REJECTED! NEW LAW HITS ADWS
By Ray Paulick
Many horseplayers attempting to use credit cards to fund legal advance-deposit wagering accounts were in for a surprise this week when their requests were turned down after the federal Unlawful Internet Gambling Enforcement Act went into effect June 1.
The law, passed in 2006 and delayed for several years as regulations were drafted, is designed to prevent Americans from using their credit cards for illegal Internet gambling, though it has specific exemptions for advance-deposit wagering approved by the Interstate Horseracing Act. But the law also provides a “safe harbor” for financial institutions, permitting them to block transactions involving any form of gambling, including licensed and legal ADW companies. In other words, though the law permits credit cards to be used for ADWs, it doesn't require banks and credit card companies to OK transactions with those companies.
One Paulick Report reader sent us the following message on Thursday: “I've had three credit cards that always worked at my ADW accounts denied by all of them today and yesterday. They said there was nothing they could do and that I would have to deposit through my checking accounts. … I play online poker a little and tested my credit cards there after this. All three still worked for deposits to the poker site I play at. I can't bet races now as my accounts are close to empty.”
The Unlawful Internet Gambling Enforcement Act was to go into effect last Dec. 1, but was delayed until June 1, a move National Thoroughbred Racing Association CEO Alex Waldrop called “an important win for the racing industry.”
At that time, Waldrop said, “We will continue to work diligently with the financial services industry and our ADW service providers to ensure that online pari-mutuel wagers are processed in accordance with the Interstate Horseracing Act.”
On March 5, writing in his blog at NTRA.com, Waldrop said, “What is the NTRA doing now on Capitol Hill that affects you? Plenty. We are working to delay implementation of the regulations associated with the Unlawful Internet Gambling Enforcement Act. Simply put, the regulations can negatively affect the ability of horseplayers to fund their advance deposit wagering accounts. A $1.3 billion market is at risk. So are the thousands of online horseplayers and the hundreds of thousands of purse dollars that Internet wagering brings to our sport. Fans and revenues are two things our industry can't afford to lose.”
Well, time flies. It's now June 4, those UIGEA regulations took effect, and many banks are not allowing transactions involving legal ADW companies. The complication arrived just days before the Belmont Stakes, one of the biggest wagering programs of the year.
“The law has a clear exemption for account wagering,” said Peggy Hendershot, who handles legislative affairs for the NTRA. “It is very specific that activities conducted under the Interstate Horseracing Act are exempt. But credit card companies have taken different approaches on how to address the UIGEA.”
One method, Hendershot said, is an opt-in process where all gambling entities are lumped together under code number 7995. In that case, she said, the credit card company would have to validate the ADW companies as an exempted entity, which requires several steps. “Not many companies were validating our merchants (ADWs),” said Hendershot. “That might explain why people are having trouble (using credit cards to make deposits).”
Hendershot said MasterCard is employing a new code unique to pari-mutuel wagering and lotteries that makes the decision for banks on whether to approve a transaction with an ADW an “opt-out” process. “Our preference would be for Visa to switch from the 7995s to the code MasterCard has adopted,” she said.
“I'm not surprised there have been bugs in the system,” said Hendershot. “It's still very much a process of education. The NTRA and our account wagering service providers are working with lobbyists and the credit card companies.”
In other news related to the new federal law, another Paulick Report reader said some banks in the United States have refused to cash purse checks from Great Canadian Gaming, which owns several racetracks in Canada, due to UIGEA and the fact the checks are foreign and from a gaming company.
UPDATE: Yet another reader sent the following comment regarding how the UIGEA may impact horseplayers: “More importantly and what VERY few people know is that banks and credit card companies are making listings/keeping files on ‘gamblers' via these funding requests and will cut credit limits. They know gamblers will default on payment at a higher rate than non-gamblers.”
Copyright © 2010, Ray Paulick
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