PayPal has recently started allowing its customers to use its service to fund their online casino and poker accounts after a three year absence.  They used to be the premier online service in North America but when they pulled their services from online gambling sites, they lost a lot of customers.  Some of those customers, however, may be feeling the heat within the next few months as PayPal has announced that they have opened up their files to the Internal Revenue Service and are allowing them to review the payment records of their members.  Supposedly the government is looking for references and transactions that were made to or paid from offshore entities.  PayPal agreed.

PayPal customers are saying that they sold out the online gambling community.  PayPal was the last option they had left to fund both payments and withdrawals from online casino and poker accounts.  All of their client accounts are going to be opened up to scrutiny and customers are up in arms over the incident because they thought their financial records were secure.

According to the government, the online gambling industry is not being targets.  The government is trying to crack down on tax evaders who think they can use their PayPal accounts as ‘tax havens’.  The IRS is trying to find income that has been unclaimed and the online casino, poker, and sports betting industries fall into this category.  No matter what the IRS claims, the online gambling industry is being targeted as specifically as all the rest.

In 2002 the Attorney General put a stop to customers using PayPal by imposing a hefty fine on the company.  PayPal was one of the largest suppliers of fund transfers between the online gaming websites and their customers.  Since then PayPal has veered away from the gaming sites even though a few of the gambling websites have contracted with the popular internet e-wallet to still use their services.  Most of those websites, however, do not accept American players.

PayPal is looking at a bunch of civil lawsuits by PayPal customers, especially those who used the e-wallet to fund their gambling accounts.  The release of customer’s records to the IRS breaches the security and confidentiality policies that PayPal was supposed to be upholding regarding customer information.  Even though the government requested the records, that does not validate PayPal releasing them without prior notification to its customers.

Even online gambling analyst Gordon Price stated that he felt PayPal sold out to the IRS.  “Even if they had kept themselves away, there was no reason for them to sell out the many people who gave them money and trusted them with private information.”