Visa and Mastercard suspend payments for ad purchases on Pornhub and MindGeek amid controversy

KEY POINTS

• Visa and Mastercard have suspended card payments for advertising on Pornhub and its parent company MindGeek.
• A federal judge in California on Friday denied Visa's motion to dismiss a lawsuit by a woman who accuses the payment processor of knowingly facilitating the distribution of child pornography on Pornhub and other sites operated by parent company MindGeek.
• Visa CEO and Chairman Al Kelly said he strongly disagrees with the court's decision and is confident in his position. 
• However, the court decision created uncertainty about the role of TrafficJunky, MindGeek's advertising arm, so the company will suspend its Visa acceptance privileges until further notice, Kelly said.
• Mastercard also cited new revelations from the case for its decision.

Visa and Mastercard said Thursday card payments for advertising on Pornhub and its parent company MindGeek would be suspended after a lawsuit stoked controversy over whether the payments giants could be facilitating child pornography.

A federal judge in California on Friday denied Visa's motion to dismiss a lawsuit by a woman who accuses the payment processor of knowingly facilitating the distribution of child pornography on Pornhub and other sites operated by parent company MindGeek.

Visa CEO and Chairman Al Kelly said in a statement Thursday that he strongly disagrees with the court and is confident in his position. 

"Visa condemns sex trafficking, sexual exploitation, and child sexual abuse," Kelly said. "It is illegal, and Visa does not permit the use of our network for illegal activity. Our rules explicitly and unequivocally prohibit the use of our products to pay for content that depicts nonconsensual sexual behavior or child sexual abuse. We are vigilant in our efforts to deter this, and other illegal activity on our network."

Kelly said the court decision created uncertainty about the role of TrafficJunky, MindGeek's advertising arm, and accordingly, the company will suspend its Visa acceptance privileges until further notice. During this suspension, Visa cards will not be able to be used to purchase advertising on any sites, including Pornhub or other MindGeek-affiliated sites, Kelly said.

"It is Visa's policy to follow the law of every country in which we do business. We do not make moral judgments on legal purchases made by consumers, and we respect the rightful role of lawmakers to make decisions about what is legal and what is not," Kelly said. "Visa can be used only at MindGeek studio sites that feature adult professional actors in legal adult entertainment."

Separately, Mastercard told CNBC it's directing financial institutions to suspend acceptance of its products at TrafficJunky following the court ruling. 

"New facts from last week's court ruling made us aware of advertising revenue outside of our view that appears to provide Pornhub with indirect funding," a statement from Mastercard said. "This step will further enforce our December 2020 decision to terminate the use of our products on that site."

At that time, Visa also suspended sites that contained user-generated content, and acceptance on those sites has not been reinstated. 

The woman is suing Visa and MindGeek over a sexually explicit video her boyfriend filmed of her when she was 13 years old.

U.S. District Judge Cormac Carney, of the Central District of California in Santa Ana, said Visa made the decision to continue to recognize MindGeek as a merchant, despite its alleged knowledge that MindGeek monetized child porn.

Hedge-fund manager Bill Ackman recently spoke out about the controversy, calling on Visa to pressure Pornhub to remove child pornography from its site.

MindGeek told CNBC it has never tolerated child sexual abuse material or any other illegal material.

"Recently, allegations have been made that MindGeek knowingly allowed and monetized [child sexual abuse material]. These assertions are reckless and, more importantly, absolutely false," a spokesperson at MindGeek said in a statement. "In many cases, these falsehoods have been propagated by groups whose stated agenda is to shut down the adult entertainment industry."