Visa and Mastercard suspend ad payments on Pornhub after lawsuit, pressure from Bill Ackman

Visa (V) and Mastercard (MA) on Thursday temporarily halted card payments for ads across Pornhub and parent company MindGeek after a lawsuit raised questions around the role of payment processors in facilitating the distribution of child pornography.

In a ruling Friday, a federal judge in the U.S. District Court of Central California denied Visa’s request to be dismissed from a lawsuit filed by a woman who claimed Visa was responsible in allowing a sexually explicit video of her at age 13 to be circulated across Pornhub.com.

Visa and Mastercard stopped allowing payments on Pornhub in December 2020 following a New York Times report by columnist Nicholas Kristof that alleged the pornographic website showed videos of child abuse and sexual assault. However, the payments processors continued to allow card payments for ad purchases.

"The legal decision, with which we disagree, has created new uncertainty about the role of TrafficJunky, MindGeek’s advertising arm," Visa CEO Al Kelly said in a statement Thursday.

"Accordingly, we will suspend TrafficJunky’s Visa acceptance privileges based on the court’s decision until further notice," he said. "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."

Mastercard followed suit in suspending the use of its cards at TrafficJunky shortly after Visa's decision.

"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," the company said in a statement to Yahoo Finance. "This step will further enforce our December 2020 decision to terminate the use of our products on that site.

“In our view, our company’s role, policies, and practices have been mischaracterized,” Kelly said. “Let me be clear: Visa condemns sex trafficking, sexual exploitation, and child sexual abuse.”

The move by Visa comes after public pressure from hedge fund billionaire Bill Ackman, who has urged the payments giant to reevaluate its relationship with MindGeek on Twitter and in a recent televised interview with CNBC.

“There have been hearings in Canada, around the world—people doing their best to shut down these companies, and the ultimate regulator is actually Visa,” the Pershing Square Capital Management CEO said on CNBC’s Squawk Box Tuesday. “Visa tomorrow could shut down MindGeek.”

In earlier tweets, Ackman also said Visa's conduct was likely to cause the company "incalculable financial and reputational damage" and create personal and potential criminal liability for the directors of the company under Delaware's Caremark rule, which places responsibility on corporate boards to make a good faith effort to exercise their duty of care.

“I have no economic stake but believe that this is one of the most egregious corporate governance failures I have witnessed, resulting in enormous harm to so many,” Ackman tweeted Monday. “Seeing that this is rectified and the victims recompensed for the harm they have endured has inspired my involvement.”

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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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