06/03/2010 11:00PM

New credit rules could impact account wagering

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Account-wagering companies in the U.S. are bracing for potential "catastrophic" consequences of a new set of regulations that went into effect on June 1 which seek to prohibit banks and credit-card companies from allowing their customers to perform online transactions with illegal gambling operations, racing officials said on Friday.

The new regulations, written over the past four years after the passage of the Internet Gambling Prohibition Act in 2006, contain exceptions for online parimutuel wagering, but federal lobbyists working on behalf of the racing industry have said that many banks and credit-card companies may issue blanket prohibitions on all gambling transactions because of the complexity of the new rules. The regulations went into effect five days before Saturday's Belmont Stakes, when a surge of horseplayers are expected to use their debit and credit cards to fund their online wagering accounts.

"We haven't seen any real impact yet," said John Hindman, the general counsel for Television Games Network, the second-largest account-wagering company in the U.S., on Friday. "But it's still early, and we view this as the most catastrophic threat to our business right now. Only time will tell."

Peggy Hendershot, the senior vice president of legislative affairs for the National Thoroughbred Racing Association, which worked with regulators to devise the new rules, said that banks and credit-card companies have been provided with a code that pertains specifically to parimutuel transactions. However, it's unclear how many banks and issuers have adopted the code, in part because of a lack of understanding over how the regulations will be enforced.

"The policing is on their shoulders, and some of them may want to claim safe harbor by refusing any and all gambling transactions, even with our exception," Hendershot said.

Hendershot said the NTRA is urging account-wagering customers to notify the association if a specific bank or card issuer blocks a transaction. The association plans to address any problems with individual banks or credit-card companies based on the information it receives from the customers and from account-wagering companies, Hendershot said.

Hindman said that TVG has notified its customers that they should have multiple funding options for their accounts in order to minimize any disruptions. TVG has also pledged to pass on specific information to the NTRA so that the association can work with the banks and credit-card companies to remove any restrictions.