How To Meet US iGaming Payment Compliance Standards

Want to succeed in the US iGaming market? Compliance is your key to thriving. Here's what you need to know:

• Compliance is non-negotiable: US iGaming operates under complex state and federal laws like the Unlawful Internet Gambling Enforcement Act (UIGEA). Non-compliance risks fines and operational disruptions.

• Licensing is state-specific: Each state requires separate licenses, with varying rules, taxes, and timelines. Multi-jurisdictional licensing is essential for growth.

• Payment compliance matters: Understand Merchant Category Code (MCC) 7995 for gambling transactions and ensure PCI DSS 4.0 compliance to secure payments.

• KYC and AML are critical: Automate identity verification, monitor transactions, and use AI tools to prevent fraud and meet anti-money laundering standards.

• Cross-border challenges: Handle multi-currency payments, ensure accurate geolocation, and align with tax reporting requirements.

• Technology is your ally: Real-time fraud detection, automated reporting, and advanced payment systems like Fluid streamline compliance and enhance user experience.

Takeaway: Compliance isn't just about avoiding fines - it's about building trust, ensuring growth, and staying competitive in a fast-evolving industry.

AML Compliance & Licensing in the Gaming Industry with Matthew Agius, CEO of Diligex | SiGMA Podcast

US iGaming Payment Compliance Requirements

Navigating the regulatory maze of the US iGaming market starts with understanding its complex framework. The industry operates under a web of federal and state regulations, each with its own nuances and challenges. Let’s break down the key aspects shaping payment compliance in this space.

Federal and State-Level Regulations

At the federal level, the Unlawful Internet Gambling Enforcement Act (UIGEA) plays a pivotal role. Rather than defining what constitutes illegal gambling, UIGEA focuses on restricting financial transactions tied to unlawful online gambling. This leaves states with the authority to determine what is legal within their borders.

This state-driven approach results in widely varying rules. Take, for instance, New Jersey, where online gambling - including casino games, slots, poker, live dealer games, and sports betting - has been legal since 2013, thanks to legislation signed by former Governor Chris Christie. In contrast, Nevada permits online poker and sports betting but prohibits online casino games altogether. States also impose specific rules on geolocation, payment processing, and licensing requirements, making compliance a moving target depending on where you operate.

MCC 7995 and Gambling Transactions

In addition to overarching laws, transaction-specific measures like Merchant Category Code (MCC) 7995 add another layer of compliance. MCC 7995 is specifically assigned to gambling-related transactions, covering activities like casino gaming, sports betting, lotteries, racetracks, and even online bingo.

"MCC 7995 is reserved for the gambling industry: casinos, sportsbooks, lottery vendors, racetracks, and even online bingo platforms. If your business revolves around bets or winnings”.

While this classification helps with regulatory oversight and responsible gaming, it can complicate transactions. Some financial institutions may block or delay payments flagged with MCC 7995, potentially frustrating players. To mitigate this, operators should consider offering diverse payment options, including alternative methods and, where lawful, cryptocurrency.

PCI DSS Compliance for Payment Security

For iGaming operators handling card payments, PCI DSS compliance is non-negotiable. It safeguards cardholder data and reinforces trust among players. The latest version, PCI DSS 4.0, introduces new measures to counter JavaScript-based threats like Magecart attacks - an issue that costs the industry up to €2.9 billion annually and accounts for 18% of all retail breaches.

Michael Seaman, Co-founder and CEO of Swipesum, underscores the importance of compliance:

"PCI compliance is vital for safeguarding customer data and maintaining brand trust.".

Key updates in PCI DSS 4.0 include Requirement 6.4.3, which mandates the management and certification of payment page script integrity, and Requirement 11.6.1, which focuses on detecting and addressing unauthorised changes to payment pages.

Operators can enhance compliance by adopting measures like tokenisation, which replaces sensitive card details with unique identifiers, and by using PCI-compliant gateways equipped with advanced encryption and real-time fraud detection. Solutions such as TransArmor P2PE can reduce PCI scope by up to 90%, streamlining compliance efforts.

Modern platforms like Fluid combine fraud detection with user-friendly features, ensuring operators maintain PCI DSS standards while delivering a seamless experience. Achieving compliance also involves establishing clear security policies, leveraging AI-driven tools to combat fraud, and encrypting cardholder data during both storage and transmission.

Licensing and Financial Compliance

Navigating licensing and financial compliance is a cornerstone of the US iGaming sector. It demands meticulous planning, solid financial backing, and unwavering adherence to regulatory standards.

Multi-Jurisdictional Licensing

In the US, iGaming operators must obtain separate licenses for each state they wish to operate in. This fragmented system brings both opportunities and challenges, as every state has its own set of licensing rules, tax structures, and compliance requirements.

To succeed, leading operators secure licenses across multiple states and even international markets. However, this requires careful research to prioritise states based on factors like potential revenue, player demographics, and the complexity of regulations. Building a team with local expertise is vital to navigate these regional differences and improve the chances of approval.

The licensing process is thorough and can take anywhere from six months to two years. Operators are required to submit proof of funds, audited financial statements, and detailed financial projections. Background checks on key personnel, shareholders, and beneficial owners are also mandatory.

Once licenses are in hand, maintaining compliance becomes an ongoing task. Collaboration with experienced payment processors is crucial to meet these regulatory demands effectively.

Partnering with Payment Processors

Partnering with payment processors who have both regulatory knowledge and technical expertise is essential. These processors face increasing scrutiny from regulators and financial institutions, making a strong compliance framework a non-negotiable aspect of their operations.

A critical factor is understanding and addressing MCC 7995 restrictions, which apply to gambling transactions. Many traditional processors struggle with these payments, leading to declined transactions and frustrated players. This makes it essential for operators to work with processors that can handle these challenges seamlessly.

Payment processors should also conduct rigorous KYB (Know Your Business) checks and utilise automated AML (Anti-Money Laundering) systems. These systems should handle identification, verification, and ongoing due diligence for gaming operators. Leveraging technology to automate AML processes and adopting a risk-based approach to tailor measures for each transaction’s risk level is equally important.

Transparency in financial reporting is another key compliance requirement. License holders must undergo regular audits and submit accurate financial reports to regulators. For casinos with annual gross gaming revenues exceeding €930,000, the Bank Secrecy Act mandates additional reporting obligations. For instance, operators must file a Currency Transaction Report (CTR) for cash transactions over €9,300 within 15 calendar days and submit a Suspicious Activity Report (SAR) for any suspicious transactions of €4,650 or more.

Given the evolving regulatory landscape, operators should align with payment providers who stay ahead of these changes and maintain open communication with authorities.

Tools like Fluid’s AI-powered digital cashier simplify compliance by integrating advanced fraud detection and offering personalised payment experiences that boost conversions. Additionally, operators must retain customer ID records, transaction logs, and SAR filings for at least five years using automated reporting systems to ensure compliance.

KYC and AML Procedures

For US iGaming operators, implementing strong KYC (Know Your Customer) and AML (Anti-Money Laundering) procedures isn't just a regulatory checkbox - it's a necessity for preventing financial crime and staying compliant. With global gambling industry fines reaching a staggering €135.6 million ($184.4 million) in 2024 alone, these processes are critical to survival.

At the heart of compliance is understanding what regulators expect. AML procedures aim to do more than just tick boxes - they help prevent fraud, stop underage gambling, combat money laundering, and promote responsible gambling practices.

Automated Identity Verification

iGaming operators need identity verification systems that strike the right balance between security and ease of use. The process starts by gathering a player's key details - name, birthdate, address, and government-issued ID. This information is then cross-checked against sanctions lists, PEP (Politically Exposed Persons) databases, watchlists, and self-exclusion lists.

Three core elements of this process include:

• Identity Verification: Confirming the player's identity using official documents.

• Source of Funds Verification: Reviewing income statements or pay stubs to ensure players are using legitimate funds, helping to flag potential money laundering.

• Address Verification: This can involve utility bills or even digital tools like IP address tracking and geolocation data to ensure compliance with region-specific regulations. This is especially important given the state-by-state nature of US iGaming laws.

Automation is a game-changer here. AI-powered solutions can cut KYC costs by 40%, complete verifications in under a minute, and reduce compliance workload by 70%. A real-world example highlights the risks of weak verification: one individual managed to defraud a major operator using multiple identities, showcasing the need for robust, automated systems.

Take Fluid's AI-powered digital cashier as an example. It integrates fraud detection with personalised payment experiences, allowing operators to maintain security while improving user satisfaction and boosting conversion rates.

But identity checks are just the beginning. Continuous transaction monitoring is the next critical layer in AML compliance.

Transaction Monitoring and Reporting

Once a player's identity is verified, the focus shifts to monitoring their transactions. This isn't just a best practice - it's a regulatory requirement in the US. In 2022, financial institutions filed over 3.6 million Suspicious Activity Reports (SARs) with the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN), and March 2023 alone saw a record-breaking 351,000 reports.

A targeted, risk-based approach is key. Instead of applying the same level of scrutiny to every player, operators should focus their compliance efforts on high-risk customers and transactions. AI-driven tools can help by detecting unusual betting patterns in real time, conducting Source of Wealth and Source of Funds checks for high-stakes players, and automating SAR filings.

The stakes are high. Fraud in the iGaming sector grew by an average of 64% annually between 2022 and 2024. And the consequences of failing to monitor effectively can be severe - TD Bank, for instance, faced a €2.2 billion ($3 billion) fine in 2024 for failing to report suspicious activities linked to criminal networks.

Effective implementation involves continuous monitoring for red flags like unusually large transactions or those tied to high-risk regions or individuals. Operators should also invest in mandatory AML training for all employees, using real-world case studies and simulations to prepare them for potential scenarios. Annual external audits can further help identify gaps and recommend improvements.

For compliance platforms, essential features include:

• Screening against PEP and sanctions lists.

• Real-time transaction monitoring.

• Document and identity verification.

• Machine learning tools to detect fraud.

• Pattern analysis for suspicious transaction detection.

A layered defence system works best. This could combine face and document checks, device and network diagnostics, and even video-based behavioural analysis. Such an approach ensures thorough protection while keeping the onboarding process smooth and user-friendly.

Cross-Border Payment Compliance

Domestic protocols like AML (Anti-Money Laundering), KYC (Know Your Customer), and PCI DSS (Payment Card Industry Data Security Standard) form the backbone of compliance. However, cross-border transactions introduce additional challenges. For US iGaming operators, navigating the maze of international regulations is no small feat. In 2023, several crypto casinos faced penalties due to inadequate KYC practices.

Cross-border compliance is complicated by varying AML and KYC requirements, conflicting data protection laws, and outright restrictions on gambling-related transactions in some regions. While domestic frameworks provide a starting point, operators must layer on international measures to address these complexities.

Multi-Currency Support

Offering support for multiple currencies isn't just about player convenience - it’s a compliance necessity. Modern iGaming platforms must handle transactions in EUR, USD, and even cryptocurrencies, all while meeting the unique regulatory demands of each jurisdiction.

Automated currency conversion systems play a key role here. By reducing conversion fees and ensuring accurate, real-time exchange rates, these systems help operators maintain transparency and meet local financial regulations. Partnering with reliable currency exchange providers is equally important.

Take Fluid's AI-driven digital cashier, for example. It supports multiple currencies and cryptocurrencies while ensuring compliance through intelligent transaction routing. The system customises payment experiences based on player location and preferred currency, balancing regulatory requirements with user satisfaction.

Tax compliance is another area where technology is indispensable. Automated systems can apply correct tax withholding rates, such as the 24% backup withholding rate mandated by the Internal Revenue Code for winners without valid taxpayer identification numbers. This automation not only prevents costly errors but also simplifies the payment process. Additionally, verifying player location adds another layer of compliance assurance.

Geo-Location and Jurisdiction Validation

Accurate location verification is critical for cross-border compliance. As Edward Bedrosian Jr., Chief Regulatory & Compliance Officer at Xpoint, explains:

"The problem for sports betting is that if you don't know if someone is actually in a valid state, or a 'legal state' for lack of a better term, they're potentially doing it illegally, and committing a crime."

Location validation technology uses a combination of IP tracking, GPS data, Wi-Fi triangulation, and device profiling to prevent jurisdictional breaches while respecting player privacy. Allison Rubin, a product manager at Xpoint, highlights their privacy-first approach:

"At Xpoint, we receive no 'PII,' which means 'personally identifiable information.' We're not connecting your name or your address to your location. We're not even pinpointing to an address, we're pinpointing to coordinates."

Real-time geofencing creates virtual boundaries around authorised jurisdictions, blocking transactions from restricted areas automatically. These systems must stay updated as regulations evolve - what’s legal today might not be tomorrow. Location data also helps flag suspicious activity, like multiple logins from different locations in a short time, which could indicate fraud or compromised accounts. Operators can also adjust KYC protocols based on risk levels, applying stricter measures for high-risk regions while maintaining smooth processes for low-risk players.

Tax Reporting Alignment

Tax compliance in the US varies widely by state. For example, New Jersey taxes online casino revenue at 15%, while Pennsylvania imposes a steep 54% tax on online slot revenue.

To avoid complications, operators should collect tax forms like W-9 (for US players) or W-8BEN (for non-US players) before processing any payments. This proactive step prevents automatic 24% backup withholding due to missing documentation.

Automated tax reporting tools, such as TAINA’s software, simplify this process by handling tax form collection, processing, and storage. These tools also provide real-time data on withholding and reporting, ensuring that tax remittance aligns with regulatory standards.

Currency conversion adds another layer of complexity. Tax reporting must reflect the exchange rates at the time of each transaction, requiring precise record-keeping and integration with reliable currency data providers. Maintaining detailed audit trails ensures transparency in how tax obligations are calculated and met across various jurisdictions and currencies.

To stay ahead, operators must view compliance as a protective measure rather than a burden. By investing in adaptable technology and collaborating with regulators, they can better navigate the ever-changing landscape of cross-border requirements.

Real-Time Compliance Systems

The iGaming industry is under constant pressure to tackle fraud while staying compliant with regulatory standards. With around 5% of global digital transactions suspected of being fraudulent and risky transactions rising by 14% annually, operators need systems that can respond to threats instantly. Real-time compliance systems have become an integral tool for safeguarding both operators and players in this high-stakes environment.

These systems now go far beyond basic transaction monitoring. By combining artificial intelligence, behavioural analysis, and automated reporting, they create a multi-layered defence mechanism. The challenge lies in implementing these systems effectively to ensure both robust security and a smooth user experience.

Real-Time Fraud Detection and Monitoring

AI-driven systems are at the heart of modern fraud detection. They analyse player behaviour, transaction patterns, and device data in real time, flagging anything suspicious. By processing hundreds of data points - like betting habits or login locations - they build detailed risk profiles for every player.

A key component of this approach is behavioural analysis. These systems monitor how players interact with the platform, their usual betting amounts, and preferred games. If a player suddenly makes a large deposit or adopts an unusual betting strategy, the system triggers alerts for manual review. This approach catches fraud attempts that older, rule-based systems might overlook.

Device fingerprinting adds another layer of security. By examining details like browser configurations, screen resolutions, and installed plugins, these systems can detect when multiple accounts are being accessed from the same device. This is especially effective in combating bonus abuse.

Another feature, 3DS authentication, tailors security measures to the risk level of each transaction. Low-risk transactions from trusted users proceed without any interruptions, while suspicious ones require additional verification. This strikes a balance between maintaining security and ensuring a seamless user experience.

Take Fluid's system, for example. It uses machine learning to adapt payment processes based on a player's location and preferred currency. This not only meets regulatory requirements but also keeps the user experience smooth and satisfying.

Real-time systems stand out because they provide instant alerts and automated responses to threats as they happen. Unlike traditional monitoring, which relies on periodic reviews, these systems continuously check against Politically Exposed Persons (PEP) and sanctions lists. This ensures compliance with anti-money laundering regulations without requiring manual intervention.

As the Chief Compliance Officer at Soft2Bet noted:

"SEON significantly enhanced our fraud prevention efficiency, freeing up time and resources for better policies, procedures and rules".

While real-time systems address threats as they arise, a strong incident response plan is essential for resolving breaches effectively.

Incident Reporting and Response Plans

Insights from real-time monitoring form the backbone of incident response strategies. A well-structured response plan ensures that operators can act quickly and effectively, especially when navigating the complex reporting requirements in the US, which vary from state to state.

Preparation is the cornerstone of effective incident response. This involves setting up dedicated teams with clearly defined roles, using monitoring tools to detect suspicious activity, and developing detailed playbooks for different types of incidents. As Mike Toole, Head of Security and IT at Blumira, explained:

"A detailed yet concise roadmap will help prevent missteps and ensure proper execution".

The response process typically includes preparation, detection, containment, eradication, reporting, and review. Automated monitoring tools play a critical role in the detection phase, scanning for anomalies in transaction patterns, user behaviour, and system performance. When an issue is flagged, alerts are sent to the response team immediately, enabling swift action.

Containment strategies are vital to prevent incidents from escalating. This might involve temporarily suspending affected accounts, blocking suspicious IP addresses, or isolating compromised systems. Pre-approved procedures ensure these actions can be taken without unnecessary delays.

Clear communication during an incident is equally important. Coordination within the organisation must go hand-in-hand with transparent communication to regulators, payment processors, and affected customers. Secure channels, like encrypted messaging or dedicated hotlines, are essential for safeguarding sensitive information.

Documentation is another critical aspect. Every incident should be thoroughly recorded, from detection to resolution, including logs of all actions and decisions. This not only ensures compliance but also provides valuable insights for improving future responses. Post-incident reviews help identify what worked well and highlight areas for improvement, strengthening the overall security framework.

Regular tabletop exercises and simulated attacks are useful for uncovering potential weaknesses in response plans. Automated compliance tools can further streamline the process by generating preliminary reports and tracking regulatory deadlines in real time, ensuring that all requirements are met.

For US operators, response plans must account for state-specific reporting rules. Some states require immediate notification, while others allow time for investigation. Automated systems that adapt to these variations help maintain compliance across all jurisdictions.

Strong incident response capabilities not only ensure compliance but also minimise the impact of security breaches by enabling faster detection, containment, and recovery.

Conclusion

Navigating payment compliance in the US iGaming sector requires a careful and well-rounded approach. In 2023, a striking 65% of operators faced fines exceeding €930,000 ($1 million CAD) due to inadequate KYC checks. The journey to compliance begins with securing the right gaming licence and establishing strong KYC protocols to confirm player identities. Beyond these essentials, operators need to strengthen AML measures, closely monitor transactions, and carry out regular audits to avoid costly penalties. These steps lay the groundwork for incorporating technology to meet regulatory demands.

Technology simplifies the intricate web of compliance requirements. Payment systems must handle multi-jurisdictional licensing, detect fraud in real time, and automate reporting processes - all while providing a smooth user experience. For example, Fluid's digital cashier demonstrates how technology can tailor payment processes to individual users while meeting regulatory standards. Embracing advanced tools like this not only ensures compliance but also opens doors to growth.

With the global gambling industry projected to hit €321.4 billion ($347 billion) in 2024, it’s clear that viewing compliance as an investment rather than a burden is crucial for sustainable success. By combining strong regulatory practices with cutting-edge payment solutions, operators can stay ahead in the evolving US iGaming landscape. Success hinges on creating compliance systems that safeguard both operators and players while delivering effortless payment experiences.

FAQs

What steps should iGaming operators take to comply with US payment regulations?

To meet US payment regulations, iGaming operators must take several essential steps. First and foremost, securing the necessary licences for each state where you operate is non-negotiable, as rules vary significantly between jurisdictions. It's also vital to comply with the Unlawful Internet Gambling Enforcement Act (UIGEA), which regulates payment processing for gambling activities.

Equally important are robust Anti-Money Laundering (AML) and Know Your Customer (KYC) protocols. These processes are designed to confirm player identities, detect and flag suspicious transactions, and maintain detailed records for reporting any unusual activity to the relevant authorities. Regular audits and compliance reviews are indispensable to ensure adherence to these standards.

By following these practices, operators create a safe and compliant payment system that earns the trust of both players and regulators.

What is MCC 7995, and how can iGaming operators address its challenges in payment processing?

MCC 7995: What It Means for Gambling Transactions

MCC 7995 is the Merchant Category Code assigned to gambling-related transactions, marking them as high-risk. This classification often triggers increased scrutiny from banks and payment processors, which can lead to declined payments or require players to go through extra verification steps.

To navigate these hurdles, gambling operators can take a few practical steps:

• Work with specialised payment providers: Partnering with providers experienced in handling gambling transactions can help ensure smoother payment processing.

• Offer multiple payment methods: Giving players a variety of payment options reduces dependence on any single method, making transactions more flexible and convenient.

• Follow US regulatory standards closely: Adhering to these standards helps minimise issues like payment rejections and potential fraud.

By adopting these measures, operators can not only increase payment success rates but also build trust among players while staying compliant with necessary regulations.

How does technology improve compliance and player experience in the US iGaming industry?

Technology plays a key role in maintaining compliance and enhancing the player experience in the US iGaming industry. Tools like AI and data analytics enable operators to automate essential compliance tasks, including Know Your Customer (KYC) and Anti-Money Laundering (AML) checks. These advanced systems can quickly identify risks, detect fraudulent activities in real time, and ensure strict adherence to regulatory standards.

On the player side, technology enhances the experience by supporting faster and more secure transactions while reducing payment errors. Machine learning, for instance, helps minimise false declines, creating smoother payment processes and improving overall satisfaction. This blend of strong compliance measures and seamless user experiences fosters trust and loyalty - key factors in such a competitive market.

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