The Supreme Court has sided with states in a dispute over sports gambling, a double victory for payment processors, which can use largely existing tools to serve an entirely new market.
The Supreme Court this week ruled 6-3 to strike down a 1992 federal law that had banned most states from legalizing sports betting. For payment processors, this new ruling can greatly improve the ROI of systems they already have built for non-U.S. markets.
Worldpay, which has its main offices in London and Symmes Township, Ohio, already has a gambling payment processing unit with an
"The SCOTUS decision opens up yet another new revenue stream for that states to drive tax revenue and expand upon a framework that has been time tested and well-proven for decades," said Joe Pappano, senior vice president of Worldpay Gaming.
The new sports gambling platforms will likely have some of the same requirements as other gambling platforms, such as "know your customer" money laundering regulations, authentication and other compliance service that payment processors often handle as part of general merchant acquiring.
"Payments is the key to a frictionless experience, for consumers to get money in and out of wagering accounts, or to manage if it's online, mobile or a card-present payment in a casino," Pappano said.
Sport betting is legal in a few U.S. locations, with almost all of the revenue coming from the Las Vegas casino sports books. Despite that narrow opportunity, sports betting sets records almost yearly, reaching
FanDuel investor
@BradleyTusk on rising value of his investment due to sports gambling decision: “We think it doubles the value of our equity. And once states start legalizing sports betting and it becomes common practice, it could be more like 5 times.”— Darren Rovell (@darrenrovell)
May 14, 2018
The case originated with a suit by former
That resulted in large financial companies such as
Other
The Supreme Court ruling "should take the negative stigma out of the gaming payment equation," said Thad Peterson, a senior analyst at Aite Group. "Processors supporting the gaming space have the knowledge and experience to capitalize on this opportunity, and they can move quickly."
That existing infrastructure and market makes sport gambling different from cannabis, which is governed on a state-by-state basis but is often avoided by mainstream financial services companies. In the case of sports, many states already have an established gambling base to build on, according to Pappano, who adds gambling isn't illegal on the federal level, as cannabis is.
"The gaming industry is already highly regulated so there's a framework wit lotteries and other localized gaming that has existed for some time," Pappano said.
But gambling payments are not total smooth sailing, according to Zil Bareisis, a senior analyst at Celent.
"Even in markets where gaming has been legal, there has been a deliberate friction in payments. For example, if a user tried to use a credit card to fund their gaming account, many issuers would treat it as a cash advance [rather than a purchase], and some would decline the transaction altogether," Bareisis said, adding that a recent
