Igaming Focus: Many unhappy returns

May 23, 2024 8:30 AM
Photo: Shutterstock: U.S. Supreme Court
  • Jake Pollard, CDC Gaming Reports
May 23, 2024 8:30 AM
  • Jake Pollard, CDC Gaming Reports

The U.S. sports betting industry celebrated the sixth anniversary of PASPA’s repeal last week, but it seems only fair to point out that it is not the happiest of occasions.

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Rewind six years and the sense of relief that followed the decision by the U.S. Supreme Court on 14 May 2018 was palpable. But even the most optimistic scenarios could not have foreseen how quickly sports betting regulation would spread in the following years.

The pandemic played a key role of course. The closures of so many businesses, and from a gambling perspective the shutting down of land-based casinos and cancellation of all sporting leagues, emphasized how important digital outlets were. With the states taking major hits to their budgets, an urgent need to generate revenues saw many of them expedite regulation.

The fact that online casino legalization has become a scarce resource is no surprise; responsible gambling issues, along with opposition from key tribal stakeholders and the potential disruption they feel further icasino regulation would bring to their activities, have been key factors in preventing the broader regulation of the vertical. However, in light of the general atmosphere that has developed around sports betting over the past six years, it might also not be a bad thing. For the time being at least.

Fast forward to 2024 and the criticisms that are aimed at the sports betting industry are also not surprising. Looking at how the regulatory scenario has played out in many other jurisdictions, the list of grievances aimed at operators should probably have been expected and addressed earlier.

Advertising 

The huge amount of betting advertising that has flooded U.S. airwaves was entirely predictable, as was the criticism that accompanied all that marketing. In addition, the presence of betting-themed or sponsored content on TV and online channels gave the impression that there were no limits to the quantity of betting-related material that could be pumped out. It’s also worth noting that, off the record, industry insiders were often highly critical of all that activity.

As with any market regulation, a rush of advertising will always follow regulation before the industry settles. Even if, and the point is made repeatedly, being able to promote sports betting products openly and on mainstream platforms is one of the rewards of being regulated and paying for the privilege of being licensed and taxed across all those individual jurisdictions.

Negative coverage 

From the New York Times to the Wall Street Journal, and the odd short seller, mainstream news outlets have written thousands of column inches on how the sports betting industry is preying on young men who are easy to influence and can quickly fall into debt and financial despair as they are encouraged to bet. The NYT’s ‘exposé’ of the industry and the (futile in many ways) responses it led to from executives in November 2022 was a case in point.

The problem is compounded by the fact that the data around deeply serious issues such as the number of problem gamblers or rates of excessive or pathological gaming are extremely hard to qualify, while the process by which they are gathered is also hotly disputed. (On this, I really recommend reading Dan Waugh of the UK consultancy Regulus Partners. He covers the topic expertly and provides excellent context on many complicated and hard-to-explain issues.)

Betting scandals

The number of betting scandals that have come to light in recent times is, for critics of the industry, another consequence of the fast spread of regulated sports betting since 2018. Increase the visibility and make sports betting easily available to the mass market, including many young and wealthy professional athletes with time on their hands and widespread access to inside information, so the argument goes, and those scandals will be an inevitable outcome.

Equally, for the industry, the discovery and detailed coverage of cheating attempts by Jontay Porter and others happened thanks to the monitoring capabilities of operators to pick up on suspicious betting patterns. Transparency procedures also mean the public and regulators are aware of the scandals and fully informed of many of the (at times incredible) details pertaining to individual cases.

Mind you, as the Shohei Ohtani-Ippei Mizuhara and Scott Sibella cases have shown, and this has been pointed out by many online industry insiders, egregious flouting of money laundering rules and responsible gambling guidelines are also plentiful in the brick-and-mortar space.

R-e-s-p-e-c-t

For the final element of this list of grievances we can turn to this week’s update on the roundtable discussions held by the Massachusetts Gaming Commission. The MGC organized the open meeting to discuss the wagering limits sportsbooks impose on players.

As has been widely reported, none of the operators who had been invited to take part in the talk showed up. They declined to attend on account of not wanting to divulge proprietary or trade secrets linked to their risk management, pricing strategies and other commercially sensitive reasons.

For good or ill, and despite players’ frequent protestations, limiting bet sizes is part and parcel of bookmaking. But the optics of having the industry’s leading sports betting brands refuse to attend the digital get-together looked terrible. To compound the situation, Bally’s Interactive clearly had not been briefed and some unlucky soul from the company, which is not even live in the state and if we’re honest barely registers as a U.S. sports betting brand, had to represent the company on a topic they were clearly not familiar with.

The bad optics are one issue, but what the industry no-show might also lead to from a regulatory perspective could, potentially, end up being much more costly for operators. One can only imagine what the MGC staff will have said about it behind closed doors, but to antagonize regulators in such a way is a strange way to go about having positive relations and devising regulations that are industry friendly.

And while the issue here is transparency around betting limits, it’s easy to imagine the conversation moving on quickly to the closure and blocking of winning players’ accounts, which could be a much tougher conversation for sportsbooks, or even a tax rate hike. It’s easy for operators to say they should never make excuses for wanting to run profitable businesses, but having good relations with regulators and lawmakers is also an integral part of building up a strong industry.