U.S. Credit Cards Hedging on Sports Betting

Months after the momentous U.S. Supreme Court decision permitting states to regulate sports betting, and the subsequent introduction of sports betting in several states (including DraftKings’ launch of the first mobile sports betting app in New Jersey) the focus now shifts to if and how U.S. credit card issuers will help fund such activities.

Currently, before accepting a gaming company as a new merchant, the gaming company must provide legal memoranda to payment processors to evidence the legality of their businesses–mainly that such activities are not considered unlawful gambling. Accordingly, many of the largest card issuers in the U.S. (i.e., Bank of America, Capital One, Chase, Citigroup, Wells Fargo, and American Express) have simply avoided any type of online gambling transactions. The significant increase in available revenue from funding sports betting could, however, alter this approach. In fact, it has been reported that several major financial institutions will review their sports wagering policies.

The next question will be how such transactions should be coded. It would be helpful to have a separate merchant category code (MCC) for online and mobile sports betting, as this would allow card issuers to create acceptance policies specific to sports wagering (several MCCs exist for online casino transactions). For instance, card issuers that permit online horse and dog racing wagers–classified under a separate MCC–can still refuse to offer other types of online gambling.

Finally, although the Wire Act, which was enacted in 1961 and prohibits using almost any known interstate telecommunications medium for transmitting bets or wagers, or information assisting in placing bets or wagers, on any sporting event or contest, does not prohibit interstate casino, poker or lottery games, it does prohibit interstate sports betting. This may be another concern for card issuers. However, as reported in GamblingCompliance, (August 9, 2018) Joe Pappano, senior vice president for Worldpay Gaming, said other states need only to look to the Nevada intrastate sports wagering model, which has operated lawfully for years, to identify how such a model can be operated in harmony with the Wire Act.

If you have questions regarding this material or need legal assistance with sports betting, land-based gaming, eSports, social gaming or promotional sweepstakes, please contact the authors Glenn Light at glight@lrrc.com, Karl Rutledge at krutledge@lrrc.com or MaryTran at mtran@lrrc.com.