SBC News Voice of the Sports Betting Industry
David Sargeant Founder and Commercial Director at Zukido and IGaming Ideas reports from G2E in Las Vegas for SportsBettingCommunity.com
AGA President Geoff Freeman opened Monday’s iGaming Congress at G2E with the strong message: “iGaming is here. Americans spent $3bn online in 2012.”
So the question is no longer whether iGaming comes to the USA but how. With Nevada live, Delaware ramping up, and New Jersey launching soon there was much speculation of how effective iGaming regulation will be and how it will happen.
The opening panel of the Congress was entitled “Building for State-by-State Regulation in the US” and this title just shows where the industry thinks the wind is blowing. MGM’s Alan Feldman lamented hat the inaction at a federal level was a tragically wasted opportunity and instead “will add many layers of complexity”. The moderator Mark Lipparelli speculated that if a Federal solution did not happen soon a “Wire Act Fix” may instead occur.
Can the US learn from the collaborative efforts from the EU? The panel said that the Europeans have learnt that player liquidity must be pooled across borders but that cross border taxation has complicated the situation. Simon Holliday from H2 Gambling Capital put it bluntly “The lesson learnt from Europe is that action is needed at a Federal level”. The various efforts to pool a compact of states led Feldman to speculate that Nevada was more likely to put together a collaboration of states in the West than NJ was to do the same in the East, with California being a key player. Techology concerns also seem to be key since mingling players is not merely a regulatory issue. In Europe the pools that do exist are owned by the techology companies. James Kilsby of Gambling Compliance summed up the complex emerging licensing issues by pointing out that 888 and Wynn will operate under a Caesar’s license.
The speed of regulation and product roll out means that the US is “in a whole new world” according to Feldman. Lawmakers and regulators need to be aware of the pace of igaming innovation. While it takes time to build bricks and mortar, igaming operations can scale and change quickly. The broad legislation in Nevada was a good example – empowering the regulator and not tying down innovation stifling specifics in law.
So what happens to the unlicensed operators as regulations emerge? Holliday said that although players want to play with trusted and regulated companies they will only move if the product is appealing and competitive – something legislation can control. Feldman pointed out that by not paying taxes unlicensed operators can be more attractive by using this money as bonuses for example. This may not be a problem for Poker, where the Black Friday enforcement has had siginificant effect, but Sports Betting and Casino can be attractive product for offshore operators.
US Casinos are building igaming brands already under the guise of social casinos. The second panel of the iGaming Congress focused on whether social gambling should be regulated. The panel, mostly of operator background, was almost unanimous about the fact it shouldnt be regulated as it wasn’t gambling. Running often as seperate businesses, with separate brands, with chance and reward, but with no consideration then this wasn’t gambling. In fact casinos argue that social games are taking players away from the casino floors leading the moderator John Hagan, of Harris Hagan, to joke that real casinos are merely marketing tools for social casinos.
As Wes Himes, of Policy Action, pointed out the emergence of real money social, such as Paddy Power inplay and Zynga+, clouds the issue . However Jenny Williams of the UK Gambling Commission said the Commission is looking at how many people are at risk from these games before they work out whether this is an issue worth focusing on.
Himes felt there was no demand from consumers for regulation. Caesars Michael Cohen agreed saying there was enough Consumer protection in place already and If there was regulation thought that there would be an exodus from the market – which ironically might be good for Caesars. Cohen thought it was still bad for the industry as a whole as this step “isn’t necessary” and would never look at gaining a competitive advantage through regulation.
Hagan cheekily asked Williams what the social gambling community can do to help her make sure that regulation wasn’t introduced. She replied companies should act responsibly, advertise responsibly, and didn’t target at risk or underage players.
Mark Dunn summed up saying it wasn’t right to say that the social casino industry is unregulated. There is regulation in place already that covers social casinos. Many local and federal laws including advertising laws and consumer protection laws, do exist for all companies, and most on the panel agreed this was enough.
So the iGaming day moved on to Lottery. When NY and IL challenged the UIGEA clarification was that it didn’t include lottery transactions. So lotteries were allowed to go online. Delaware has online products, IL and GA have draw based games, Michigan and Maryland looking to go online. So if legal why are so few lotteries online?
David Briggs, Chairman of Geocomply, underlined some of the issues he faced at the DC Lottery. Lotteries have to overcome political obstacles to gain State backing for online (DC was 16 days from going online before politicians pulled the plug). Then there are the issues of Geolocation, localised payments, and age verification, which as the NJ operators are finding out – are not trivial to solve.
Stephen Martino Director at the Maryland State Lottery Agency outlined another issue. The biggest challenge for Maryland was persuading big name chain retailers that their revenue would not be compromised.
So once they are online will lotteries diversify into pan-gaming operators as we see in Europe. The panel was bullish, and several lotteries including Georgia are looking at the possibility, but it depends on regulators and policy makers.
Michael Pollock from Spectrum Gaming Group said there is no diffference between slot machine and an online scratch ticket. What is needed are new concepts for lotteries to grasp – they need to entertain their customers as slot manufacturrers understand. David Briggs agreed and said there was no reason a lottery couldnt be a successful casino operator (Svenska Spel and BCLC are great examples of this) but it depended on the regulatory voice over whether this could happen.
Land based and online technology is very different. Briggs highlighted the problems that entities going online will have – mainly not having relevant experience. But technology is very different too. iGaming playforms are very open with many options available – this doesnt happen in the land based world. He feels companies going online will have growing pains as the companies transitiion to a different way of thinking.
Briggs was hardline in his views and stated lotteries not going online doesn’t serve anyone but a small group of lobbyists. Younger players won’t buy lottery tickets so lotteries are losing out on new players, losing revenue, and missing out on bigger jackpot pools which in turn drives new players.
The sports books at the casinos are already full of online and mobile product. For example Cantor offer account based casino games and inplay sports betting on mobile. Bill Pascrell of Princeton Public Affairs was adamant sports betting wouldn’t just be restricted to Nevada. On Tuesday morning’s fantasy sports panel he claimed it was not if but when NJ will introduce sports betting. Eamonn Toland, of Paddy Power North America, agreed and was confident that legalised sports betting will reach more and more States because legalised sports betting only represented 1% of the betting market. He stated that regulating the industry is the only way to control and limit the chances of sporting corruption.
However there is another side to the argument. SBC spoke to John Ford, CEO at BAMSAS, and he was bullish that PASPA wouldn’t be overthrown and the status quo would remain. BAMSAS focus on two legal sports industries – daily fantasy sports, a market worth up to $300m already, and horse racing, a huge market worth up to $2.5bn. BAMSAS are also interestingly diversifying into popular culture based daily fantasy – targetting a new demographic of online bettor.
Ford thought daily fantasy would be hard pressed to compete with “real sports betting” but is compelling as a legal alternative. Ford said BAMSAS were well placed to exploit their Horse Racing and Fantasy B2C brands on a national basis while building a B2B business to supply companies looking at a State by State play.
Maybe it is because BAMSAS occupies the softer end of the Fantasy market, but when SBC spoke to Jonathan Aguiar, Operations Director at Draft Kings, he explained he thought the US fantasy market is here to stay no matter wht happens to PASPA. Draft Kings offers an impressive $3.1m prize pool. He thought the high liquidity, combined with the unique cultural fit, plus the social nature of the product made fantay robust in an evolving regulatory environment no matter which product verticals they had to compete against.
The actual G2E exhibition was focused on the landbased casino vertical but the bustling exhibition floor was full of North American as well as European vendors selling their iGaming products to the US market. There was no question on the exhibitors mind whether iGaming was an important new distribution channel. The Europeans have spotted opportunity too with vendors such as Inspired, Everymatrix, Meridin and Bet Construct all showing off their iGaming systems. Ford was wary of the threat of European iGaming participants but BAMSAS has 7 years experience in online betting in North America – which not many companies can boast. Will be interesting to see which brands will prosper in this new world.
So the stage is set and the goldrush is here. G2E is full of companies from around the world and there is a real buzz about iGaming across all product verticals. Who would have imagined when UIGEA hit that there would now be legal online lottery, poker, casino, horse racing, fantasy betting, and inplay sports betting in the USA.
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David Sargeant – Zukido CEO
