Just as legal online gambling gets started in the U.S., banks and payment processors are refusing to play.
Credit-card issuers Bank of America Corp., Wells Fargo & Co. and American Express Co., along with eBay Inc.'s PayPal, aren't allowing the transactions, according to the companies. Delaware and Nevada permit Internet wagering, with New Jersey poised to become the third and biggest state on Nov. 26.
The rejections threaten a nascent business with the potential to reach $7.4 billion in annual revenue in four years, the estimate of researcher H2 Gambling Capital. Some Visa and MasterCard issuers have concerns over potential liability for underage wagering or other violations, according to the American Bankers Association. American Express and PayPal say they don't process gambling transactions of any kind.
"There are still things that can go wrong even with controls in place," Steve Kenneally, vice president for regulatory compliance at the Washington-based association, said in an interview. "Does the revenue I get offset the potential downside?"
In Delaware, which introduced online betting Oct. 31, players' Visa and MasterCard transactions were rejected by some banks, according to Vernon Kirk, director of the state lottery, which runs the wagering there.
Players in Nevada, which took its first online poker bets April 30, have had difficulty opening accounts. The state is communicating with credit-card issuers, Jim Barbee, technology chief for the state Gaming Control Board, said in an e-mail.
Visa Inc. and MasterCard Inc. allow gambling-related credit-card transactions on their networks in states where it's legal, according to both companies. That leaves the decision- making to the card issuers.
"Visa has updated its procedures to code newly legalized Internet gambling transactions so that financial institutions can identify and process them in states where they are allowed," Rosetta Jones, a spokeswoman, said in an e-mail.
MasterCard allows its cards to be used for online gambling in states where it's legal, according to Jim Issokson, a spokesman, who declined to discuss individual banks.
"This is all bank-dependent," said Seth Palansky, a spokesman for Caesars Entertainment Corp.'s interactive unit, which runs the World Series of Poker website in the state. "There is an education that is ongoing regarding gaming transactions due to the new laws."
Bank of America doesn't allow the transactions, Anne Pace, a spokeswoman for the second-largest U.S. bank, wrote in an e-mail. The company is reviewing whether to permit them in the future, she said.
American Express bars use of its cards for any gambling, Marina Norville, a spokeswoman, said in an e-mail.
Wells Fargo also doesn't allow the use of its credit cards for online gambling, said Natalie Brown, a spokeswoman for the San Francisco-based bank. Nor does Discover Financial Services, according to Jon Drummond, a representative of the Riverwoods, Ill.-based credit-card issuer. Both cited federal compliance issues.
PayPal, the Web-based payments service, cited internal policies, which it said are subject to change.
"PayPal does not permit the use of its service for online gambling in the U.S. according to our acceptable use policy," said Jeff Rutledge, an outside spokesman with MSL San Francisco.
Banks are concerned they may be held liable for illegal bets placed with their credit cards, such as by underage gamblers or customers who may not be physically present in the states where online betting is legal, said Kenneally, of the banking association.
"There's still the uncertainty over Internet gambling and the liability that could fall on a bank," Kenneally said.
Banks programmed their card-payment systems to reject gambling transactions after Congress passed the Unlawful Internet Gambling Enforcement Act in 2006, according to Kenneally. The law barred businesses from accepting payments for illegal online bets.
In the past year, Nevada, Delaware and New Jersey legalized online betting and now must get banks to alter their setups to accept transactions they have been blocking.
The rejections in Delaware have been most acute with Visa credit-card transactions, according to Kirk, the state lottery official. Many banks offering MasterCard have updated their systems to reflect the legal changes, he said. Debit-card transactions have been approved virtually 100 percent.
Delaware is compiling data about credit-card acceptance rates and will contact the card issuers, Kirk said in an e-mail. Lottery officials have also discussed the situation with the Delaware Bankers Association. About 1,100 players have signed up in the state in the past two weeks.
WSOP.com and Ultimate Poker, two sites licensed to offer online poker to people in Nevada, have averaged 130 players and 110 players, respectively, over the past week, according to Pokerscout.com, an industry website. PokerStars, the largest player outside the U.S., averaged 23,500.
Customers of Ultimate Gaming in New Jersey, which is scheduled to introduce online betting Nov. 26, will have a variety of payment options, including wire transfer, check by mail and cash deposits at the Taj Mahal casino in Atlantic City, according to Tom Brietling, chairman of the company.
"We will continue to work with Visa to improve acceptance rates," he said in an e-mail.