 2004 through March, is working on the gambling restrictions in the White House Office of Public Liaison, White House spokesman Dana Perino confirmed yesterday.

“He appropriately sought and received clearance from ethics officers to be able to work on this rule,” Perino said, adding, “I know our ethics officers to be professionals who know the law and the guidelines inside out.” She said last night that she could not immediately reach the officers to learn their reasoning in this case.

The 2006 law at the center of the White House review has been of intense interest to the NFL. With the league’s support, it was tacked onto unrelated legislation, meant to upgrade counterterrorism measures at U.S. ports, in the waning hours of the congressional session that year and approved without getting a separate vote in the House or Senate.

Ever since, the measure has been attacked as unwieldy or unworkable by banks and the Internet gambling industry, now based mostly overseas and bringing in many billions of dollars each year. A top official of the Federal Reserve Bank testified in April that, due to the difficulties of pinpointing illegal gambling transactions amid the huge flows of funds online, “the ability of the final [implementing] rule to achieve . . . [its goals] is uncertain.”

Democrats such as Rep. Barney Frank (Mass.), chairman of the House Financial Services Committee, have sponsored alternative measures that would regulate and tax Internet gambling, rather than ban it altogether. But they have been thwarted by Republicans who have depicted the existing law as a way to safeguard morals and stop personal misspending.

“I am deeply disappointed to hear that your agency is proceeding with what I consider to be unseemly haste in issuing regulations” to implement the law, Frank wrote Monday in a letter to Treasury Secretary Henry M. Paulson Jr. He said the new regulations would “burden the financial services industry at a time of economic crisis” and tie the hands of the Obama administration.

The NFL’s general counsel, Jeffrey Pash, urged lawmakers in March to “support the integrity of American athletics” by rejecting Frank’s bill or any other alternative to the existing legislation. But Internet gambling officials have long maintained that the NFL’s real motivation is to block any competition for lucrative “fantasy football” gambling via the Internet, which was explicitly exempted from the 2006 ban.

The NFL provides statistics, logos and player information to fantasy leagues that pay substantial royalty fees, industry sources say. It backed the exemption on grounds that fantasy football is a game of skill, not chance.

Rep. Stephen I. Cohen (D-Tenn.) wrote to White House counsel Fred Fielding on Friday to express concern that the “impetus for the rule may have been a particular White House employee who has a clear and obvious conflict of interest.” Cohen said he had been told that Wichterman “has been a source of considerable political pressure to speed this regulation through to finalization.”

A phone call to Wichterman, seeking comment, was returned by a White House press aide, who declined to add to what Perino said.

Cohen, a proponent of the Internet gambling that Congress banned in 2006, also raised questions about William Wichterman, a White House staffer. Wichterman represented the National Football League, a proponent of the proposed rule, as a lobbyist as recently as March of this year.

“I am sure you will agree that, at a minimum, the appearance of a conflict of interest is undeniable,” Cohen wrote.

Cohen, instrumental in bring the lottery to Tennessee, called the late regulatory effort “midnight rulemaking.”

Casinos and gambling interests gave Cohen $64,000 in his recent bid for re-election, the third-largest industry group after lawyers and retirees, according to the center for Responsive Politics, a Washington watchdog group.

When the Judiciary Committee held a hearing on Internet gambling last November, Cohen’s questions to witnesses, including a representative of the Family Research Council, made his position clear. Five days later, he attended a fundraiser in Las Vegas where he collected checks from 10 professional gamblers, some with nicknames like Texas Dolly and Vegas Stud.

Cohen’s letter raises questions about Wichterman’s role in the rulemaking effort and on the White House policy on conflicts of interest. The White House did not immediately respond to a request for comment.