PayPal Used by Problem Gamblers to Circumvent Bank Limits
The UK Department for Digital, Culture, Media, and Sport (DCMS) said problem gamblers are using PayPal to gamble as much as $150,000 a day. The DCMS said time lag on the PayPal payment service is being used by gamblers to circumvent bank limits.
In light of the report, DCMS called on the UK Gambling Commission to consider payment providers among its targets in a review of gambling via credit cards. British MPs and gambling experts called on the Gambling Commission to stop such payment processors from allowing gambling transactions which could ruin its users.
PayPal allows people to transfer money to anyone with an email address. Because a PayPal personal or business account is tied to a person’s bank account or credit cards, it is instant and easy to transfer cash to another person.
The world famous payment provider also issues debit cards to users, so they can withdraw cash from an ATM machine or buy goods and services anywhere that Visa or MasterCard is accepted. Since PayPal is the preferred payment method at Ebay, the PayPal network of customers has extended around the globe.
PayPal does not support gambling deposits and withdrawals in many countries, but because gambling is legal and licensed in the UK, PayPal is an accepted payment method there.
British NHS Doctor on PayPal Gambling
One therapist, Henrietta Bowden-Jones, who founded the National Health Service’s only gambling clinic, said that gamblers can use time lag to withdraw £2,000 every few minutes from a PayPal account — thus circumventing limits on gambling expenditures.
Dr. Bowden-Jones said, “The first time I ever heard about a gambler using PayPal to pay for online gambling occurred about two weeks ago in clinic, when a young man came accompanied by one of his parents. The patient was 20 years old, with no savings.”
She said, much to her horror, that bank limits had no seeming effect on the ability of PayPal to fund gambling accounts.
Bowden-Jones added, “He had been online gambling, had reached his limit on his bank card but somehow managed to withdraw by direct debit £2,000 every few minutes to continue gambling whilst his parents were asleep next door. When they woke up the next day, he had lost £150,000.”
This apparently was considered everyday practice with PayPal, the US payment service which came to prominence because it is owned and promoted by Ebay. The British gaming therapist said, “I was horrified when I heard that this had been a legitimate use of PayPal.”
Transferring Student Loans into PayPal
Henrietta Bowden-Jones is not the only one with anecdotal evidence that PayPal is abused for the purposes of gambling. Stephanie Bramley, a research assistant at King’s College London, said she has heard horror tales of students using PayPal to gamble with their scholarship money.
Bramley said such gamblers “essentially try to conceal their gambling behaviour from student support staff by transferring their student loans into PayPal and then using this as a method for payment for gambling.”
PayPal Statement on DCMS Charges
In response, PayPal said it was “extremely concerned” to hear stories that its service is being used for “excessive online gambling”. PayPal’s User Agreement specifically state that their service should not be used for gambling purposes.
Under the “Unlawful Internet Gambling Notice” of the User Agreement’s Restricted Activities page, PayPal states: “Restricted transactions as defined in Federal Reserve Regulation GG are prohibited from being processed through your PayPal account or your relationship with PayPal.”
PayPal’s Restricted Activities
“Restricted transactions generally include, but are not limited to, transactions in which credit, electronic fund transfers, checks, or drafts are knowingly accepted by gambling businesses in connection with unlawful Internet gambling.”
Because of the United Kingdom’s well-developed regulatory framework, most online gambling in the UK is legal and therefore is not “unlawful Internet gambling”.
Of course, the third paragraph of the Restricted Activities is a more open-ended prohibition against illegal activity using PayPal’s services.
The page states that PayPal does not allow people to “violate any law, statute, ordinance, or regulation (for example, those governing financial services, consumer protections, unfair competition, anti-discrimination or false advertising).”
“Like Gambling Credits”
The Internet seems to create different dynamic than live casino gambling for some bettors. Liz Carter, a UK gambling therapist, said a female problem gambler said that betting online with a payment service does not feel like real gambling. Instead, said Carter, “She said she did not feel like she was spending money, it was just like gambling credits.”