Surprising to me they could do payouts at all before without verifying an identity. Anyone know how this worked?

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Not sure but seems to be the direction everything is going recently. I believe it was only within the last couple of years that online marketplaces like eBay and Amazon started requiring ID for sellers. Before that you had to verify your bank account info (and of course the bank’s ID’d you), but didn’t have to verify government identity with the marketplaces themselves.