For years, the use of cash advances on credit cards in Kansas closely tracked the pattern in the neighboring state of Missouri. Then in September 2022, around the start of the NFL season, the states’ trends diverged.

While the incidence of cash advance fees grew in both states, the spike was much more pronounced in Kansas, where sports gambling had just been legalized, according to new research from the Consumer Financial Protection Bureau.

“Kansas cardholders became far more likely to incur cash advance fees than Missouri consumers that first month sports betting went live,” CFPB researchers wrote Monday in a blog post that sheds light on the growing entanglement between the credit card business and the nascent sports gambling industry.

“The cash advance rate for Missourians also rose above the national average, possibly suggesting that some people crossed state lines to place a wager,” the researchers added.

What happened next is perhaps counterintuitive: The incidence of cash advance fees on credit cards in the two Midwestern states fell sharply, though not back to their levels prior to the legalization of sports gambling in Kansas.

In both Kansas and Missouri, the fee declines in late 2022 raise questions about whether bettors understood that they’d be hit with fees if they used credit cards to fund gambling accounts.

The CFPB researchers wrote that their findings suggest “cardholders may experience initial confusion about cash advance fees before switching their payment method on a sportsbook.”

In its report, the CFPB points to some potential reasons why consumers might be confused. Sportsbooks typically provide limited or no disclosure about the potential for cash advance fees, the researchers wrote.

“The app may note the possibility of card issuers assessing additional charges in the process of making a payment. Yet some companies only include the warning in small, grey font or characterize the fees as a possibility in their frequently asked questions, rather than the norm,” the blog post states.

As sports betting has spread in the wake of a pivotal Supreme Court decision in 2018 — it’s now legal in 38 states and the District of Columbia — some major banks have loosened their restrictions on an industry that had previously been largely illegal outside of Nevada.

The CFPB researchers wrote that even when bettors understand that banks might charge cash advance fees, they would struggle to learn the policy of their own particular card issuer. Banks charge the fees not only when cardholders withdraw cash from an ATM, but also when they engage in certain “cash equivalent” transactions.

“Credit card agreements include fine print on cash advances, but the actual policies of the company change over time and differ based on the particular circumstances of a given transaction,” the CFPB researchers wrote. “It is difficult to imagine that a consumer would think to refer to their credit card’s terms and conditions when placing a wager for the first time.”

JPMorgan Chase, Discover Financial Services and American Express all classify online gambling transactions as cash advances, according to a CFPB review of recent credit card agreements. Citigroup and Capital One Financial classify legal wagers as cash advances without specifically calling out online gambling.

Bank of America and Wells Fargo, meanwhile, warn that they may decline Internet gambling transactions, though they also list bets as cash equivalents, according to the CFPB’s review of credit card agreements.

All seven banks mentioned in the CFPB’s blog post either declined to comment on the bureau’s findings or did not provide a comment by deadline. The Consumer Bankers Association, which represents many of the nation’s largest banks, also declined to comment.

When consumers incur cash advance fees, the price can be steep. The fees are typically the larger of either $10 or 5% of the cash advance, according to the CFPB. In addition, the advances start accruing interest — typically at a 30% annual percentage rate — on the transaction date.

Sports gamblers have been filing complaints to the CFPB regarding cash advance fees. Some of them allege that they were charged a separate cash advance fee for each bet, with no warning about the potential for the additional charges, according to a CFPB report last year.

“Cardholders, especially those betting for the first time, may not grasp the difference in using their credit card in a sportsbook app compared to a ride share or food delivery service,” the 2023 report stated.

The CFPB’s scrutiny of banks’ role in the fast-growing sports betting market comes at a time when Congress has started considering whether to provide more federal oversight of the state-regulated gambling sector.

At a Senate Judiciary Committee hearing on Tuesday, Chairman Richard Durbin, D-Ill., expressed concern that consumers’ round-the-clock access to gambling on their mobile phones can feed addiction.

“A person with a gambling problem can chase the action at the click of a button and rack up ever-increasing losses, whether on an NFL game or professional table tennis,” Durbin said. “I believe gambling operators must play a greater role in preventing addiction on the front end by helping identify problem gamblers and directing them to help.”

Advocates for gambling reform have called for bans on the use of credit cards to fund gambling accounts, arguing that borrowing is the refuge of bettors who have already depleted their savings. 

A number of states, including Iowa and Massachusetts, currently ban the use of credit cards in online sports gambling. Federal legislation introduced earlier this year by Rep. Paul Tonko, D-N.Y., includes a nationwide prohibition on the use of plastic to fund accounts at sportsbooks.