Paypal Quietly Drops Gambler Protection

Poker and DFS players are among those affected by PayPal’s decision this week to stop offering customer protection on their gambling and gaming transactions.

The unexpected decision by the global payment processor was quietly introduced in a change to their T&C’s and will initially affect markets in the US, Canada, Japan, and Brazil as of June 25th, though it is expected that the changes will be made globally in the near future.

The new PayPal User Agreement has been changed to remove consumer protection for any “ gambling, gaming and/or any other activity with an entry fee and a prize,” and will also affect crowd-funding sites such as KickStarter, Razoo, and Indiegogo, as well as the unusual line on “anything purchased from, or an amount paid to a government agency.”

Quite what effect it will have on the poker scene is unclear. At one point, PayPal was a major player in the poker e-wallet market, but their withdrawal in 2003 due to grey areas in the law was only reversed in 2010.

PayPal’s rules, at the time, continued to prohibit transactions using its technology for gambling, except for approved merchants in locations where gambling is legal. PayPal was still available for many European gambling sites though. Recently they had started to offer their services to the online poker markets of Nevada and New Jersey, both of which are regulated.

It was only last September when PayPal announced a 4-site trial in the US, seemingly looking to test the waters in the $billion online gambling industry and appearing on sites such as Caesar’s Interactive WSOP.com.

A spokesman for PayPal, which split from Ebay last year, told Fortune.com, at the time, that integrating with gambling sites was a limited test with four operators, including Caesars Entertainment where gamblers could use PayPal to fund their online accounts with the site.

Quite what problems, if any, showed up in these test-runs is unclear, but the decision made is absolutely certain: No PayPal for gambling and gaming.

Since the early days, poker sites have become much stricter in their financial transactions policies – and so the main area of concern from PayPal’s point of view seems to be the online crowd-funding sites where people commit money to a person’s ideas or a cause.

Although KickStarter does not allow PayPal payments, a study by the University of Pennsylvania found that 9% of projects “failed to deliver rewards” – which includes ‘take the money and run’ scams.