To everyone who in 2023 is feeling a little wary of giving information to any company: yeah, I hear you.
The underlying problem is that the only payment processors that will work with season-long fantasy sports companies in 2023 are ones that primarily work with sports betting and DFS companies. Traditional payment processors, due to a myriad of state-level and federal-level laws, will no longer host fantasy sports companies. This is what happened with PayPal - they determined we should be grouped in with sports books, and decided we weren’t worth the risk even after we appealed many times about our legality and how different our offering is than that of a DFS provider or a sports book.
Paydala is focused on compliance rather than just ignoring certain businesses. This means reassuring their backing financial institutions that they aren’t abetting money launderers or credit card fraud. This in turn means getting a bit more information from customers than just swiping a credit card, in order to perform Know Your Customer (KYC) and anti-money laundering (AML) checks.
Concerns about money-laundering or credit card fraud are legitimate concerns for sports books and casinos and even DFS sites, due to how those offerings work*. They are not reasonable concerns for Ottoneu, but, again, due to the current legal landscape across the United States, this is the class of business we are grouped with. I’ve had multiple calls with the Paydala team helping them understand our offerings and how they differ from sports books, casinos, DFS, etc. They understand these differences and are working with me to make their offering less strict on the KYC and AML fronts, for specifically Ottoneu, their first non-DFS, non-sports book client. However as they are navigating their compliance they’ve requested that if we want to go live, we have to go live with these KYC and AML checks in place.
I’ve looked at a number of payment providers. Paydala is the only one that I believe has the combination of technical understanding, responsiveness to Ottoneu’s product needs, smooth existing payment flow, and quality of the founding team that I was willing to partner with. And this is no joke - if we didn’t find the right partner, it is extremely unlikely I would have been able to continue Ottoneu past this baseball season. We have taken $0 in income since being kicked off PayPal in May and the landscape of payment processors that are willing to work with fantasy sports providers is dire right now.
So at the end of the day, I’m continuing to work with Paydala to ease the KYC and AML requirements for Ottoneu’s customers and they are working to meet our needs. My hope and belief is that this regulatory climate will change, especially in terms of separating season-long and dynasty fantasy sports from the regulations that rule DFS, sports betting, and casino operators. However, if you want to play fantasy football in 2023, it is very likely that this identifying information will be a requirement from Paydala, for at least the next couple of weeks.
Here is Paydala’s terms of service. They are a platform that does not store PII or credit card information, in order to stay compliant with the various relevant laws around privacy. They utilize Dwolla, MX, and Lexis-Nexis, all of whom have published SOC 2 audits. I requested these audits this morning from Paydala and I’ve put them in a public Dropbox folder.
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- I’m happy to discuss this further if it is of interest. I’m also happy to discuss how we got here and what can happen next, but that might be more of an in-person conversation.