The Supreme Court’s decision on Murphy v. National Collegiate Athletic Association in May of 2018 changed the sports betting landscape forever.

The Supreme Court ruled that the Professional and Amateur Sports Protection Act of 1992 was unconstitutional, clearing the way to craft legislation legalizing and regulating sports betting at the state level.

Many speculated about the massive amount of economic opportunity from sports betting payments that presented itself for states to grab ahold of. The American Gaming Association estimated around $150 billion dollars per year was wagered illegally across the country. By contrast, a tax on legal sports betting could represent an enormous source of revenues for states to offset other forms of taxation.

While the news created numerous opportunities, people speculated the sports betting industry could face difficult challenges related to online payment processing. This has been a neverending battle for the online gambling industry, even after it went live in New Jersey back in November 2013.

Legislators and Banks Skeptical About Sports Betting Payments

So far, four states decided to permit online gambling, and another 12 have pending legislation. Despite the increased interest among the states, payment processing issues continue. Many credit card providers and banks are reluctant to change long standing policies for New Jersey, and the subsequent states where online gambling is permitted.

Pressure is low on financial institutions to change their rules, and many of them simply choose to deny all online gaming transactions, regardless of legality. As a result, some websites list alternative payment methods in anticipation of declined charges, with the greatest success for processing sports betting payments among processors that accept high risk payments.

Many in the industry have long understood the risks associated with sports betting, from the perspective of authorities concerned over chargebacks and illicit activities. National regulations like the Federal Wire Act further complicate payment processing, with heavy restrictions on the transfer of gambling funds across state lines. This presents the greatest compliance challenge for payment processors with robust mobile and online services.

Though there are still federal restrictions, C.J. Fisher of Fox Rothschild, states that the law is crafted in a way that “should allow the interstate transmission of information assisting in the placing of bets on sporting events, as long as the transmission is between states in which such bets are lawful.”

A Push In The Right Direction for Sports Betting Payments?

Some elements of payment processing have improved, but there is speculation that increased legal sports betting could change financial practices surrounding sports betting payments. At critical mass, US banks and credit card companies would be forced to review their policies and adapt them to the rapid rise of sports betting.

In April 2015, legal online gaming entities were given Merchant Category codes (MCCs) to help facilitate payment processing and fraud prevention. This was a continuation of other efforts, including outreach to banks and credit card companies, to bring financial institutions into alignment on payment processing standards. In the wake of the May Supreme Court decision, numerous payment processing companies are instituting standards to comply with KYC (know your customer), anti-money laundering (AML), and other payment processing regulations.

The rapid shift from illegal to legal sports betting payments presents a great opportunity for companies to use payment processing services with low fees, fast clearing times, and the ability to process credit cards and other forms of payment, along with authentication platforms that verify the age and the identify of gamblers to maintain compliance.  

The massive impending economic opportunity from sports betting payments has caused financial institutions to re-think their polices. Standards will continue to evolve as more states legalize sports betting, to take advantage of the decision by the Supreme Court to strike down the Amateur Sports Protection Act of 1992.

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