Innovations and Payment Systems

Chase cardholders can charge advance horse-racing bets


A decision by Chase to allow credit card transactions for online wagering on horse races is expected to prompt rivals to come out of the starting gate.

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Chase allows advance wagering on pari-mutuel races

And they’re off! A decision by Chase to allow credit card transactions for online wagering on horse races is expected to prompt rivals to come out of the starting gate.

That, in turn, is likely to encourage more online bettors to pony up for the Kentucky Derby and other horse races.

In early February, the National Thoroughbred Racing Association, the top lobbying group for the horse-racing industry, announced that Chase, the country’s largest credit card issuer, would start approving deposits made via credit card into customers’ accounts at online betting operations for horse racing.

Chase’s action applies only to “advance deposit wagering” companies, or ADWs in industry lingo, that are licensed and regulated in the U.S.

Repeated attempts to seek comment from Chase were unsuccessful.

Thoroughbred association talking with other card issuers

While the Chase decision primarily affects online wagering, it also could impact at-the-track betting via mobile phone, says Alex Waldrop, president and CEO of the National Thoroughbred Racing Association.

Waldrop says his organization is working with three other major card issuers – Bank of America, Capital One and Wells Fargo – on reversing their approaches to ADW transactions. The three banks have been declining all ADW transactions, he says.

What about American Express and Discover? Both companies prohibit gambling-related transactions on their credit cards, but Waldrop says the thoroughbred association also is pressing American Express and Discover to permit ADW transactions.

While major credit card issuers historically have blocked ADW transactions, some issuers have enabled those deposits to go through.

Waldrop says his group doesn’t have any data about the overall rate of declined ADW transactions, but Shawn Egide, co-founder and CEO of betting website, estimates the rejection rate is 40 to 45 percent.

Today, ADWs represent about 40 percent of all money wagered on horse races, Waldrop says.

While there have been ways to clear the credit card hurdle – such as using a prepaid card, money order, wire transfer, mailed-in check or electronic withdrawal from a bank account – to make an ADW transaction, supporters of online betting say Chase’s move will ease the process for holders of both credit and debit cards.

“In general, internet businesses are based on delivering easily accessible goods and services with a few clicks. If obstacles are thrown in the way, the willingness to follow through fades,” says Anthony DiMaria, co-owner of betting website

“For fear of running afoul of federal law, credit card issuers for years have routinely denied 7995 gambling transactions, including off-track bets on horse races.”

Behind Chase’s decision: A change in merchant category codes

So, exactly how is Chase enabling ADW transactions now? It switched transactions via licensed, regulated ADWs in the U.S. from the 7995 merchant category code (MCC) – a general bucket for gambling – to 7802, a specific code for online transactions tied to horse racing and dog racing.

Visa, Mastercard, American Express and Discover added the 7802 code in 2015.

For fear of running afoul of federal law, credit card issuers for years have routinely denied 7995 gambling transactions, including off-track bets on horse races, since passage in 2006 of the federal Unlawful Internet Gambling Enforcement Act.

Until recently, the credit card and banking industries had “lumped gaming all into one huge whole bowl, if you will, or one huge basket,” Egide says.

“Presumably, the attorneys and business executives at Chase have reached the conclusion that the increase in revenues that would be derived from accepting pari-mutuel bet money is greater than the outstanding business and legal risks,” says sports and gaming consultant Marc Edelman, a law professor at Baruch College’s Zicklin School of Business in New York.

Waldrop says he and his colleagues – including U.S. Rep. Andy Barr, a Kentucky Republican who co-chairs the Congressional Horse Caucus – successfully lobbied Chase and its card-processing partners that ADWs using the more acceptable 7802 code are legal, regulated outfits, unlike potentially shady gambling ventures in other countries.

“This decision by Chase means more people now have credit cards in their wallet that will be honored at the industry’s ADW online sites,” Waldrop says.

Why card issuers have stayed away from the tracks

The story behind the credit card industry’s reluctance to accept ADW transactions has about as many turns as a horse-racing track.

Waldrop explains that the Unlawful Internet Gambling Enforcement Act made it unlawful for financial institutions to handle illegal betting transactions via credit card. But that left this crucial question: “What is a legal betting transaction?”

For years, the thoroughbred association and other horse-racing groups have argued that the federal Interstate Horseracing Act takes precedence over the Federal Wire Act, which prohibits online betting, Waldrop says.

The Interstate Horseracing Act allows interstate wagering on a legal, regulated race in the state where the race is run and in the state where the bet is placed. The 7802 merchant code arose to account for the differentiation between the two laws, he says.

“Understanding the interplay between these two federal statues is key to credit card-issuing banks accepting our players’ account funding transactions,” Waldrop says.

DiMaria says he hopes Chase’s new stance will have a “profound effect” on his company and the entire online wagering business in horse racing.

“Being able to follow through and deliver what the player is expecting is paramount,” he says. “The silver lining from this decision and how it affects our business is that it helps shift the initial player experience from a negative to positive.

“After all of the marketing dollars are spent and you are able to attract someone into establishing an account, the last thing you want to have happen is for their deposit to be declined.”

Will other card issuers enter the race and allow ADW betting with their cards? Time will tell. A Payments Journal piece about the largest U.S. credit card issuer’s change of stance ended this way:  Right now, Chase is in front of this issue by a nose\u2026

See related: 10 things you can’t (easily) buy with credit cards, Buy lottery tickets with a credit card? Probably not

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