Online Casinos Hobbled as Credit-Card Issuers Reject Bets

Just as legal online gambling gets started in the U.S., banks and payment processors are refusing to play.

Credit-card issuers Bank of America Corp., Wells Fargo & Co. and American Express Co., along with EBay Inc.’s PayPal, aren’t allowing the transactions, according to the companies. Delaware and Nevada permit Internet wagering, with New Jersey poised to become the third and biggest state on Nov. 26.

Enlarge image

Credit-card issuers Bank of America Corp., Wells Fargo & Co. and American Express Co., along with EBay Inc.’s PayPal, aren’t allowing online gambling transactions, according to the companies. Photographer: Ron Antonelli/Bloomberg

The rejections threaten a nascent business with the potential to reach $7.4 billion in annual revenue in four years, the estimate of researcher H2 Gambling Capital. Some Visa and MasterCard issuers have concerns over potential liability for underage wagering or other violations, according to theAmerican Bankers Association. 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 association, said in an interview. “Does the revenue I get offset the potential downside?”

In Delaware, which introduced online betting Oct. 31, players’ Visa and MasterCard transactions were rejected by some banks, according to Vernon Kirk, director of the state lottery, which runs the wagering there.

Players in Nevada, which took its first online poker bets April 30, have had difficulty opening accounts. The state is communicating with credit-card issuers, Jim Barbee, technology chief for the state Gaming Control Board, said in an e-mail.

Bank Dependent’

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,” Rosetta Jones, a spokeswoman, said in an e-mail.