Representative Joe Barton (R-TX) introduced the Poker Freedom Act last month. This bill would create federal framework for a national online poker system. The spirit of the bill has wide support from the online poker industry. The Safe and Secure Internet Gambling Initiative took exception to a portion of Section 107 that states:
PROHIBITION ON THE USE OF CREDIT CARDS FOR INTERNET POKER.
—No licensee, no person operating on behalf of a licensee, and no person accepting payment for or settlement of a bet or wager who intends to transmit such payment to a person licensee, may accept a bet or wager or payment for or settlement of a bet or wager that is transmitted or otherwise facilitated with a credit card (as defined in section 5362(11) of title 31, United States 21 Code).
No other deposit options are specifically excluded in the Poker Freedom Act.
In a letter to Rep. Barton, Michael Waxman of the Safe and Secure Internet Gambling Initiative asks for this proposed ban on credit card deposits to be reconsidered. Waxman states:
The Ban would leave consumers at greater, not lesser, risk due to protections credit cards have compared to other payment vehicles.
The letter makes four points as to why the Safe and Secure Internet Gambling Initiative feels that credit cards would provide consumer protections that may not otherwise be available through other methods.
Protection Against Fraud and Identity Theft
Credit card account holders are only responsible for $50 in liability due to fraud if a transaction is reported to the issuing bank within 60 days. Bank account holders only have a $50 fraud liability if a transaction is discovered within two days, otherwise a bank fraud victim would be obligated to cover the first $500 in transactions.
“In light of these differences, consumers are much better protected from fraud through credit card use than they are if someone accesses their bank account with a debit card or ACH transaction.”
Ability to Detect Unusual Activity
Credit card issuers are known to question card holders about transactions that appear to be suspicious using a formula that flags unusual activity. This will provide an additional layer of protection that may not be found using ewallets or bank accounts to make an online poker deposit.
Protection Against Underage Gambling and Gambling from Prohibited Locations
“The credit card transaction has flexibility to accommodate data elements to signify the age of the cardholder and location of the computer device that authorized the transaction.”
Credit card processors often use codes to identify transactions to the issuing bank. The current code for unregulated online gambling is 7995. Using this or a similar code on regulated online gambling transactions would help prevent underage and excluded players from being able to make a deposit. Ewallet, bank wires and electronic funds transfers do not currently offer this same protection.
Controls to Combat Money Laundering
Players using a credit card to make a deposit could be required to accept withdrawals using the same method. This could prevent money laundering and other types of fraud.
Proposed Credit Card Ban Likely Tied to Problem Gambling Controls
Problem gambling is an issue that affects the brick and mortar and interactive casino industry. It appears the credit card exclusion was added to keep problem gamblers from getting into debt. The Safe and Secure Internet Gambling Initiative’s letter makes the point that there is little anyone can do to prevent players from borrowing money to gamble. The group points out several ways a player could take out an unsecured loan to fund their online poker account.
Other Potential Reasons to Allow Credit Cards
The Safe and Secure Internet Gambling Initiative makes a number of points about why credit cards provide a safe deposit method for players. There are several other reasons that credit cards may be a favorable deposit option for online poker.
Credit Card deposits offer a layer of security that goes above that provided by ewallets. For example, a player must have the actual credit card in hand to initiate a deposit. The deposit process will require the security code imprinted on the front or back of the credit card to complete the transaction. The address of the card holder must also be submitted for approval. Potential fraudsters would need a lot of information about their victim to be successful.
An ewallet may be hacked by simply gaining access to someone’s associated email account and changing the password on both accounts. This has been a problem in the regulated online gambling industry, but would not be an issue with credit cards as a hacked credit card account will not reveal a number, expiration date or security code.
Players that are uneasy about using their credit card online could use a feature such as Bank of America’s ShopSafe. This provides a temporary credit card number to use with online merchants and not require players to expose their bank information.
Nevada and New Jersey allow a player to make a deposit in person at a casino cage. There are ATM machines within a few steps of these cages that process credit card cash advances. The fees on these transactions can run as high as 15% if a player does not have a PIN or wants to withdraw more than their daily cash advance ATM limit. While online poker transactions would also be cash advances, they would not be subjected to third party fees.
The proposal to exclude credit card deposits from federal online poker has the best of intentions. In reality, players that want to borrow money to play online poker will find a way. Many of these options are far more expensive than accepting credit cards directly at the online poker room.
Safe and Secure Internet Gambling Initiative Letter to Representative Barton