The rise of fantasy sports adds another layer of complexity, as lawmakers and fantasy sports businesses argue over whether the activity is truly “gambling.” However, if you run a casino, online gambling site, or fantasy sports site, be aware that you’ll be considered “high risk” when it comes to credit card processing.
High Risk Merchant Accounts
Businesses that operate in industries considered “high risk” will need a dedicated high-risk merchant account. That will allow you to accept credit cards by using a company that explicitly supports high risk businesses. Who determines what businesses are high risk? While the credit card companies themselves have a small list, credit card processors themselves ultimately determine the risk classification. Businesses that aren’t on Visa or Mastercard’s list can still be high risk. Processors make the determination based on industry, card acceptance method, poor personal credit, trouble with prior processors, or a combination of factors. The good news is, if your business is legal, there’s a processor out there who can support it. The bad news is, some gambling businesses are illegal by state law. That makes it more difficult for online gambling businesses. We’ll take a look at why that matters a little later in this article.Why is gambling considered high risk?
Processors consider gambling to be high risk for a few reasons, including age restrictions, the complexity of adhering to different state laws, federal regulations such as the Unlawful Internet Gambling Enforcement Act, and the possibility of higher-than-typical chargebacks. When looking for a merchant account for your gambling business, save time by seeking out companies that explicitly support gambling.Merchant Accounts for Casinos
Physical casinos that don’t offer gambling online will usually have an easier time securing a merchant account, but processors still consider it high-risk. In-person transactions are less risky from a processing standpoint. Additionally, the customer is physically present in the legal business, not accessing it from another state that prohibits gambling. But the potential for chargebacks from “buyer’s remorse” is greater than in some industries, and age restrictions are still in place. You should expect to need a high risk merchant account for casinos. Additionally, keep in mind that “chips” for gambling will still need to be purchased in cash. That said, many casinos offer services other than just gambling, such as food and alcohol sales, gift shops, catering and events, and more. If your casino offers such services, be sure to secure a separate merchant account for each type of service. You don’t want your on-site wedding event department accepting payments through your gambling floor merchant account. Aside from being a good business practice, maintaining separate merchant accounts will help your bottom line. An on-site restaurant or other low-risk department will be able to secure a merchant account with more favorable credit card processing rates.Online Gambling Merchant Accounts
Businesses offering online gambling will have the hardest time securing a merchant account. Many processors simply don’t support it, due to complex laws and regulations. If you do find a processor to offer an account, keep in mind that they may impose restrictions, including ACH delays or rolling reserves. Additionally, you may need to certify that you won’t allow users from states where gambling is prohibited. While in-person gambling has restrictions, online businesses often find it more challenging to secure a processor. This is partly due to the Unlawful Internet Gambling Enforcement Act of 2006, a US government regulation concerning internet gambling.Unlawful Internet Gambling Enforcement Act
Passed in 2006 to curb payment processing for online poker, the UIGEA sought to clarify the illegality of online gambling. In short, the Act “prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law.” It also requires payment systems to have policies in place to block processing for unlawful or restricted transactions. Rather than open themselves up to potential problems, many processors simply choose not to support online gambling.Fantasy Sports Merchant Account
In the past several years, fantasy sports have grown in popularity. But businesses running websites for fantasy sports betting have not been without controversy. The Unlawful Internet Gambling Enforcement Act proves a little vague when it comes to fantasy sports. The Act potentially offers a carve out for allowing fantasy sports, by differentiating games of chance from games of “skill” or “knowledge.” That’s the argument that daily fantasy sports businesses have attempted to use: that fantasy sports is a skill-based game. Ultimately, the UIGEA doesn’t provide a clear-cut definition on fantasy sports legality. States are largely able to determine if fantasy sports falls under illegal gambling per their own state laws.DraftKings, FanDuel, and Vantiv: Court Cases for Fantasy Sports Processing
Participants in fantasy sports may remember a 2016 showdown between DraftKings, FanDuel, and payment processor Vantiv. The kerfuffle started when Vantiv informed fantasy sports sites that it would stop payment processing for daily fantasy sports businesses. According to The New York Times, Vantiv claimed the reasoning was that fantasy sports were considered a form of gambling and illegal under some current laws. Since the onus is on the payment processor to ensure that it is not offering services for an illegal business, some processors simply choose not to be involved with industries that may walk a fine line. In Vantiv’s case, the company told fantasy sports businesses that use Vantiv that they could not accept players from New York. That restriction was the result of a cease-and-desist order from the office of the state Attorney General, who claimed that fantasy sports count as illegal gambling under New York state law. However, around the same time, a Massachusetts court ordered that Vantiv had to continue processing payments for DraftKings. Fantasy sports businesses challenged New York’s ruling. Vantiv asked the courts to clarify, stating that the company was stuck in the middle between conflicting court rulings. As fantasy sports continues to grow in popularity, expect to see clarification on these issues. For the time being, fantasy sports remains a high-risk situation. Even some credit card processors that specialize in high risk won’t support fantasy sports businesses in the United States.Sports Betting
In late spring of 2018, the United States Supreme Court changed course on a long-standing prohibition on sports betting in the country. According to Reuters, the SCOTUS struck down a federal law from 1992 that banned sports betting in most locations. The Court sided with the state of New Jersey, which argued that the federal law interfered with states’ rights to regulate sports betting. The decision does not automatically permit sports betting in all states, and indeed, many states would need to pass or amend their own laws to permit it. Additionally, some opponents of the change argue that it could have negative implications as far as game-fixing and other cheating strategies. However, others say that it should be legalized and regulated, allowing for fan engagement and a possible economy boost. ESPN published and maintains a tracking map showing which states have taken action related to sports betting. The newness of the decision means we’ll have to wait and see how it plays out regarding credit card processing. Given that sports betting will be age-restricted and is likely to be governed by a variety of state-level laws and regulations, it’s safe to assume it will be considered a high-risk industry for processing even if it becomes legal in all 50 states.Gambling Merchant Account Rates and Fees
High risk merchant accounts will cost more than lower risk accounts, and that holds true for gambling accounts. Unfortunately, since high-risk processing is even more business-specific than other types of processing, you usually won’t see rates and fees published online. Instead, you’ll need to request a quote tailored to your specific business. Be prepared to offer details on what kind of business you run, how you accept payments, your average transaction size, your expected monthly volume in card payments, and supporting documents such as financial and bank statements, social security number, and ID. We've made the process of getting quotes easier than ever. By providing some details about your business, you can get instant quotes from processors that support high risk industries. It's free, private, and no obligation. Try it here!
Ben Dwyer
Ben Dwyer began his career in the processing industry in 2003 on the sales floor for a Connecticut‐based processor. As he learned more about the inner‐workings of the industry, rampant unethical practices, and lack of assistance available to businesses, he cut ties with his employer and started a blog where he could post accurate information about credit card processing. As the blog gained in popularity, Ben began directly assisting merchants in their search for a processor. Ben believes in empowering businesses by providing access to fair, competitive pricing, accurate information, and continued support. His dedication to transparency and education has made CardFellow a staunch small business advocate in the credit card processing industry.
