The Supreme Court in May ruled in favor of the state of New Jersey in its bid to legalize gambling on sporting events, overturning a 1992 federal law that made sports betting illegal in the United States outside of Nevada and a handful of other states.
The ruling was greeted with jubilation by supporters around the country who hope it will usher in an era of online sports betting where residents of every state can legally and conveniently place bets on everything from the Super Bowl to NCAA squash games. How the credit card industry responds to the new legal landscape is anyone’s best guess, especially since issuers so far have largely limited how you can gamble with credit.
Gambling With Credit
Given the convenience credit cards offer consumers, most sports bettors will wonder if they can place their wagers using credit cards. In Nevada, home to the country's most mature sports betting market, most of the major sportsbooks allow bettors to fund an account or prepaid card with the sportsbook using a credit card, but this can lead to hefty fees.
For example, Stanton Casinos allows players to make a deposit on a prepaid card using a credit card, but the credit card issuer counts it as a cash advance rather than a regular purchase. That means the player will be charged a fee—typically 5% of the amount—and will immediately rack up interest as high as 25% on that cash advance without the usual grace period. Likewise, the terms and conditions of the playMGM card—the prepaid card used at MGM-affiliated sports books—notes that financial institutions may charge a cash advance fee for a prepaid card deposit.
The reason bettors can only use their credit cards to receive very expensive cash advances lies with the credit card industry's reluctance to wade into the sports betting and gambling arena—rather than any federal law.
This may surprise bettors who have grown used to using their credit cards to place bets with popular daily fantasy sports leagues such as DraftKings and FanDuel. But issuers don’t consider these fantasy-league bets as cash advances. While the distinction between placing a bet with fantasy leagues and a bet on a single game may seem arbitrary, federal law has specifically singled out betting on fantasy sports as permissible (though some states have stepped in and passed their own laws prohibiting daily fantasy sport leagues).
A Bet on the Future?
Given the current reticence of credit card issuers to get involved with online gambling and sports betting, should people celebrating the recent Supreme Court ruling prepare to put away their plastic if they want to place bets online in the future? Maybe, but there are also signs credit card issuers are tentatively dipping their toes into an arena they previously considered verboten, starting with Chase and horserace betting.
The Interstate Horseracing Act that's been on the books since 1978 permits gambling on legal, regulated horse races both in the state holding the race and in the state where the bet on the race is placed. Despite the legality of these wagers, credit card companies historically have denied transactions on online betting sites dedicated to these races—that is, until Chase announced a reversal of its policy in March of this year. Credit cards issued by Chase now can be used to place bets at advance deposit wagering companies online. At the time, the National Thoroughbred Racing Association said it hoped that Chase’s move “could lead to acceptance of these types of transactions by other leading credit card issuing banks.”
It could also serve as a precursor to how credit card issuers will respond to sports bets if—or when—the industry becomes legal in the wake of the recent Supreme Court ruling.