One of the defining aspects of the payments revolution of the past few years—at least from a regulatory perspective—has been the question of whether any particular payments service is subject to regulation as money transmission. Almost all U.S. states regulate money transmitters under state-specific licensing regimes; the statutory definitions of money transmission are quite broad and typically cover any entity that “receives” and “transfers” money.

These laws were crafted to address what we would today call “traditional” money transmitters—i.e., major, wellknown brands that sell money orders, stored value cards, and offer domestic and international wire transfers. Today, however, there are a number of new and innovative companies that are playing a somewhat different role: They play a part in facilitating the receipt of payments by merchants and other sellers of goods and services (such as utilities) as opposed to facilitating the transmission of funds on behalf of a sender. An entity providing this type of service may have a contractual relationship with the recipient pursuant to which the entity is appointed as an agent to receive funds on behalf of that recipient (i.e., the merchant). In recent years, state licensing authorities— and various participants in this market—have grappled with whether, and to what extent, this type of activity could be subject to state money transmitter licensing laws. Indeed, a number of states have recently concluded that, subject to certain conditions, state money transmission licensing laws do not apply to services provided as an agent of a merchant or other recipient of funds pursuant to a direct contractual agreement.