ARTICLE
7 October 2025

The Payoff: Can US Financial Institutions Process Payments For Today's Gambling Industry? Growth Opportunity Or Too Much Risk?

JW
Jones Walker

Contributor

At Jones Walker, we look beyond today’s challenges and focus on the opportunities of the future. Since our founding in May 1937 by Joseph Merrick Jones, Sr., and Tulane Law School graduates William B. Dreux and A.J. Waechter, we have consistently asked ourselves a simple question: What can we do to help our clients succeed, today and tomorrow?
Any analysis of the legality of wagering must include an analysis of the federal gaming laws (largely prohibitions), including, but not limited to, the Wire Act, the Travel Act, and the Illegal Gambling Business Act...
United States Media, Telecoms, IT, Entertainment

History of regulation of wagering in the United States

Any analysis of the legality of wagering must include an analysis of the federal gaming laws (largely prohibitions), including, but not limited to, the Wire Act, the Travel Act, and the Illegal Gambling Business Act, all largely adopted in the 1960s and early 1970s to combat illegal bookmaking and organized crime. Importantly, a violation of federal anti-gambling law typically must be predicated on an underlying violation of state law. The 10th Amendment of the US Constitution reserves to the states such "police power" to regulate matters of public health, safety, morals, and general welfare (subject to certain federal law and other constitutional rights). Wagering falls under this police power. As such, a complete analysis of the legality of any wagering business must also include a 50-state survey of applicable state laws. Below is a discussion of various developments over the years that when taken together, make up the framework of any analysis of legality and risk of payment processing for wagering providers.

Online wagering and horse racing

For decades, horse racing had a monopoly on online wagering in the United States. Such wagering was governed by the Interstate Horseracing Act of 1979 (IHA) and a patchwork of more than 30 state racing commission statutes and rules. In 2000 the IHA was amended to expressly permit phone and internet wagering. Horse racing tracks are licensed by their respective state racing commissions and are tightly regulated. The 2000 amendment to the IHA led to the proliferation of online horse racing wagering companies ("account wagering" or "advance deposit wagering") and the decline of on-track (in-person) wagering. Online wagering now makes up more than 90% of wagering gross revenue ("handle") on horse racing in the United States.

Repeal of PASPA

Following extensive litigation advanced primarily by the State of New Jersey and then Governor Chris Christie (Murphy v. NCAA), the Professional and Amateur Sports Protection Act (PASPA) was repealed in 2018. The repeal led to significant expansion of sports betting in the United States. Additionally, the expansion of legalized sports betting in now 38 states has led to a proliferation of other forms of betting — some tightly regulated (horse racing, sports betting) and some not as regulated, including fantasy wagering, sweepstakes, and prediction markets. This market expansion resulted in financial institutions being approached on a more frequent basis to handle payments in the gaming industry.

UIGEA and Regulation GG

Any financial institution involved in processing payments for gaming companies must comply with the federal Unlawful Internet Gambling Enforcement Act (UIGEA) passed in 2006. This act shifts significant responsibility to the payment providers for evaluating and policing unlawful internet wagers. UIGEA prohibits payment processors from knowingly processing payments resulting from illegal wagering.

Financial institutions must adhere to the due diligence requirements of Regulation GG in order to comply with UIGEA. Regulation GG sets forth policies and procedures for identifying and prohibiting illegal wagers. All payment systems, including banks, credit unions, and credit card companies, that process ACH payments, checks, wires, credit cards, etc., must be compliant.

Reasoned legal opinions

A significant part of Regulation GG is the requirement that a financial institution be provided with a reasoned legal opinion prepared by experienced gaming legal counsel on behalf of the customer (31 USC 5364 Reg GG 73 FR 69405). This legal opinion will provide an analysis of federal and state gaming laws (or tribal laws and compacts) and the customer's specific business to determine the legality of their operations and which jurisdictions the gaming client may accept wagers from. In most (but not all) states, legal wagering providers must be licensed, which provides an additional layer of support for the payment provider.

Anti-money laundering, know-your-customer, and geo-locating/blocking

UIGEA was passed in an effort to prevent money laundering and funding of terrorism or other advancement of illegal activity and shifts responsibility for evaluating and conducting due diligence to the payment processors. Failure to comply may result in criminal and civil liability if the payment processor has not undertaken reasonable steps to institute policies and procedures to identify and prohibit the transmission of funds from unlawful wagering. As a result, the customer must be geo-blocking states in which their business model is not authorized, and the financial institutions/payment providers must comply with other federal laws around anti-money laundering and suspicious activity reporting. Both the customer and the payment processor must undertake reasonable know-your-customer policies.

Bank response to UIGEA

Upon the passage of UIGEA, financial institutions were strongly reluctant to facilitate payments for the wagering industry. Their immediate response included blocking numerous credit card codes, which resulted in the unexpected shutdown of licensed wagering providers, including racetracks that had been authorized for years. Over the years and as the wagering industry in the United States matures, financial institutions are gaining increased comfort in their due diligence in this highly regulated industry.

Responsible gaming

Some institutions take an active role in advancing responsible gaming, including permitting individual customers of the bank or other financial institutions to self-exclude from utilizing their accounts for wagering, not unlike the policies in place at casinos.

What to watch

Developments in gaming or gaming-adjacent businesses include the current movement across many states with state attorney general or gaming commission actions, or legislative action against the "sweepstakes" online casinos (which regulators view as skirting the licensing and regulatory framework of online gaming) and the current litigation around prediction markets led by Kalshi (see, e.g., Kalshi Acts Swiftly Across Pending Litigation After Adverse Maryland Ruling). Kalshi argues that their prediction markets are governed by the Commodity Futures Trading Commission (CFTC) as sports event contracts and are not sports bets, and that the federal CFTC preempts state sports betting laws.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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