Could restrictive credit-card company rules impact the newly legalized US sports betting industry?
After Monday’s Supreme Court ruling on sports betting in the United States, lawmakers have begun to discuss how they can legalize the option and offer sports wagering in their individual states. While there is much money to be made in this new industry, one thing that might be standing in the way of a sports betting boom is credit cards.
Currently, certain credit card issuers do not allow their cards to be used for sports betting. This could be an issue as players in the US use credit cards for major transactions, including gambling.
No sports betting charges
When it comes to gambling, players want to have a nice selection of methods to place their wagers. Credit cards are among payment methods that consumers want to use when visiting a casino or engaging in online gameplay – they are often used as a form of payment in general. At present, however, companies such as American Express, Citigroup, and JPMorgan Chase do not allow their cards to be used for transactions involving sports wagers.
In a recent email to Bloomberg, JPMorgan spokeswoman Mary Jane Rogers said: “We will closely watch developments from the ruling and will consider any implications to our policy as the states put their own processes in place.”
Credit card companies are being cautious, it seems, as they could make money within the sports betting industry, but also may be at risk. Consumers are wagering around $150bn (£112bn) a year on illegal sports wagers, so there is money to be made. However, if consumers use a credit card to bankroll their bets and then default on what they owe, the lender could be stuck footing the bill.
Without the major credit companies allowing sports betting wagers to be placed, operators will be limited as to what type of payment methods they can offer. Consumers would also be limited as to what options they have for funding their sports bets, whether in land-based facilities or online. In the US, both online and land-based gambling should be an option when it comes to the sports betting industry.
Credit card companies being wary of the gambling industry is nothing new. In 2013, when New Jersey, Nevada, and Delaware began to offer online gambling, deposits and withdrawals via credit cards were an issue. Despite the online gambling industry being legalized in each state, credit card companies were not quick to get on board with allowing their cards to be used to fund online-casino and poker-player accounts.
By 2014, progress had been made. The New Jersey Division of Gaming Enforcement reported that in their state, Visa card transactions had increased approval ratings of around 73%, while MasterCard transactions saw around 44% approved. At the time, a new credit card code was being created for legal online gambling transactions so that such charges could be easily tracked. However, in the meantime, not all transactions via credit cards were approved, which left players without the ability to deposit funds into their online gaming accounts.
Since that time, additional improvements have been made, and payment processors are more open to the idea of online gambling, which makes it easier for consumers to enjoy their favorite casino and poker games without delay, as their deposits are being processed in a timely fashion.
Payment issues in the past have led US online gaming operators to offer alternatives. The latest instance of this comes from New Jersey. PlaySugarHouse began accepting Wyrz prepaid cards back in April, providing players with a simpler alternative to credit card use. The payment method allows players to use their credit card to purchase a prepaid card, that can then be used to fund a real-money account at the online casino.
Over the past few years, payment processors like Worldpay have begun working with credit card companies like MasterCard and Visa to allow gambling transactions via credit card. Worldpay is reportedly working with banks to educate the facilities on how they can make policy changes based on the recent Supreme Court ruling.
Worldpay Senior Vice President Joe Pappano said: “We are working with the card schemes – meaning Visa and MasterCard – on really putting together a SWAT team and really working with the issuing banks. Issuers have to modify their real-time decisioning tool, they have to update policies, they have to feel confident that the compliance and the framework and those consumer protections exist.”
Credit card issuers have an opportunity now that has never been seen before, and Pappano feels that the card issuers will begin to rethink their stance on gambling payments once they see how big the market is.