For sportsbooks in Iowa, you can’t use credit cards to place wagers. And one licensing company found that out the hard way.
In July, regulators fined the sportsbook licensing company American Wagering Inc. $60,000 for this action. American Wagering Inc. is a subsidiary of Caesars Entertainment and does business with Caesars Sportsbook in Iowa.
Brian Ohorilko, the administrator for the Iowa Racing and Gaming Commission (IRGC), said they discovered the incident in 2021. But the commission agreed to the penalty in the August meeting.
An audit discovered American Wagering Inc. allowed Iowa sportsbook deposits to be made with a credit card. And in some cases, prepaid debit cards deposited funds.
“Once it was determined what had occurred, the commission knew that this particular payment processor was also being utilized by six other vendors in Iowa, six other online sportsbooks,” Ohorilko said.
Ohorilko said the commission is negotiating stipulated agreements with other Iowa sportsbooks that were part of the incident.
Looking specifically at the incident that occurred with Caesars Sportsbook, Ohorilko said the $60,000 fine was due to the high volume of transactions.
“With the Caesars Sportsbook situation, there were 485 credit card transactions totaling about $212,000,” he said.
Also during that same August meeting, FanDuel was fined $75,000 because of two counts: This credit card incident and another transaction that occurred after the corrective action was taken, Ohorilko said.
Additionally, the commission has looked into and has agreements with BetMGM, Elite, Hard Rock, and Q. The commission is still investigating two other unknown companies.
Q will appear at the November meeting, Ohorilko said, while the other three will appear in September.
For Iowa sportsbooks, how common is illegal credit card use?
According to Ohorilko, it’s not common for this to happen.
Companies go through an extensive review of their internal controls before they receive a license to operate in Iowa. One of those controls is to restrict bettors from using credit cards to bet on sports.
Additional checks are in place, too, should something fall through the controls. Ohorilko explained that sportsbooks are expected to perform independent audits with third-party gaming and processing companies.
“If they’re doing these audits regularly or thoroughly, if there does become an issue, it’s caught very quickly or even before something may occur,” he said.
From there, the IRGC will perform its auditing and compliance measures as the third layer of monitoring.
Typically, it doesn’t get to that point. Ohorilko says the sportsbooks in Iowa do a solid job complying with the rules and regulations.
“There are situations that come up that the commission addresses, but in terms of the volume of transactions that are conducted throughout any given year, the operators in this state have a high level of compliance with all regulations,” he said.
How did the Iowa sportsbook illegal credit card use happen?
Issues with allowing credit cards as payments most likely happen due to a misstep in the control layer. Ohorilko said:
“Specifically, when we’re dealing with credit cards, it’s usually a coding issue. When someone uses a credit card, there’s a particular financial code that’s associated with that. It’s a matter of restricting certain codes, or if those codes aren’t easily identifiable, then just to restrict that particular form of payment.”
What other punishments may there be for non-compliance?
The IRGC hands out punishments on a case-by-case basis, but there are several tools it can use.
“The range is anywhere from verbal to written warnings to license suspensions – that’s typical of any infraction,” Ohorilko said. “The goal, really, truly, is compliance. I think that’s important.”
Is it illegal to use credit cards for gambling in other states?
It depends.
Iowa included this law in 2020 legislation, and it doesn’t just apply to online sportsbooks. Iowa casinos also restrict the use of credit cards. Ohorilko continued:
“Every state is different. Some states do permit the use of credit cards. That is one thing we heard from the operators… Every state is a little bit different, and that’s one thing, with state-by-state regulations, those operators that are doing business understand or need to understand.”
