Legalized sports gambling could be a boon for huge credit-card banks
Credit card companies may stand to benefit significantly from a Supreme Court ruling that paves the way for legalized sports betting across the U.S.
“Credit card companies have generally steered clear of allowing gambling-related transactions,” wrote Matt Schulz, a senior industry analyst at CreditCards.com. “However, the sheer amount of money that this Supreme Court ruling will unleash is likely to make the big credit card banks rethink their stance.”
The ruling overturned a 1992 federal law that prohibited most states from authorizing betting on football, basketball, baseball and other sports.
“We’re talking billions and billions of dollars,” Schulz told Yahoo Finance. “Even if a small fraction of that were put on your credit card, that would be a significant thing. It’s complicated in a lot of ways, but I would imagine that at a minimum, banks are going to be taking a look at what happened today and seeing if they want to.”
A multibillion-dollar industry?
David Katz, an analyst at Jefferies, estimated that the market for legal sports betting could be as big as $57 billion nationwide, according to the Associated Press. In a note by Global Market Advisors last year, analysts estimated that gaming revenue coming from sports betting alone in Nevada in 2016 accounted for nearly $220 million — the highest portion of revenue coming from football.
And the American Gaming Association has estimated that the illegal sports betting market produces $150 billion in wagers today.
With legalization, “if you can place a bet with your credit card, then the banks get a small fee every time somebody makes a purchase with a credit card — generally like 2 to 3%. You could make money that way,” Schulz noted.
Credit card companies have already started to profit more from gambling. In February this year, for example, Chase began allowing deposits made through credit cards for online betting on horse races.
Too much money to ignore
The potential loser here is likely to be Las Vegas, said Schulz, “because you’ll no longer have to go there to bet on sports, once various states get on board.”
Additionally, there are numerous risks involved for the credit card companies. “There are along with the financial risk, moral issues that many people have with gambling,” said Schulz.
But it will be a risk they’d be willing to take, said Schulz. “It’s not anything that’s going to happen today or next week,” he said. “But I believe that eventually credit card issuers will loosen their stance as it relates to gambling. There’s simply too much money in it for them not to.”
We reached out to several credit companies for comment, including MasterCard, which stated, “We are reviewing today’s ruling from the Supreme Court. It’s too early to speculate on how this may play out.”
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