A View On How US States Are Dealing (Or Not Dealing) With Online Gambling

Posted: April 23, 2015

Updated: April 23, 2015

A dim future for legalizing online gambling in the US lies ahead with the possible RAWA to be implemented.

Morgan Stanley believes that 15 states will have online gambling by 2020. To date only Delaware, New Jersey, and Nevada allow online gambling including mobile betting in the US. However other states want to but there seems to be some fuzzy area in US Federal government legislation which makes it difficult to really understand their position on online gambling.

Under the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 it is stated that some online gambling is forbidden. But get this, it’s legal under US gambling laws, if it’s intrastate and inter-tribal gaming. So far it’s hands off for state-run online gambling industries, but even then banks and financial institutions don’t want to get in that fuzzy area.

Banks steering clear of trouble

So Bank of America, Wells Fargo, PayPal and American Express are taking a wide berth by not allowing any online gambling transactions even if an online internet casino website is legal. Banks feel they have nothing to lose as in any case the percentage of people who gamble online is so small, in comparison to the whole banking population that they think it’s not worth the risk of infringing on the UIGEA.

But there may be hope. Last Friday, in order to help the online gaming industry advance, MasterCard, Visa, American Express, and Discover managed to implement a new Merchant Category Codes (MCCs) for legal online gaming transactions. This is because there have been too many bad payment issues linked to credit cards payments on New Jersey’s regulated online poker sites.

According to Matthew Katz, CEO of CAMS, a player verification company in the regulated U.S. Market,
“Credit card issuer and suppliers’ hesitancy to support iGaming transactions has hobbled the industry here in the United States”. The new MCCs will give more legibility to the legalized online operating industry, but it will eventually lie on the individual bank or credit card company to make the choice of processing online gaming transactions or not.

RAWA could end online gaming in all states

Welcome to Delaware

Although the new MCCs do not replace in any way what should be a more clear-cut federal legislation, their introduction may enhance the profitability of existing online gambling industries as well as the likelihood of legalizing online gambling in Pennsylvania and California. But then again it’s land-based gambling tycoon, Sheldon Adelson, who is backing the implementation of the Republican bill in Congress.

The bill is the Restoration of America’s Wire Act (RAWA), which is against wire transfers for electronic wagering. So, there may be trouble ahead for existing online gambling operators. It would mean that those states wishing to engage in online gambling, operators and gamblers, alike would see their bets for legalization of online gambling go up in smoke if the controversial bill gets passed.

So what profits exactly would or could go up in smoke? When Delaware legalized online gambling, they were looking at making as much as $5 million bucks. The stark truth is they made only “$318,000 for the state and none at all for the three casinos involved”. With that much less made they are lucky if they reach the adjusted figure of $2.7 billion, by 2020. However, even though there hasn’t been the rocket take off as expected, it could provide more revenues for the Federal governments that regulate it.

According to Morgan Stanley, “Legislative processes continue to be slow as lawmakers remain unconvinced that online gaming is currently worth the hassle for limited tax revenue”. It has forecast that federal legislation to ban online gaming may be just a spun tale but fears are that it’s Congress that will give the calling card on whether or not to legalize and regulate online gambling. This would also mean users would be protected from crooked gambling websites.

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