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The complexities of U.S. regulations

As each state has its own individual regulations to follow,
licensing processes for both merchants and PSPs can be
expensive, time consuming and complex. When entering
into new states, new licenses are required for both parties,
but there is no universal price for these licenses. It is set by
the state and between merchant and provider licenses, one
is more expensive than the other.
To address those complexities, PSPs and merchants have
been forced to take a different approach to complying
with regulation, as required by each state. For example,
New Jersey only allows withdrawals from closed-loop
cards, which places a limitation on the end-user’s access
to play. It also requires that cash be caged in a safe place at
the casino, exchanged for tokens that must be used to play
instead, requiring another step in the payments process.
The need to build In contrast, throughout states such as Michigan, prepaid

trust with merchants cards are not accepted at all, so there is a limitation on
which closed-loop cards can be used. Some states take
regulation further still, such as Tennessee, which explicitly
in the gaming market forbids gambling merchants to accept credit.

What this means for merchants
By Kamran Hedjri All of these examples highlight the challenge for gambling
PXP Financial merchants and payment providers alike when it comes to
expanding into new states. This means that when moving
[Editor's note: This article originally appeared in Fintech Times on Sept. a payment system into a new state, some of the process
21, 2021. Copyright (c) by PXP Financial. Reprinted with permission.] will have to be changed, and the merchant will have to be
n the United States, constitutional laws allow states prepared for the friction this could cause customers.
to create, implement and enforce their own indi-
vidual regulations. This is because every U.S. state However, the regulations don’t exist within a vacuum.
I is considered its own sovereignty, and the unique They are the result of a complex payment environment
characteristics of each state, such as demographics, popu- across the United States that merchants need to know how
lation and social standards, warrant unique law—on top to navigate and be compliant within. The issues, instead,
of the countrywide federal laws. For a country as large as come from the difficulty of doing so. From the high costs
America, this makes sense. After all, from coast-to-coast of manpower and time required to understand a new
and throughout the middle of America you can find dif- market it can sometimes feel like entering a new market is
ferent climates, environments and cultures to the point not worthwhile. But it is.
where they almost feel like different countries entirely.
Successfully addressing the challenges of state-by-state
But for businesses hoping to operate across the entirety regulation can allow gaming merchants to open up
of the United States, much like they would in any other new customer bases, and payment providers with local
country, this becomes a challenge. Gaming and sports knowledge can help speed up the journey. A payment
betting is no exception, as each state has its own set of provider can take on all the complexities of understanding
laws and regulations that merchants and payment service the payment ecosystem in the United States so that the
providers (PSPs) need to follow. merchant can focus on providing an engaging customer
experience.
The simplest solution to navigate this climate is for the How fraud can increase the level of friction
payment providers and merchants to work together, but
in order to do so while ensuring there is no friction with Fraud is another factor to consider when dealing with
the service of either, trust needs to be established. And separate regulations per state. The issue of fraud obviously
to establish that trust, the payment provider needs one creates friction for any merchant, and risk systems need to
thing: knowledge. be put in place to attempt to prevent any malicious activity.

However, with the different regulations of each state and
some states only just opening up to allow gaming and
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