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On May 14, the United States Supreme Court ruled that states can allow betting on individual sporting events. This overturns the 1992 federal law, the Professional and Amateur Sports Protection Act, that banned sports betting across America (except for Nevada).
The new ruling doesn’t technically legalize gambling on the federal level, but it lifts the original federal ban, effectively putting the ball in state-level government court. So, states now have the opportunity legalize and regulate sports betting as well as collect taxes on the practice.
As the states begin preparing for legalized sports gambling, credit issuers are saying not so fast.
Paying for bets with a credit card won’t be easy. Some of the biggest U.S. card issuers such as American Express, Citigroup, and Chase don’t allow their cards to be utilized for sports gambling, according to Bloomberg.
Upon hearing the Supreme Court’s decision, imminent changes have not been planned. In an email comment to Bloomberg, Chase spokeswoman Mary Jane Rogers noted, “We are watching the impact of the new ruling and may adjust our policies as we learn more.”
An Opportunity for Card Issuers
So, why would a card issuer see an opportunity in sports gambling? It’s an easy question to answer.
Before legalization, the monetary volume of illegal sports betting in America is estimated at $150 billion annually. But with its legalization, it could grow considerably, and this growth could appeal to credit card issuers as a new way for consumers to use their products – potentially hundreds of billions more collectively.
However, allowing credit card use for gambling presents problems in addition to opportunity. Remember that these cardholders are gambling money, and gamblers can lose.
Card issuers may take issue with extending lines of credit to consumers who are effectively putting that money up in the air for better or for worse. It’s easy to see the issue here. If a cardholder takes a bet on credit and loses, then they’re on the hook for that debt plus interest after losing their money.
Of course, the line of credit isn’t their money to begin with; however, it’s easy to assume they didn’t have the cash if they’re rolling the dice on credit. If a cardholder can’t pay the bill, then the card issuer is out on the money. With overdue credit card debt reaching a seven-year high last quarter, it’s a valid concern.
Consumer Debt Isn’t the Only Problem
There are other challenges, and one of them involves the Unlawful Internet Gambling Enforcement Act. Under this legislation, banks are required to prevent debit and credit card payments to online casinos. The Supreme Court did not address this particular law in its recent ruling, and the line could be blurry between an online casino and online sports betting.
Despite all the potential problems, gambling proponents might help push card issuers to make changes regardless. Payment networks such as MasterCard and Visa have already laid part of the groundwork to authorize card transactions for gambling, Bloomberg reported.
Credit Card Gambling Could Be Regulated Privately
In 2015, Mastercard and Visa began changing their merchant classification codes for gambling companies such as government-owned lotteries, horse-racing venues, and licensed online casinos by giving them distinct codes. This could have established a precedent.
Theoretically, banks and card issuers could use these classification codes to regulate gambling activity. For example, a cardholder with a $15,000 credit card limit may be restricted to a $2,000 gambling limit by a bank or card issuer.
In any case, if issuers decide to allow the use of credit cards to place bets, cardholders should remember to exercise caution not to go into debt and be sure to pay off the amount in full. It is hard enough paying off a credit card when it’s used for things like groceries and gas. Throwing gambling in the mix could be a life-changing problem for some unwary cardholders.
Author: Andrew Rombach
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