U.S. Banks and Payment Processors Refusing Transactions for Online Gaming
With legalized online gambling now being available in some form to residents of Nevada, New Jersey and Delaware, internet gaming is poised to become big business. Unfortunately, officials have discovered a problem with their plans; some credit card issuers are not allowing online gambling transactions and it is leaving their customers on the outside looking in.
Banks Worried About Financial Responsibility
The main worry that causes banks to reject these transactions is the liability concern of the financial institutions that issue the cards. Issuing banks are afraid they will be left holding the financial bag in instances of illegal gambling such as underage wagering and illegal betting. When contacted, both VISA Inc. and MasterCard Inc. said they allow the online gaming transactions; both also allow the financial institutions who issue the cards to place further restrictions on their cardholders. A representative for Discover Financial Services, which issues the Discover card, said his company does not allow online gaming payments. A representative from American Express confirmed the company does not allow any gambling transactions, online or otherwise.
Currently Bank of America Corp. and Wells Fargo & Co. are two of the largest banks denying their cardholders the option of online gambling. A representative for Bank of America Corp. did state that the company is reviewing its policy on such matters where online gaming is now legal. PayPal stated they do not permit the use of PayPal funds for online gaming; a representative also said that the rule was subject to change.
The Effects of Federal Internet Gaming Laws
The problem originated with the Unlawful Internet Gambling Act of 2006 passed by the United States Congress and signed into law by then President George W. Bush. After the law passed, banks programmed their systems so they would reject any such transactions. Now that online gambling is legal in some states, the banks have been slow to reverse that programming. In Delaware, most of the credit card rejections are by banks who issue VISA cards. Most banks issuing MasterCard have changed their systems to accept online gaming transactions where they are now legal. Contrasting credit card payments, transactions involving debit cards have an almost 100% acceptance rate.
“This is all bank dependent” stated Seth Palansky speaking for Caesar’s Entertainment Corp. which owns the online site World Series of Poker in the state of Nevada, “There is an education that is ongoing regarding gaming transactions due to the new laws”. The Nevada Gaming Control Board is communicating with banks who issue credit cards in response to Nevada gamers being denied accounts due to banking issues. The state of Delaware is collecting data and may do the same.
A Temporary Problem as Things Move Forward
Most officials see this as a temporary problem as states where online gambling is legal are communicating with banks on the changes in the laws. However, it appears that the final decisions rest in the hands of the institutions who issue the cards; banks must weigh the potential advantages and risks to their bottom line for doing so.