Navigating the ins and outs of online gambling laws has never been an easy process. And while those waters were supposed to be a little less murky as legal online gambling grew some legs in the United States, several major banks are making things harder. Despite a select few states regulating online gambling, banks are blocking fully legal transactions.
Big Names Block Legal States
Bank of America, Wells Fargo, American Express and even PayPal are leading the charge of credit card issuers who aren’t allowing online gambling transactions in Delaware and Nevada, even though the states have the legal precedent to do so. On Nov. 26, New Jersey will also become regulated and it’s assumed that similar restrictions will be in place. For a state like Nevada, which first opened online bets on April 30, the issue is more than frustrating for players wanting to open up accounts. Delaware players are also having problems after the state opened bets on Oct. 31.
UIGEA’s Dark Cloud
A large part of banks’ stonewalling stems from a number of federal changes implemented by the Unlawful Internet Gambling Enforcement Act (UIGEA) laws of 2006. In the past, those laws were meant to prevent banks and credit card issuers from processing payments where online gambling was not legal. Fears of being held liable over any UIGEA violations and, especially, laws relating to underage gambling have caused those banks to avoid any possible risk and block all transactions, even if they don’t pose a possible threat.
Steve Kenneally, vice president for regulatory compliance at the American Bankers Association, expressed his concerns saying, “There are still things that can go wrong even with controls in place. Does the revenue I get offset the potential downside?”
Imposing Threat to a Large Revenue Stream
Banks and credit card companies no doubt have self interest in mind when covering their own backsides. However, such preventative damage control does little to help out the states affected by these restrictions. The online gambling industry has the potential to reach an estimated $7.4 billion in revenue over the next four years.
Blame it on the Bank
Oddly enough, these strict rules aren’t entirely widespread. Some companies are staunchly opposed to online transactions (legal or not) while others are much more lax. Bank of America, Wells Fargo, Discover and PayPal won’t allow their services to be used for online gambling transactions; though both Bank of America and PayPal claim their policies can be changed in the future. On the other hand, American Express prevents their cards from being used for any type of gambling, online or otherwise.
Interestingly, Visa and MasterCard have actually updated their legal jargon to allow gambling transactions on their cards in states where it is legal. Though this may sound like good news, both companies actually leave most decisions in the hands of the banks where the cards are issued. This means that a bank has the option of simply rejecting the transaction if they are unsure of it. “This is all bank-dependent,” said Seth Palansky, a spokesman for Caesars Entertainment. “There is an education that is ongoing regarding gaming transactions due to the new laws.”
Time for a Change
An education is certainly what is needed for banks and card issuers who are leery of illegal betting and other issues. Much of the obligation falls on banks and card companies to update their policies and the systems that are in place to prevent illegal gambling. Banks fearing potential liability charges aren’t exactly quick to make changes, even where online gambling is legal.
The transition might be slow in the making but some are coming up to speed. As mentioned, Bank of America is revisiting their policies of preventing transactions in the United States. Vernon Kirk, director of Delaware’s state lottery, says the state is compiling information on when credit cards are accepted or rejected and will contact the companies with the data. There, MasterCard transactions have a high approval rate with more Visa related rejections; debit cards are rarely rejected. When online betting opens in New Jersey, players will have a wealth of payment options including wire transfers, check by mail, and even cash deposits at select casinos.
