Just about everyone has heard of PayPal, the digital e-wallet founded in 1998 by Silicon Valley entrepreneurs Peter Thiel and Max Levchin. Since its inception, PayPal's popularity has spread like wildfire across the globe. Hundreds of thousands of people use the online service to make digital financial transactions every day. In the US, however, PayPal has never been one of the many viable payment options when it comes to online gambling.
Rumors say that PayPal's prohibitive online gambling policy is about to change. The rumor is based on a tweet made in mid-August by Chris Grove, one of the founders of a notable online poker news site. If the rumor proves to be true, the world-famous e-wallet will soon be offering Americans a new way to carry out their online gambling transactions. As of right now, Neteller and Skrill are the two primary e-wallets that cater to American gamblers. The horizon is changing when it comes to the legality of online activities in America, however, and if PayPal joins the ranks of Neteller and Skrill, the industry is likely to reap some huge rewards.
Neteller and Skrill
Neither Neteller nor Skrill are as familiar and well-loved as PayPal, but both e-wallets have served Americans well during their tenure thus far. Neteller is a free e-wallet service that accepts many different currencies. Gamers can load their Neteller account with cash either from a bank account or credit card. Online casinos accept digital Neteller money as cash. Payouts are made to either to Neteller or to the bank from which a member's money originated.
Skrill is a UK-based company with a 10-Euro annual fee. Gamblers load their Skrill account with cash; this money is applied, in turn, to the online casino(s) of their choice. Small fees sometimes apply when using Skrill, but many users find this minor cost to be worth the online security Skrill provides, as the e-wallet is overseen by the Financial Services Authority of the UK.
PayPal is a free service based out of California. Users can send and receive money and purchase items using their PayPal account. Cash flows from users' bank accounts and/or credit card accounts to PayPal for online digital use. Individual users don't usually pay transaction fees, although merchants, business owners, and “Premier” PayPal account holders sometimes do.
PayPal's Popularity Could Strengthen Online Market
PayPal is owned by eBay, the world-renowned e-commerce company. Since the companies merged in 2002, over 150 million users have taken advantage of PayPal's easy-to-use digital wallet. PayPal's popularity could draw massive business to online gambling if it becomes a participant in the US industry. Americans who like the idea of online gambling, yet feel intimidated by less-familiar e-wallets like Neteller and Skrill, are quite likely to become attracted to the idea of using PayPal to make online wagers.
Why American Online Gamers Need E-Wallets
The only online casinos that are legal in America at this point are located in Nevada, Delaware, and New Jersey. As required by law, each site is affiliated with a brick-and-mortar casino. Theoretically, people who wish to play slots and table games via the Internet could go to their online casino's brick-and-mortar counterpart to deposit playing money. This is not always convenient, however, and e-wallets offer a solution to those who, for whatever reason, cannot make a field trip to deposit money.
Why America's Online Industry Needs PayPal
While it's true that the US online gaming industry is active in three states, business in those states has experienced a slow start. Officials in Nevada have yet to release revenue data, but representatives from New Jersey and Delaware have confirmed that online revenue has fallen short of what they hoped and expected (read details).
Some industrialists speculate that the unwillingness of American banks and other financial institutions to involve themselves in online gambling transactions is part of the problem. After all, it's a credit risk for banks to fork over spending money to gamblers, and US laws about the legality of such Internet activities are murky at best.
If PayPal steps up to the plate, all this could change. The influential company has the power to alter American perceptions of what is acceptable online behavior. Bank administrators and individuals could think to themselves, "If PayPal is doing it, it must be okay." Indeed, when people find out how easy it is to use PayPal money for online wagering, the customer base for US online casinos could skyrocket. This, in turn, would fuel the industry and boost state economies with some much-needed revenue.
Legalized Market Has Not Swayed Credit Card Companies
Most banks, credit card companies, and other financial institutions have traditionally refused to be a party to gambling-related transactions in the US, even in the states where the activity is legal. When online wagering was approved by the governments of New Jersey, Nevada, and Delaware, the executives of these financial companies continued to look the other way. They could have changed their policies in those states, but they didn't. Leaders of large companies like Wells Fargo, Bank of America, and PayPal initially stated they would refrain from partaking in online wagering, but PayPal executives hinted that they might eventually change their minds. Indeed, it seems that PayPal's headmasters may have done just that.
Offshore Sites Embrace PayPal
This news is only "news" in the US. Elsewhere in the world, PayPal has been a viable payment option for online gambling for years. Sites like Gibraltar's 32RedPoker.com accept PayPal because PayPal officials have no qualms about servicing customers in areas where the activity is clearly legal. 32Red is a reputable site that has won many awards for its high quality and reputation.
In the coming months, the public will likely find out whether the Twitter-based "rumor" about PayPal getting involved with online gaming is true. If it is true, the American economy is likely to benefit. Proponents of the online gaming industry are keeping their fingers crossed.