Pulse
Soft2Bet: striking the balance between effective regulation and sustainable business
By William - 1 May 2024
Examining the landscape of online sports betting and iGaming regulation in the United States, Ohad Straschnov, Senior Compliance Director at Soft2Bet, says a careful balance must be struck between effective regulation and the ability to conduct business in a profitable and sustainable manner.
Could you provide an overview of Soft2Bet’s US operations?
Our turnkey solutions include front-end, back-end services that can create personalised design and layouts targeting specific audiences. We’re able to build custom functional capabilities allowing our clients to build their own functions and decide on navigation, content, and layout, as well as a bespoke bonus systems – features we offer globally and are looking to roll out in the US in the coming year.
Additionally, we will offer personal gamification features that can be customised to enhance user engagement and attract new users. We’re currently in the process of expanding into the US, starting with the licensing procedure in New Jersey. Once approved, we plan to collaborate with a local licensed partner for a market access agreement and launch our brand in NJ this year.
Our goal is to offer a comprehensive package of services, including a top-notch platform, sportsbook solutions, CRM, payments, and security services. From there, we aim to penetrate the market and launch our B2C operation so we can demonstrate and showcase our technology to the market and attract other operators to use our technology.
What are the key compliance issues for Soft2Bet in the US?
The licensing process may differ from one state to another, with each state involving unique and new requirements and unexpected challenges.
For Soft2Bet to achieve its goal of obtaining licences in regulated states as swiftly as possible, we must first understand and evaluate the licensing and technical requirements. Particularly any new and unique requirements that differ from other markets where the company already operates; e.g. special reporting, submission deadlines, special approval processes, etc.
High tax rates and advertising restrictions are also challenges that an operator such as Soft2Bet needs to face when entering the US. In order to overcome regulatory challenges, operators must maintain flexible and adaptable operations to any regulatory changes that take place, whether it relates to advertising restrictions or any other challenging requirement.
Artificial intelligence is playing a key role in shaping the future of Soft2Bet’s product development and growth, particularly with regard to the company’s MEGA solutions. What safeguards does Soft2Bet have in place to guard against the existing and potential compliance and security issues of utilising AI?
Soft2Bet adheres to established regulatory frameworks such as GDPR, and other relevant data protection laws, regardless of if a product involves AI. The team also dedicates resources ensuring that AI applications comply with these regulations.
Going beyond what is required by regulators, Soft2Bet has strict principles when it comes to transparency, fairness, and accountability in AI decision-making processes.
Data security measures are essential to protect sensitive customer data, and Soft2Bet intends to conduct regular audits and assessments of AI systems to identify and mitigate any potential compliance or security risks. This could involve third-party audits as well.
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?
The landscape of online sports betting and iGaming regulation in the United States is indeed evolving rapidly, and it’s likely that we’ll see increased consumer protections similar to those being considered in the EU. At Soft2Bet we take these matters seriously and are always looking to promote the conversation around safe and responsible gambling.
As we look forward, states may consider implementing wagering limits to prevent excessive gambling and protect at-risk players. There could be adjustments to advertising practices to ensure responsible marketing and minimise the exposure of vulnerable populations.
This might include restrictions on the timing and content of ads, as well as requirements for clear and prominent responsible gambling messaging. States may introduce measures to monitor players’ gambling activity and intervene if excessive losses are detected.
We could also see the implementation of financial checks to assess players’ ability to sustain losses and mechanisms for setting loss limits or providing self-exclusion options. States may also mandate that online gambling operators implement robust responsible gambling programs, including features such as self-exclusion, cooling-off periods, and access to resources for problem gambling support.
States will likely also invest in expanding problem gambling support services, including helplines, counselling, and treatment programs, to address the needs of individuals struggling with gambling addiction.
It’s worth noting that the regulatory landscape for online sports betting and iGaming varies across different states in the US, with some states already implementing certain consumer protections while others are still in the process of developing regulations. As awareness of the potential risks associated with online gambling grows, it’s likely that we’ll see an increased focus on protecting consumers and promoting responsible gambling practices nationwide.
Are such changes a positive for the health of the US online betting industry long term?
Yes, implementing measures to enhance consumer protection and promote responsible gambling can ultimately benefit the long-term health of the US online betting industry in various ways such as building trust and credibility within the industry. Players are more likely to feel confident and safe engaging in online betting when they know there are protections in place to safeguard their interests.
Also, by implementing safeguards such as wagering limits, responsible gambling tools, and financial checks on losses, the industry can help mitigate the risk of individuals developing gambling-related problems. This not only protects consumers but also reduces the likelihood of regulatory backlash and public scrutiny over issues like addiction and harm.
A sustainable online betting industry relies on maintaining a healthy player base over time. By promoting responsible gambling practices and preventing problem gambling, the industry can help ensure that players continue to engage in betting activities responsibly and sustainably, rather than burning out or experiencing negative consequences.
Adhering to strict regulatory standards not only fosters a healthier industry environment but also helps operators avoid legal and financial penalties associated with non- compliance. By proactively addressing consumer protection concerns, operators can minimise the risk of regulatory intervention and maintain a positive relationship with regulators.
That being said, there are some strict limitations and restrictions being discussed – such as vast restrictions on advertisements – that would limit some operators from running their business and will push out legitimate players from the market.
This has the potential to leave a gap for unregulated operations to come in, which the regulators have no control over. This will eventually lead to the opposite goal that regulators are trying to achieve. A careful balance must be struck between effective regulation and the ability to conduct business in a profitable and sustainable manner.
Soft2Bet operates out of and generates the bulk of its revenue from Europe which has a tougher regulatory environment than that of the US. Does this offer Soft2Bet an advantage to get ahead of any potential regulation changes?
Definitely, Soft2Bet already has robust compliance infrastructure in place to adhere to European regulations. This infrastructure can be leveraged to quickly adapt to new regulatory requirements in the US, ideally giving us an advantage next to competitors entering the market, who may need to invest more time and resources to establish similar systems.
Also, EU markets have a strong focus on responsible gambling and consumer protection, which is reflected in its regulatory framework. Soft2Bet’s experience operating in this environment will give it a deeper understanding of the importance of responsible gambling measures and how to effectively implement them, which could be beneficial in meeting regulatory expectations in the US.
Operating in a regulated market like Europe enhances Soft2Bet’s brand reputation and credibility and can be advantageous when entering new markets, including the US.
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 a combination of regulatory complexity, stakeholder interests, public perception, technical challenges, revenue considerations, and political dynamics.
However, as more states observe the success of early adopters and face budgetary pressures, there may be increasing momentum towards iGaming legalisation in the future. The slow pace of iGaming legalisation in the US can be attributed to the complex regulatory landscape with gambling laws varying significantly from state to state, which can be time-consuming and challenging for legislators.
There are also various stakeholders with vested interests in the gambling industry including brick-and-mortar casinos, tribal gaming operators, and anti-gambling advocacy groups. These stakeholders may lobby against iGaming legalisation for various reasons, such as concerns about competition and social implications.
Despite growing acceptance of gambling as a form of entertainment, there is still a lingering stigma surrounding online gambling, particularly online casinos. Legislators may be hesitant to support iGaming legalisation due to concerns about public perception and potential backlash from constituents – something we as a company are working to combat.
Sports betting has carried a lower tax rate on average in the US, between 10 to 15 per cent, while taxes on iGaming have been in the 15 to 35 per cent range. Given sports betting’s lower margin rate, is this driving operators to push more players into iGaming in states with both sports betting and iGaming? Will this only drive the need for more content as more states legalise iGaming?
As more states legalise iGaming, the demand for content is likely to increase. Operators will need to offer a diverse range of iGaming options to attract and retain players, driving the need for more content providers and partnerships. This could include expanding their portfolio of online casino games, developing innovative gaming experiences such as gamification and collaborating with leading software providers to offer high-quality content.
The differing tax rates between sports betting and iGaming in the US incentives operators to promote iGaming offerings, particularly in states where both are legal. This trend is likely to drive the need for more content as the iGaming market continues to expand and evolve across the country.
What states do you anticipate will legislate sports betting and iGaming respectively in the coming months and years?
There are many markets making waves in the industry indicating an exciting time and lots of opportunity for operators like Soft2Bet. Delaware is exploring expansion of mobile sports betting and Florida, with its large population and tourist appeal has strong potential to legalise sports betting considering efforts to negotiate a new gambling compact with the Seminole Tribe.
Additionally, California represents a massive potential market for sports betting. However legalisation efforts have faced challenges due to competing interests among tribes, cardrooms, and other stakeholders. Ongoing negotiations and proposed ballot initiatives suggest progress could be made in the coming years.
New York already has retail and mobile sports betting and there’s growing momentum to expand to online casino gaming as well. Budgetary pressures and competition from neighbouring states could drive lawmakers to consider iGaming legalisation.
Massachusetts and Maryland have also expressed interest in legalising online gambling, including iGaming, to capture revenue and address the demand from residents.
