The fact that gambling is illegal does little to stop NCAA basketball fans from betting online or engaging in office pools. But PayPal is doing what it can to block users from getting in on the action. The service is restricting accounts it believes have been used for gambling.
Bloomberg Businessweek relays the message PayPal sent to accused poolmongers:
After a recent review of your account activity, it has been determined that you are in violation of PayPal’s Acceptable Use Policy regarding your sales / offers of March Madness sports pool.
As Bloomberg notes, PayPal’s user agreement forbids members from using their accounts for sending or receiving money for contests with entry fees and prizes. It seems as though office pool maestros who hoped to use PayPal this year will have to resort to the old-fashioned money jar.
PayPal Restricts Accounts Used for March Madness Bets [Bloomberg Businessweek]
Previously: PayPal Changes Its Mind, Decides You Can Use It To Buy Erotic E-Books
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I’m no fan of office pools, and generally think college basketball is stupid BUT–those office pools are generally legal. I looked up the statutes a few years ago when our corporate email was (as it is every year) full of junk from these pool people. Annoying, yes. Illegal gambling, no.
Winners pay taxes on that money in your office?
I would guess not. I wonder how that’s supposed to work?
I thought that for slots at least you only pay taxes on winnings over a certain amount. At the very least, I know the casinos will have you fill out a form for taxes if you win big.
I am too lazy to look up the specifics, but I have a feeling that this has to do with the reporting threshold (like $600 for a W-2), which is not the same as what is taxable, even though people often get away with treating them as such.
Correct. Any income is supposed to be reported unless specifically excluded by law. Just because you do not receive a 1099 doesn’t mean that you don’t have to claim it. Worst case scenario is they sent it to a wrong address or it was lost in the mail. The gov’t would have a record of it and you didn’t report it. Could be problems for you.
In the U.S., gambling winnings, even those from illegal gambling, are always taxable income. See line 21 of the 1040.
As just an example, Colorado law allows for office pools so long as 100% of all inputted funds is released as winnings. Meaning, no one can take a rake or finder’s fee or whatever. All money must be available to be won.
But why even use PayPal? Don’t they charge you a fee for the money transfers? Seems a waste of time, especially since they have a tendency to hold your money without cause for an unspecified about of time.
“Don’t they charge you a fee for the money transfers?”
Only if you bring in a certain amount (I forget what that threshold is). There is some magic number that is the maximum for a free account and anything above that becomes a business/premier account with some added fees.
That’s generally the rule in every state. Holding any of the winnings aside makes you a bookmaker. I don’t know why anyone would use Paypal for it, though.
I’m guessing because it’s a quick and free (if you use the “pay money owed” option) to get the money to someone geographically distant. Some pools get rather large.
(Sorry if a similar comment pops up later. I left one, but it seems like the system ate it).
Problem is the laws for this are different state to state and PayPal operates internationally as well as in all states, so they made their rule the safe thing to ensure they are not going to end up in the middle of some legal problem.
Also based on most state laws, holding back any of the money for the “house” takes this from being legal to illegal activity, and since PayPal does charge fees on the money it transfers they could somehow end up in trouble if people moving office pool money around and they are collecting their fees. This is more likely laws lagging behind technology, but you cannot blame PayPal for protecting themselves from the one entity that is even stupider and more evil than they are… government.
This move by PayPal wouldn’t have looked so bad if they didn’t just get caught trying to ban books.
Do banks in the US still not offer email bank transfers? It’s a lot easier than PayPal, only costs one dollar (on average), and takes about two hours for it to go through.
Not that I know of, sounds like a silly foolish thing to do, as the number of e-mail accounts that are hacked.
However, I know that it’s possible to transfer money from my personal account to another person’s personal account at a different bank for free. I believe my bank limits it to $1000 per day.
It’s safer than you think. I log in to my bank account and choose to transfer, say, $500 dollars to a friend by providing their email address. They get an email notifying them of this, but to actually claim the money they need a secret password I chose. I would call them to give it to them (never email it), which they then enter, log into their own bank, and the money’s there.
“March Madness”
Enough said.
When, oh when will PayPal finally be regulated as a bank? Everything they do says, “We wanna be your bank”. I wonder what would happen if FDIC, Federal Reserve or other auditors forced open PayPal’s books. I wonder what they would find.
‚ÄúPayPal follows all the legal and regulatory rules in the U.S. as it relates to gambling,‚Äù she said.”
Oh yeah? $100 says it doesn’t.
I see what you did there…
Um, federal law says no betting. In this case, I have to side with PayPal.
I feel sick now.
Crain’s on the legality of office pools: http://www.crainscleveland.com/article/20120314/BLOGS04/120319917
Right, but an office pool is intrastate. Once you start doing it online and potentially across state borders, you run up against federal law, which is not favorable on online gambling in general, and sports-related betting in particular.
That’s why when I have people send me money; in the Subject they type Mall Madness. Not only does it fool PayPal’s filter but who doesn’t love gambling on the outcome of a children’s game that involves fake credit cards and buying fake clothing?
It is not Paypals job to police peoples accounts…. to stop activity and should not practice policing the internet This is one of the reasons that I dropped my account with Paypal.
It’s not PayPal’s job to uphold PayPal’s terms and conditions? Whose job is it to uphold PayPal’s terms and conditions?
Legally, it is, though. That’s like saying you aren’t liable for accepting stolen goods. It all falls under the very broad, very old principle of not allowing illegal activity to occur on your property. We’ve had that in the US since our founding, and inherited it from English law.
I love this idea, free for all on money laundering on PayPal….
Oh wait, this just shows how stupid this comment is. Like any “Bank” or more specifically “Bank like entity” PayPal is required by the government to make sure that they look for and do whatever they can to prevent / report illegal activity. While I would agree that PayPal takes this to unreasonable extremes in many cases, Stating they should not be doing anything is an unreasonable extreme in the opposite direction
I found out today that companies that offer reloadable gift cards have to take precautions to ensure that they do not become a “provider”, which comes with increased regulations on ensuring that money is not being laundered through the gift cards. See: http://bankbryancave.com/2011/09/fincen-issues-final-rule-on-prepaid-access/
paypal is a friend to none.
My issue with this is that they’re assuming that accounts are being used for that. They might not have any real proof but they’ll go ahead and shut them down anyway. Guilty until proven guilty.
Some people may have put “NCAA Pool Entry Fee” in the memo section. Not saying this is everyone, but those folks would be low hanging fruit for Paypal.
By “restricting accounts” they mean “Stealing their money.”
When will people just STOP using Payn’Steal? Just say NO!
What do you mean illegal? The President of the United States is quite vocal about his brackets, which we all know damn well are backed by money….and he wouldn’t ever do anything illegal, right?