Prepaid Debit Cards and Internet Gambling

Like it or not, one of the popular uses for prepaid debit cards in the United States is to transfer funds to and from offshore Internet gambling sites. Those transfers may be coming to an end, as the date of enforcement of Federal Regulations prohibiting the transfer of funds to illegal Internet gaming sites went into force on June 1, 2010.

Late in 2006, Congress passed the “UIGEA” (full title: the “Unlawful Internet Gambling Enforcement Act of 2006” found at 31 U.S.C. § 5361–5367) which prohibits the transfer of funds from a financial institution to an illegal Internet gambling site, specifically excluding fantasy sports, online lotteries, and horse/harness racing. In November 2009, Representative Barney Frank was instrumental in obtaining a delay in the date for implementing regulations in the Unlawful Internet Gambling Enforcement Act (UIGEA). In particular, the regulations were delayed by six months, from Dec. 1 to June 1, 2010.

Apparently, debit card issuers (including prepaid card issuers) are starting to enforce the regulations, as there have been reports of debit card accounts being shut down , as well as recent reports from NetSpend card users that their accounts are being blocked based on their use of NetSpend prepaid Visa cards for Internet gambling. The Offshore Gaming Association provides the following account:

[L]ast week NetSpend began calling customers who had used the card for gambling transactions with a pre-recorded message telling them the sad news – NetSpend will block all gambling-related charges due to the UIGEA .

An email was also sent out to many customers who used the pre-paid card for gambling. “Our records show that you may have used your NetSpend Visa Prepaid Debit Card for internet gambling transactions in the past. Beginning May 31, 2010, MasterCard and Visa will begin complying with the Unlawful Internet Gambling Enforcement Act by blocking all online gambling transactions attempted by U.S. cardholders. This means you will not be able to use your NetSpend card or account for internet based gambling transactions. Internet gambling transactions will be automatically declined to comply with these federal regulations. NetSpend has no control over this change.”

When you call NetSpend the very first thing that you hear is a message about VISA and MasterCard and the UIGEA. I cannto imagine how much of NetSpend’s business was gambling-related for them to have an introductory message, before you get to hit 1 or 2 to continue, on their main phone number. In addition, your NetSpend account now must be tied into your social security number. According to thier customer service it is MANDATORY to provide a social security number for an ID check. These is apparently another new rule mandated by the government.

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