Chile's Financial Regulator Moves to Cut Card Payments to Unlicensed Betting

The CMF's draft rule would bar payment operators from serving any activity that is illegal in Chile, and its president says that covers online casinos and their payouts. Congress is still debating whether to license the sector at all.

• The Comisión para el Mercado Financiero (CMF) has proposed rules preventing payment card operators from providing services to unauthorised online gambling platforms, La Tercera reports via G3 Newswire
• The draft, published for consultation in August, limits the complementary activities payment operators may conduct to services for entities operating in accordance with Chilean law, and excludes foreign activities that would be illegal if carried out in Chile
• CMF president Catherine Tornel said the provision applies to online casinos because unauthorised online gambling is currently illegal in Chile, and that payouts from such platforms would also be blocked if the rule is approved as drafted
• Earlier this month Chile's telecoms regulator Subtel ordered six internet providers to block 42 gambling URLs within 48 hours under a court-backed process, and the state lottery has named 11 operators in a criminal complaint
• Congress continues to debate a bill that would create a regulated online betting market with a new gaming authority and a 20% tax

Chile Adds the Payment Rail to the Blocking Order

Chile is building an enforcement regime against offshore betting one institution at a time, and the latest to move is the financial regulator.

The Comisión para el Mercado Financiero has proposed an update to the list of complementary activities that payment card operators are permitted to conduct, according to La Tercera, as reported by G3 Newswire. Under the draft, published for consultation in August, authorisation would be limited to services provided to entities operating in accordance with Chilean law and holding any required permits, licences or concessions. It would also exclude services to foreign activities that would be illegal if carried out in Chile.

The CMF's president, Catherine Tornel, said the provision would apply to online casinos because unauthorised online gambling is currently considered illegal in Chile, so payment operators would be unable to serve platforms without a business recognised as legally operating in the country. Asked whether payouts would be covered, she said that if the rule were approved in its current form, payment operators would not be able to process payouts for activities considered illegal in Chile.

The Rest of the State Has Already Moved

The proposal lands on top of a series of actions from other Chilean institutions. The Supreme Court ruled last year that unauthorised online betting is illegal and ordered internet providers to block unlicensed sites, and a court has since set a continuing process for adding domains to the block list; earlier this month the Subsecretaría de Telecomunicaciones ordered six internet service providers to block 42 betting and gambling URLs within 48 hours. The tax authority has enabled foreign platforms to register for VAT on transactions with Chilean customers, and Polla Chilena de Beneficencia, the state lottery, filed a criminal complaint in August naming 11 operators.

All of this is happening while Congress debates the bill that would create a licensed online betting market, with a new gaming body and a 20% tax on gross revenue. The CMF's rule would, if adopted, strengthen enforcement through the payments system while that framework remains unresolved.

Payment Blocking Is the Measure Every Regulator Wants and Few Can Impose Alone

The Dutch and German regulators spent this week saying, in different ways, that fines and domain blocks do not reach operators domiciled offshore and that cutting off the money is the lever that works. Chile is in the unusual position of being able to pull it, because the authority over card acquirers and payment processors sits with a financial regulator that has decided the gambling question is already settled by the Supreme Court. The CMF is not making a gambling policy judgement; it is applying a general principle, that licensed payment operators may not serve illegal activity, to a sector the courts have already classified. That is a cleaner legal route than most gambling regulators have, and it does not depend on the operator's cooperation, its licence elsewhere or a VPN. It depends on Transbank and its competitors reading the rule the same way the CMF's president does.

A Market Being Closed Before It Is Opened

The order of events is the striking part. Chile is enforcing illegality, through ISP blocks, a lottery's criminal complaint and now the payment rails, ahead of a law that would make some of the same operators legal. The betting bill has been through both chambers in various forms and is still not enacted, and every month it is delayed the offshore operators lose more of their Chilean infrastructure. That may be the point: a regulated market opened after the black market has been squeezed launches with a channelisation advantage that most Latin American markets never had. It may also mean that by the time the licence window opens, the operators best placed to apply are the ones that left. Either way, the CMF has given the eventual licensing regime a payment-blocking enforcement tool before the regime exists.

Chile is proving that a state can close the money to offshore betting without a gambling regulator. Whether it then opens a legal market, or simply keeps the door shut, is Congress's call.