The credit card company signed an agreement in Superior Court in Marin County, Calif., saying that for the next three years it won't operate merchant accounts with companies running online casinos that may do business with California residents.
The agreement stems from a legal dispute between Discover and Frederick Marino, an online gambler who racked up more than $70,000 total in wagering debt, losing both his house and his wife in the process.
Ira Rothken, Marino's attorney, said he hoped the agreement would encourage credit card companies to crack down on online wagering.
"I think to a certain extent it's a benefit for everyone," Rothken said. "There's a lot of injury that happens to people from using credit cards for Internet gambling."
Rothken downplayed the fact that Marino had run up a gambling debt he couldn't afford.
"That's not what this case is about," he said. "The greater evil is the credit card companies trying to make money off of people gambling online."
Marino sued both Discover and American Express two years ago on behalf of the state's residents and struck deals with some other credit card companies he had used for online wagering. Discover has agreed to relieve him of the $700 he charged on its card and pay $2,000 in attorney's fees. A trial is set to start early next year regarding the more than $10,000 wagered through his American Express card, Marino's attorney said.
Because it's difficult to discern whether a casino client is a California resident, the case could prohibit almost any wagering site from having a Discover Card account--something the company already is trying to do on its own.
Discover Card said it's had a policy for years to not do business with any site that it knows participates in online gambling. If the company finds out that one of its clients is running an online casino, it pulls the account, according to a spokeswoman.
"The industry is very hard to regulate; the company has made a business decision to go that route," Discover Card spokeswoman Cathy Edwards said.
Several credit card companies have a policy similar to Discover Card's. However, Marino's attorney said that if Discover Card had been enforcing the ban, his client would never have been able to charge so much at the casinos.
As the number of wagering sites grows, along with the number of people losing vast amounts of money through them, more gamblers are turning to the courts in an attempt to wipe out or reduce their debt. Many use the same argument Marino did: The credit card companies are loaning people money for gambling.
In October 1999, Visa settled a similar suit brought by a woman who had accrued charges in the same range as Marino. She also was represented by Rothken.