Pulse
BetComply: the US is poised for legislative change
By William - 30 April 2024
With 38 out of the 50 states including Washington D.C. legalising sports wagering, what – and where – is next? Will the slow pace of iGaming legalisation continue?
Following his recent appointment as US Compliance Consultant at BetComply, Mark Roy casts his expert eye over the current legislative landscape for online betting stateside.
What is the current state of sports wagering regulation in the US?
The current state of sports wagering regulation in the US shows significant variability but with a general trend towards legalisation. Currently, 38 of the 50 states, including Washington D.C., have legalised sports wagering. This broader acceptance impacts the regulatory landscape for Native American tribes as well.
For the tribes there are currently 45 tribes across 16 states that have incorporated sports wagering on their tribal lands. The expansion of sports wagering in these tribal areas is expected to continue, though it may progress at a modest pace. This is because Tribal-State Gaming Compacts typically allow tribes to offer only those legal gaming types in the state.
Additionally, these compacts usually restrict betting to tribal lands, which means tribes cannot offer wagering services across the entire state where they reside. Thus, while state-wide legalisation is growing, tribal sports wagering must navigate these specific regulatory limits.
The landscape of sports wagering in the United States is poised for significant changes, with several states actively exploring introducing and legalising sports betting. These states include Alabama, California, Georgia, Minnesota, Missouri, Oklahoma, Texas, and Hawaii.
Each state faces unique legislative hurdles that must be overcome to enable sports wagering, from introducing the necessary bills to navigating them through their respective legislatures for final approval by their governors.
The potential market changes in these states are substantial. Established markets may see shifts in consumer behaviours and increased competition, leading to innovations in betting technology and customer service.
Legalisation could create a robust economic boost for the new markets, generating new jobs, tax revenues, and business opportunities. This shift could also stimulate infrastructural developments, such as creating new sports bars, entertainment centres, and digital platforms tailored to sports betting.
Moreover, the approval of sports wagering in these states could influence surrounding regions and potentially prompt neighbouring states to reconsider their stance on sports betting, thus altering the broader market dynamics. As the interest in sports wagering continues to grow, established and potential new markets are at the cusp of transformative growth that could redefine North America’s sports and betting landscape.
Increasingly stringent legislation set to be imposed in the UK begs the question if, and when, US states will increase consumer protection for online sports betting and iGaming. What protections do you foresee being imposed?
As the online sports betting and iGaming sectors continue to evolve in the US, there is a growing discourse around enhancing consumer protections to align with increasing legislative scrutiny seen in places like the UK. In the US, there is a significant emphasis on safeguarding citizens from potentially harmful external influences while preserving individual freedoms. However, as public concern around these industries grows, so too does the political pressure on lawmakers to enact regulatory measures.
Given these developments, we anticipate several potential consumer protection measures being adopted in the US. First, as the issue of problem gaming has increased nearly 30 per cent since 2018, states are likely to implement more stringent responsible gaming measures. These could include mandatory self-exclusion options, limits on betting amounts, and tighter controls over the frequency of bets. Such measures aim to curb gambling addiction and its associated social costs.
Additionally, advertising for sports wagering and iGaming could see heightened regulation. While currently less restricted than in the EU or UK, the US could introduce more rigorous standards to prevent aggressive marketing practices that target vulnerable populations, including minors and problem gamblers.
Moreover, with the integration of Artificial Intelligence (AI) in gaming platforms, there is a potential for new regulations ensuring that AI usage does not detrimentally affect consumers. This could involve oversight to prevent algorithms from encouraging excessive gambling behaviours or exploiting user data unethically.
Ultimately, it is in the interest of the US gaming industry to proactively enhance their responsible gaming frameworks to preclude the necessity for severe government-imposed regulations. By taking the initiative in this area, the industry can demonstrate its commitment to consumer protection and potentially mitigate the extent of legislative intervention.
Are such changes a positive for the health of the US online betting industry long term?
The long-term health of the US online betting industry hinges on a delicate balance between regulation and fostering a positive player experience. While regulatory measures are essential for ensuring consumer protection and market integrity, excessive regulation risks stifling industry growth and innovation. Therefore, it’s crucial for both legislators and industry stakeholders to adopt a forward-thinking and proactive approach to regulation.
Regulations should aim to create a framework that safeguards players without unduly burdening the industry. By implementing responsible gambling measures and promoting transparency, the industry can demonstrate its commitment to mitigating the harmful effects of gambling while enhancing the overall player experience. This proactive stance benefits players and reduces the likelihood of regulators imposing stricter measures in the future.
Ultimately, a regulated market can thrive if regulations are implemented thoughtfully, balancing the interests of all stakeholders involved. The US online betting industry can position itself for long-term success and growth by fostering an environment that prioritises player well-being and industry sustainability.
How significant a threat does the still-thriving illegal market pose?
The thriving illegal market poses a significant and persistent threat to the legalised gambling industry, particularly as regulatory restrictions increase. With each additional restriction imposed on the regulated market, the illegal market gains momentum and attracts more players seeking alternative avenues for gambling.
In the US, the illegal gaming market remains alarmingly robust, comprising a substantial portion of overall gambling activity. Studies suggest that nearly 50 per cent of players engage in the illegal market, resulting in substantial lost tax revenue estimated between 12 to 15 billion US dollars annually. This staggering figure eclipses the tax revenue collected in the legalised gambling sector, highlighting the magnitude of the threat posed by illicit gambling operations.
Efforts to combat illegal gambling must address the root causes driving individuals to participate in underground markets, such as limited access to legal options, excessive regulatory burdens, and the allure of potentially higher payouts.
Additionally, enhancing enforcement measures and promoting public awareness about the risks associated with illegal gambling can help mitigate its impact on the legalised gambling industry. Overall, the continued existence and expansion of the illegal market underscore the pressing need for policymakers and industry stakeholders to collaborate on effective strategies to combat illicit gambling activities while simultaneously fostering a robust and regulated gaming environment.
What are the different regulatory approaches to sports betting compared to fantasy sports, and what challenges does this create?
In the US, sports betting is classified as a form of gambling, subject to rigorous regulation. In contrast, fantasy sports are typically regarded as games of skill and thus not subject to the same level of regulation.
This disparity in regulatory treatment presents several challenges. For operators in the sports betting industry, obtaining licences and adhering to regulatory requirements entail significant time and financial investments. In contrast, participants in the fantasy sports sector face fewer regulatory hurdles, requiring minimal time and resources to engage in the activity.
Consequently, the sports betting industry may face limitations regarding the number of companies able to participate due to the stringent regulatory framework. This discrepancy in regulatory burdens creates an imbalance in the competitive landscape between the sports betting and fantasy sports industries.
Furthermore, the perception of sports betting as gambling can lead to stigmatisation and stricter public scrutiny compared to fantasy sports, which may be viewed more favourably as a game of skill. This divergence in public perception adds another layer of complexity to the regulatory landscape and can influence public policy decisions regarding the two industries.
Navigating these regulatory disparities and addressing their challenges requires careful consideration from policymakers and industry stakeholders. Balancing the need for consumer protection with fostering innovation and competition is essential for ensuring the long-term sustainability and integrity of both the sports betting and fantasy sports sectors.
What can industry stakeholders do to ensure the US market grows responsibly?
Industry stakeholders play a pivotal role in fostering responsible growth within the US market. Rather than merely meeting regulatory requirements, stakeholders should strive to exceed expectations and uphold the highest standards of integrity and player protection. Don’t just comply; don’t just tick the box. Do better.
First and foremost, stakeholders must prioritise building trust with regulators, policymakers, and the public. This entails demonstrating a commitment to transparency, ethical practices, and responsible gaming initiatives. By going above and beyond compliance and actively engaging with regulatory bodies, stakeholders can help cultivate a positive regulatory environment conducive to industry growth.
Furthermore, industry stakeholders must proactively implement measures to preserve the integrity of sports wagering and ensure the security of the player experience. This includes investing in robust security protocols, leveraging advanced technologies such as blockchain and AI to detect and prevent fraudulent activities, and fostering a culture of responsible gambling through education and support programs for players.
By taking a proactive approach to responsible growth, industry stakeholders can help mitigate the risk of reactionary regulatory measures that may stifle innovation and hinder market expansion. Ultimately, by prioritising integrity, transparency, and player welfare, stakeholders can contribute to the sustainable and responsible development of the US market for sports wagering and iGaming.
Despite the size of the market, US iGaming is still in its infancy stages for content suppliers, operators, and regulators. Why has the pace of iGaming legalisation been slow out of the gate? What’s the reticence for legislators not putting through online casino bills?
The slow pace of iGaming legalisation in the US can be attributed to several factors:
Responsible gambling concerns: There’s a legitimate worry among policymakers about the potential for increased addiction and problem gambling associated with online slots and table games. The ease of access and convenience offered by online gaming platforms raise ethical and regulatory concerns, prompting caution in expanding iGaming.
Fear of cannibalisation: Many legislators are concerned that introducing iGaming could draw customers away from traditional land-based casinos, ultimately harming their revenue streams. This fear of cannibalisation leads to reticence in pushing through online casino bills as policymakers weigh the potential negative impact on existing casino establishments.
Prioritisation of revenue streams: Some lawmakers prioritise sports wagering over iGaming because they perceive that sports betting has a higher revenue potential. The booming popularity of sports betting and its potential to generate significant tax revenues may overshadow the perceived financial benefits of iGaming, leading to a lack of urgency in its legalisation.
These factors collectively contribute to legislators’ cautious approach to introducing online casino bills despite the size of the market and its potential for growth. Balancing the economic opportunities of iGaming with concerns regarding responsible gambling and the impact on traditional casinos remains a complex challenge for regulators and industry stakeholders alike.
Sports betting has carried a lower tax rate on average, between 10 to 15 per cent, while taxes on iGaming have been in the 15 to 35 per cent range. What impact is this having on states which have legalised both sports betting and iGaming?
The discrepancy in tax rates between sports betting and iGaming has several impacts on states that have legalised both forms of gambling. While ideally, industry stakeholders would prefer uniform tax rates for sports wagering and iGaming, the higher tax burden on iGaming has several implications.
Firstly, the higher tax rates on iGaming may deter potential operators from entering the market or investing further in their iGaming offerings. The increased tax burden reduces the profitability of iGaming operations, potentially stifling competition and limiting market growth.
Additionally, the higher taxes on iGaming could lead to disparities in revenue distribution among states that have legalised both sports betting and iGaming. States with lower tax rates on iGaming may attract more operators and generate higher tax revenues than states with higher tax rates.
However, despite the higher tax rates, iGaming operators may still find the business viable due to the minimal expenses required to operate online platforms compared to traditional brick-and-mortar establishments. The impact of increased taxes on iGaming operations may, therefore, be mitigated to some extent by the relatively lower operational costs associated with online gambling.
Overall, the disparity in tax rates between sports betting and iGaming presents challenges for states in optimising revenue generation while ensuring a competitive and sustainable gambling market. Achieving a balance between tax rates that incentivise industry growth and generate sufficient revenue for state coffers remains a key consideration for policymakers in jurisdictions where both forms of gambling are legalised.
What states do you anticipate will legislate sports betting and iGaming respectively in the coming months and years?
In the US, several states are actively considering legislation to introduce both sports wagering and iGaming. For sports wagering, states such as Alabama, California, Georgia, Minnesota, Missouri, Oklahoma, Texas, and Hawaii are currently in the legislative pipeline. However, the specific timelines for approval in these states remain uncertain.
Similarly, states like New York, Hawaii, Indiana, and California are exploring potential legislation for iGaming. Again, the exact timing of approval for iGaming in these states has yet to be determined.
As the legal landscape surrounding sports wagering and iGaming continues to evolve, closely monitoring developments in these states is crucial.While the introduction of legislation is a significant step forward, the process of legalisation and implementation can vary widely, influenced by factors such as public opinion, political dynamics, and regulatory considerations.
Therefore, while these states may be on track to legislate sports wagering and iGaming, the precise timing and outcomes remain uncertain.
