Credit Card Majors Make Online Gambling Moves

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MasterCard and Visa have started making moves in the American online gambling market. It is now more than evident that legalized online gambling is gathering momentum in the United States. Nevada, New Jersey and Delaware have already legalized some forms of online gambling and many other states are thinking of following suit. Every now and then there is news of a new federal legalization initiative. MasterCard and Visa had blocked processing of all online gambling transactions after the UIGEA rules came into effect. These rules put the onus on the financial services provider to prevent financing of online gambling transactions.

MasterCard seems to be first off the block. The Nevada licensed Ultimate Poker site is accepting MasterCard transactions. Earlier the credit card companies had classified all gaming transactions under Merchant Category Code (MCC) 7995 and had instructed the affiliated banks not to process any transactions under this code. Now it seems that MasterCard has added several new MCCs for different gambling transactions. MCC 9754 is for horse racing, dog racing and non-sport internet gaming. MCC 9399 is for lotteries. Transactions under these codes are being processed in the normal way. Unconfirmed reports state that MasterCard transactions with Ultimate Poker are being coded with MCC 9754.

Visa has followed a slightly different route for differentiating between illegal and legal gambling. Earlier the credit card company had sent a circular to its merchant customers that stated “not all transactions coded with MCC 7995 are from unlawful internet gambling merchants”. Certain online gambling transactions can be legally processed. In order to identify and process these transactions the merchants are required to register with the Visa merchant verification value program. After an extensive and somewhat bureaucratic validation process the betting transactions the merchant wants to process are evaluated in terms of the UIGEA. If they are determined as legal then the merchant is given a specific code to speed future transactions and avoid automatic blocking.

The exact mechanics of the Visa merchant verification value program are not known. Also it is not clear how the program will keep abreast of the regular changes taking place in the American online gambling market. Whether there is a separate program, or at least separate guidelines, for each state? Whether repeated validation will be required every time a new legislative move is enacted by the legislators or law enforcement agencies? If the Department of Justice does not concur with Visa’s reading of the situation, the affiliated banks can run afoul of the UIGEA. How many will be prepared to take the risk? These are some of the questions being asked.

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