PayPal Inc. (PYPL), the company that was providing the mechanism for payment of illegal Internet wagering transactions, has agreed to settle an investigation by New York State officials by paying a fine and becoming a snitch for the authorities.
The company, in the process of being acquired by eBay Inc., agreed to pay a $200,000 fine and to alert law enforcement officials if it suspects that its customers are involved in Internet gambling. Such gambling violates laws on both the federal and state levels.
There never were any charges filed against PayPal but pressure from New York State officials that threatened to interfere with its merger with eBay, forced company officials to expedite a settlement. But, that settlement has caused other legal groups to rise up in opposition.
A spokesman for the Center for Democracy and Technology who monitors Internet legal issues called the settlement "overbroad," causing PayPal to constantly monitor its customers.
PayPal denied the implication, saying the company already reports people engaged in "fraud" to law enforcement. Also, anyone believed to be selling contraband on websites would be reported.
The pursuit of PayPal began in early summer by the office of N.Y. Atty. Gen. Eliot Spitzer, who has been very involved in the activities of some big name Wall Street companies such as J.P. Morgan, Citigroup, Morgan Stanley and others.