Processing Procedures for Online Gambling Transactions

Processing Procedures for Online Gambling Transactions


Recently MasterCard has been reported to crack down on online casino deposits. The action was seen as a sign that banks and payment companies are preparing for implementation of America’s Unlawful Internet Gambling Enforcement Act (UIGEA), which bans the facilitation of online gambling by payment companies. The Act was originally supposed to have been enforced from 1 December 2009, although the US treasury later approved a delay allowing companies until 1 June 2010 to comply.


The issue that prompted the crackdown was the widespread practice of online casino operators coding online gambling transaction as other kinds of online commerce, in order to manipulate the system.


Let’s take a look at how online gambling transactions are classified at present and how the payment card industry has mandated their processing.


Online casinos are processing what are known in the payment card industry as “unique transactions.” Unique transaction is a transaction that cannot be categorized as a retail sale or a cash advance, and for which there are special merchant classification codes (MCCs). Merchants processing unique transactions are required to follow card acceptance procedures that may differ from the ones needed in regular transactions. All unique transactions must be properly identified as such in all authorization and clearing messages.


Online casinos must incorporate the following requirements into their payment acceptance procedures:

  • All cardholders must be required to identify the state or foreign country where they are physically located at the time of the transaction. The response must be recorded and kept, along with the cardholder’s account number, the transaction amount, and the date. This information must be retained for a minimum of one year from the transaction date and provided to the acquiring bank on request.
  • In order to establish?áa merchant account with a U.S. processing bank, online casino merchants must post a notice on their websites (in a position such that the notice will be displayed before requesting a card account number, such as a click-through notice) stating that assertions have been made that online gambling may not be lawful in some jurisdictions, including California, and suggesting that the cardholder check whether online gambling is lawful under applicable law.
  • Online casino merchants must not sell chips or other value that can be used, directly or indirectly, to gamble other than at a merchant that sells such chips or other value.
  • Online casino merchants must not credit winnings or unspent chips or other value usable for gambling to a cardholder’s card account.


The fact remains, however, that in the U.S. payment companies are banned from processing online gambling transactions and internet casinos will have to find other ways to collect payments.


Image credit: Freepokerphotos.com.

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