Regulatory Inferno: EGBA Unleashes Complaint on Walletto for Illegal Gambling Payments

The European Gaming and Betting Association (EGBA) has formally accused Walletto, a payment services provider based in Vilnius, of processing deposits for illicit online gambling platforms. This complaint, lodged with the Bank of Lithuania, stems from an EGBA investigation involving test transactions on unlicensed gambling websites and applications that target European consumers. The core of the allegation revolves around merchant category miscoding, where transactions linked to illegal gambling operators were supposedly routed through Walletto in a manner that concealed their true nature, enabling them to traverse mainstream card networks.

Walletto holds principal memberships with both Visa and Mastercard, prompting EGBA to raise concerns directly with these card schemes, as well as with the European Commission’s DG FISMA. Maarten Haijer, EGBA’s secretary general, characterized the issue as a systemic problem rather than an isolated incident. He highlighted that illegal operators thrive by exploiting legitimate financial channels and the widely used payment networks. Haijer underscored the crucial role of card schemes, as they establish the rules for these payment networks and possess unique visibility into transaction flows.

This complaint surfaces at a sensitive time for Lithuania’s fintech sector, which has grown into a significant EU gateway for payment service providers seeking passporting rights across the bloc. This expansion has attracted hundreds of licensed e-money institutions and PSPs, a model reliant on robust supervision. Adding to the regulatory pressure, the European Commission recently initiated infringement proceedings against Lithuania and three other EU member states for their failure to correctly transpose anti-money laundering (AML) rules into national law. Given that the transactions investigated by EGBA occurred in Denmark and Poland, the case underscores the cross-border implications of Lithuanian regulatory oversight. The broader payments sector in Lithuania, beyond just Walletto, is now facing scrutiny regarding whether the country's e-money licensing regime is adequately resourced to supervise its substantial volume of business. EGBA also noted a growing similar pressure on card schemes in the US concerning illegal gambling transactions, indicating a tightening enforcement climate internationally.

The EGBA’s complaint explicitly cites the EU’s Payment Services Directive (PSD2) and its anti-money laundering framework as the legal basis for enforcement. Under PSD2, payment service providers are obligated to conduct thorough due diligence on their merchant base, and the misclassification of gambling transactions is a well-known method for regulatory evasion. While the upcoming PSD3 and the revised Payment Services Regulation (PSR) are expected to enhance merchant onboarding obligations, their implementation timelines depend on member-state transposition. More immediately, this case reveals a structural gap in current enforcement mechanisms: national gambling regulators can revoke licenses from unlicensed operators but possess limited direct authority over the payment intermediaries that are essential for these operators' commercial viability. EGBA advocates for financial regulators to proactively utilize existing powers against PSPs rather than awaiting new legislation.

The proliferation of illegal gambling poses a significant threat to licensed operators, including EGBA members such as Flutter, Bet365, and Entain, which collectively represent approximately 30% of European online gambling gross gaming revenue. Unlicensed platforms operate without the consumer protections mandated for regulated operators, lacking identity verification, safer gambling tools, AML controls, and guaranteed payouts. The commercial and reputational damage inflicted upon the licensed sector by unregulated competitors underscores why industry bodies are taking the initiative to drive regulatory complaints, rather than leaving enforcement solely to public authorities. As of now, the Bank of Lithuania has not publicly responded to the complaint. Key developments to monitor include whether the central bank initiates a formal supervisory process against Walletto and whether the card schemes impose any remedial requirements on their principal member.