Late last week, the nation’s largest credit card companies (American Express, Discover, MasterCard and Visa) began utilizing Merchant Category Codes (MCCs) specifically designated for credit card transactions entered into between consumers and legal online gaming venues – such as those permitted to operate in New Jersey, Nevada and Delaware. These MCCs, or “transaction codes,” are used by financial institutions to determine the type of transaction associated with the underlying payment authorization request.

Will Payment Processing Become Easier for Online Gaming Venues?

This recent move by the credit card companies comes largely in response to complaints from legitimate online gaming venues about the high rate of rejections from banks that are hesitant to process transactions involving online gaming due to concern over the reach of certain anti-gambling statues, such as the Unlawful Internet Gambling Enforcement Act (UIGEA).

Online Gaming Payment Processing Codes Pave Way for Greater Bank Acceptance

In particular, many banks have been rejecting attempted credit card payments associated with online gaming activity due to the fact that banks have been unable to discern between payments originating from jurisdictions in which the underlying gaming activity is legal, and those where it is not. The new specially designated MCCs should help to alleviate the banks’ concerns to some extent by creating a separate batch of codes that legitimate operations can avail themselves of.

A Boost in Payment Processing for Fantasy Sports?

Many prominent fantasy sports venues have experienced similar difficulties in gaining approval for the processing of credit card payments in connection with their commercial ventures.  This attempted MCC solution provides cause for optimism that a similar, common sense approach will be adopted in order to facilitate payment processing transactions for those venues operating in compliance with applicable law.

This MCC development only reinforces the need for fantasy sports venues to obtain the advice of qualified counsel to ensure that their operations are compliant with applicable law, and that they can obtain an opinion letter detailing this compliance in order to gain desired payment processing approvals.

The ongoing evolution of banking and payment processing practices associated with fantasy sports and legalized online gaming warrants continued attention from fantasy sports attorneys, online gaming attorneys, and those interested in payment processing in general.