Vantiv Stops Processing DFS Payments

The daily fantasy sports industry received some potentially damaging, and judging by DraftKings response, unexpected news on Friday afternoon. Vantiv, an integral cog in the industry’s payment processing structure, announced they would no longer process payments for DFS companies in the United States.

According to the New York Times, which broke the story, Jonathan Ellman of Vantiv.com wrote the following in a letter obtained by The New York Times:

“As you are aware, an increasing number of state attorneys general have determined that daily fantasy sports (‘D.F.S.’) constitute illegal gambling. Although in recent weeks D.F.S. operators have raised numerous arguments to the contrary, to date those arguments have been unsuccessful and/or rejected.”

 According to the Times story, Vantiv will cease processing payments for DFS companies on February 29, 2016.

As Chris Grove notes, the withdrawal of Vantiv shouldn’t jeopardize player funds in any way, assuming the safeguards we have been led to believe are in place ARE in place (there’s no reason to suspect otherwise). It also shouldn’t prevent players from withdrawing their funds if they’re so inclined.

As noted above, the announcement seems to have caught DraftKings DFS off guard, as their attorney David Boies issued the following statement soon after the news broke:

“We are not aware of what Vantiv may or may not have told other industry participants about its plans. However, to be clear, first, Vantiv has not told DraftKings that it plans to cease fulfilling its contractual obligations as of ‘Feb 29, 2016’ (or any other date). Second, Vantiv is under court order to continue to fulfill its contractual obligation to DraftKings.”

What Happens Next For Vantiv?

As Boies’ statement intimates, DraftKings and Vantiv have a bit of a history already. Following New York Attorney General Eric Schneiderman calling DFS illegal gambling, DraftKings was compelled to sue Vantiv in Massachusetts back in November of 2015, after Vantiv told DraftKings and FanDuel to leave the New York market in the wake of New York Attorney General Schneiderman’s crackdown.

The Massachusetts court that heard the case granted the restraining order DraftKings asked for.

In their filing, DraftKings attorneys wrote that the restraining order was necessary because Vantiv was the company’s only credit card processor: “This Court’s immediate intervention is necessary to preserve the status quo and prevent Defendants from irreparably harming DraftKings while the claims by the NYAG are addressed in New York.”

DraftKings and/or FanDuel could once again go the restraining order route, but how successful that will be now that several other states Attorneys General have followed Schneiderman’s lead, and how far down this path these companies would want to go (forcing people to work with you through lawsuits doesn’t feel like a sound long-term decision), remains to be seen.

Their other option is to find a new payment processor willing to process DFS payments, but as the Twittersphere (many who have a lot of experience in payment processing from their online poker days) has noted, the likelihood of them finding a processor on Vantiv’s level is slim.

In his semi-daily email newsletter, The Grove Report, industry analyst Chris Grove phrased the situation thusly:

“By any reasonable measure, this appears to be a significant loss for operators. Other processors may be available (most eyes are turning to PayPal), but it’s not immediately clear why they’d be willing to shoulder a risk Vantiv apparently isn’t willing to absorb. US-based payment processors are arguably the most tightly-regulated and legally-sensitive cog in the DFS machine.” 

Why The Vantiv Payment Processing Decision Isn’t Surprising

Considering the amount of publicity DFS is now receiving, and considering the industry’s legality is now being openly challenged in several states, Vantiv’s decision isn’t overly surprising.

Regardless of how you fall on the “is it gambling , is it legal sliding scale,” banks and payment processors are under no obligation to process payments for legal industries if they view those industries as hazardous.

For instance, despite Nevada, Delaware, and New Jersey having legalized online gambling, and despite credit card companies introducing new MCC codes for legal online gambling transactions, there are a number of banks that continue to refuse to process these 100% legal transactions.

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