The Supreme Court gave states the OK to legalize sports betting this week, but putting bets on your credit card is – at least for now – a costly proposition.
Most credit cards treat gambling transactions as a cash advance – if they allow gambling transactions at all. American Express network rules forbid gambling charges outright, and most cards block online gambling charges.
So if you’re thinking of racking up credit card rewards such as points or cash back while wagering on your favorite hockey or football team, don’t bet on it.
Cash advances’ high costs and card issuers’ high risk
Generally, cash advances don’t earn rewards. What they do come with is a hefty transaction fee, no grace period and high interest charges, compared to the interest rate for purchases. Credit cards also set a lower credit limit for cash advances than purchases.
“This is a risk decision for the banks – gambling on a credit card is high-risk,” said Kevin Morrison, senior analyst at Aite Group. “If they allow sports betting in certain states, I don’t think that’s going to change.”
That said, if the default risk of sports betting transactions started to change as more states jump in, card issuers might re-examine their policies, he said.
Ruling leads card issuers to review policies
Some card issuers contacted by Creditcards.com indicated they are reviewing their policies on gaming transactions.
“We are watching the impact of the new ruling and may adjust our policies as we learn more,” Chase spokeswoman Mary Jane Rogers said in an email interview.
Wells Fargo’s Sarah Dubois had this to say: “In light of the Supreme Court decision, we are reviewing our policy on credit card purchases for sports betting.”
Wells Fargo deems “wagers” and other gambling a cash-like transaction, processed as a cash advance. Its card agreement says it will deny online gambling transactions.
“Our policy is based on multiple factors including applicable state and federal laws, credit risk, fraud and reputational risk,” Dubois said in an email interview.
A closer look at the ruling and what’s next
The Supreme Court struck down the Professional and Amateur Sports Protection Act, which made gambling on sporting events illegal, except in Nevada. The law, intended to keep wagering from corrupting competitive sports, overstepped states’ constitutional rights to legislate within their borders, the court ruled.
New Jersey, which pushed the case in order to legalize sports betting at casinos and horse racing tracks, could implement sports betting within weeks, track officials there have said. Four other states have plans for sports betting in the works – New York, Pennsylvania, West Virginia and Mississippi.
There’s still uncertainty how the ruling will play out as states look at their options.
“It’s pretty early,” said Casey Clark, spokesman for the American Gaming Association, a casino industry group. “I think every state is going to approach this differently.” How states license, regulate and tax sports betting will influence the shape of the market in each area, he said.
Sports betting’s billions and card networks’ unease
The association estimates $150 billion in illegal sports bets are made annually in the U.S., making the potential market huge. Nevada’s legal sports betting generated $4.9 billion in revenue in 2017, of which 5.11 percent was kept as profit by sports book makers, according to UNLV’s Center for Gaming Research.
Card networks are wary about gambling in general. Online betting is especially problematic because of the Unlawful Internet Gambling Enforcement Act – which is untouched by the Supreme Court’s ruling. Under the law, banks need to police their business to prevent debit and credit card payments to online casinos.
The Supreme Court’s decision to open up sports betting may not be the final word on the subject. Congress may write a new law directly outlawing sports gambling at the federal level, fixing a defect of the struck-down law.