Payment complications for U.S. online gambling

Just as sanity appeared to have returned to the American online gambling industry with state-by-state legalisation in Delaware, Nevada and New Jersey, complications have arisen from the financial transactions perspective, reports the Bloombergs business news agency.

In an article titled “Web Gaming Curbed as PayPal to Bank of America Refuse Bets”, the agency reports that U.S. banks and payment processors are refusing to cooperate.

The article claims that credit-card issuers Bank of America Corp., Wells Fargo and Co. and American Express Co., along with PayPal, aren’t allowing the transactions, according to company spokesmen, endangering a nascent business with the potential to reach $7.4 billion over the next four years.

Some Visa and MasterCard issuers have concerns over potential liability for underage wagering or other violations, according to the American Bankers Association, whilst American Express and PayPal say they don’t process gambling transactions of any kind.

“There are still things that can go wrong even with controls in place,” Steve Kenneally, vice president for regulatory compliance at the Washington-based ABA said. “Does the revenue I get offset the potential downside?”

In Delaware earlier this week , Vernon Kirk, director of the state lottery, revealed that players’ Visa and MasterCard transactions were rejected by some banks.

The rejections in Delaware have been most acute with Visa credit-card transactions, according to Kirk. Many banks offering MasterCard have updated their systems to reflect the legal changes, he said. Debit-card transactions have been approved virtually 100 percent.

Delaware is compiling data about credit-card acceptance rates and will contact the card issuers, Kirk said. Lottery officials have also discussed the situation with the Delaware Bankers Association. About 1,100 players have signed up in the state in the past two weeks.

Players in Nevada, which took its first online poker bets April 30, have had difficulty opening accounts, Bloombergs claims, adding that Nevada Gaming Control Board technology chief Jim Barbee says the state is communicating with credit-card issuers.

Visa Inc. and MasterCard Inc. allow gambling-related credit-card transactions on their networks in states where it’s legal, according to both companies. That leaves the decision-making to the card issuers.

“Visa has updated its procedures to code newly legalized Internet gambling transactions so that financial institutions can identify and process them in states where they are allowed,” spokesperson Rosetta Jones told Bloombergs.

Jim Issokson, speaking for MasterCard said the same policy was being applied.

“This is all bank-dependent,” said Seth Palansky, a spokesman for Caesars Interactive Entertainment Corp. “There is an education [process] that is ongoing regarding gaming transactions due to the new laws.”

Anne Pace, a spokesperson for the Bank of America told Bloombergs that her company does not permit online gambling transactions, but the company is considering whether to permit them in the future.

American Express bars use of its cards for any gambling, spokeswoman Marina Norville wrote in an email. Wells Fargo has a similar policy, according to spokeswoman Natalie Brown, whilst PayPal said its policy was the subject of change.

“PayPal does not permit the use of its service for online gambling in the U.S. according to our acceptable use policy,” said Jeff Rutledge.

There is still uncertainty over internet gambling and its legality, and banks are concerned that they could be subject to liability, the ABA spokesman said, noting that many US banks programmed their card-payment systems to reject gambling transactions after Congress passed the Unlawful Internet Gambling Enforcement Act in 2006.

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