Why Banks Are Hesitant To Accept Legal Sports Betting Transactions
NEW YORK – The Professional and Amateur Sports Protection Act of 1992 (PASPA) was repealed in 2018, allowing states to legalize sports betting on a state-to-state basis but banks are shying away from the industry even though more and more states are making the pastime legal.
With almost half of the United States having some form of a legal sports wagering market and even more in talks to have their own in the future, why are banks in the U.S. hesitant to do business with sportsbooks?
The short answer is simple enough; these financial institutions do not want to be held liable and then prosecuted by federal courts should any fraudulent activity take place.
The long answer for banks declining business and transactions with online and mobile sportsbooks is more detailed because it’s quite literally all about the details.
Each state with a legal sports betting market has a set of their own individual rules and regulations.
Banks would need to ensure that they know the ins-and-outs of each particular state’s rules and regulations to be able to fully cover themselves from any potential legal issues that could stem from the gambling industry and money changing hands.
This would take a bit of effort on the part of banks and would cost them money as they feel they’d require a separate set of employees who know the rules and regulations for the sports wagering industry of each state and what red flags to look out for with gambling transactions.
Because of the friction between sportsbooks and financial institutions, plenty of money is being lost in revenue for the legal sports betting market through all of the declined transactions that take place each year.
The main issue outside of understanding the laws of each state is geolocation technology. Should a sports bettor use a mobile sportsbook outside of state lines with their bank card and the sportsbook’s geolocation technology fails to catch it, the bank could face federal charges for allowing the money to go through and unknowingly facilitated the crime to take place.
“You don’t need to be aware of all of the intricacies and requirements that each state places on their sports betting or sports gambling regimes, but you need to be confident that your client (sportsbook) has a compliance program and a compliance officer,” said Dan Kim, assistant general counsel for global financial crimes at JPMorgan Chase. “How large is their staff? How sophisticated is their technology when it comes to ensuring that all this activity is occurring in the state?”
Banks want to be able to visit with gaming operators and get a firsthand look at the technology being used and their financial monitoring systems before they begin to embrace the idea of doing business with sportsbooks.
Knowing that the companies have a handle on their security and monetary transactions will help banks to breathe easier when adding to the handle of a sportsbook through approving member deposits for sports betting activities.
Once banks familiarize themselves with a sports wagering platform and understand what is and isn’t normal in the sports betting industry, more of these institutions will work with sportsbooks without issue.
It’s understandable that these financial businesses to want to make sure they’re safe and not inadvertently helping to commit a crime because of poor technology and security on the part of a sports betting application.
As the popularity of the legal sports betting industry continues to grow nationwide, banks will slowly make their way onboard the sportsbook train.
Outside of this, there has been talk that President-Elect Joe Biden will put more restraints on wire transactions regarding wagering on sports and other online and mobile types of betting. However, there have also been rumors of Biden not planning to put any restrictions on industries that have already been established.
Until Biden’s views can be verified as to what his plans are for sports gaming, banks will hold back from any further acceptance of the sports betting market so as not to put employees in place for a gambling sector only to have to change it if the rules change under the new President.
A definitive answer is expected to happen at the beginning of the year. Should Biden take no action, U.S. banks will start to allow sportsbook transactions to happen more and more as they learn about market safety for themselves.
https://www.legalsportsbetting.com/news/why-banks-are-hesitant-to-accept-legal-sports-betting-transactions/