Increased federal gambling regulation remains a significant potential obstacle for the industry as well as an untapped resource, multiple gaming figures reaffirmed Tuesday.
A heavy-handed federal approach could dispel the progress of legal sportsbooks and iCasinos, particularly around advertising. This could then indirectly funnel money back to unregulated markets and diminish the legal market stakeholders have spent the better part of a decade – and billions of dollars – developing.
Conversely, the federal government remains the single greatest asset for a crackdown on unlicensed regulators hurting the current state-by-state patchwork of state regulators and officials. Federal intervention could also assist state-level problems and responsible gaming initiatives.
Current and former state gambling regulators, industry lawyers, and problem gaming organization officials largely reaffirmed these points during a panel at the SBC Summit conference in New York on Tuesday. But when it comes to day-to-day gambling operators, federal involvement would be detrimental, said Behn Dayanim, a partner at legal firm Orrick.
“The history of Congress and gambling legislation has not been a positive one,” Dayanim said.
Significant federal involvement could upend state-level gaming
Gaming regulators, operators, and the industry largely supported the state-level implementation of gambling that began nearly a century ago with the legalization of casino gambling in Nevada. That has carried over to the rapid expansion of regulated sports betting in roughly 40 U.S. jurisdictions since the Supreme Court struck down the federal wagering ban six years ago.
Stakeholders remain concerned federal intervention could upend this progress. The most significant pending federal legislation includes a bill introduced earlier this year that could drastically restrict advertising, limit the number of bets, and prohibit artificial intelligence-aided tracking of a bettor’s wagering habits, among other limitations.
In this “worst case” scenario, the added regulation could weigh so heavily on the regulated industry that it limits profitability so much that new companies no longer enter the market, profits diminish, and the regulated industry suffers a massive collapse, Dayanim said. This then allows the unregulated offshore industry to thrive.
Existing federal regulations already stifle intervention, Dayanim said. Decades-old background check policies and other security measures already dissuade major companies such as Amazon from exploring gaming involvement as they look to avoid increased public scrutiny.
These federal licensing requirements also add significant costs in compliance, finance and opportunity, Dayanim said, which further dissuades outside investment and industry interest.
State regulators seek to continue in the lead
Further restrictions, especially around advertising, would be even more detrimental, said Lou Rogacki, deputy director of the New Jersey Division of Gaming Enforcement. More federal law means more restrictions by agencies such as the Federal Communications Commission, increasing the burden on operators that have spent millions of dollars and countless hours working to enter the market properly, Rogacki said.
“The states have spent a lot of time fighting the federal government,” Rogacki said, referencing New Jersey’s near-decade-long legal fight to approve sports betting that led to the federal ban’s repeal. “Now six or seven years later, the federal government stepping in and thinking they could do better – that’s a worst-case scenario.”
Sports betting’s rapid growth has drawn increased public and legislative attention nationwide, particularly around advertising. The language around “risk-free” bets, and even the sheer number of ads, have amplified interest in federal action.
Opponents of further nationwide intervention have argued that advertising is already regulated federally by the Federal Trade Commission.
In the absence of federal action, states have embraced their role as leading regulators and consumer protection advocates, former Massachusetts Gaming Commission chair Cathy Judd-Stein said during Tuesday’s conference. Judd-Stein, who oversaw Massachusetts’ sports betting rollout, said she hopes to see increased collaboration at the state level – not sweeping federal regulation.
Attention on offshore operators
Instead, Judd-Stein and other panelists reaffirmed pushes for the federal government to turn its efforts on combating the unregulated offshore market. Without legal action against books that don’t have to adhere to player protections or tax requirements, the regulated industry will never reach its potential.
“We have to have partners in the law enforcement agency,” Judd-Stein said.
Rogacki said that even New Jersey, with roughly 30 licensed gaming operators, still sees seemingly ubiquitous access to unregulated sites. He said there’s nothing New Jersey can do to crack down on online gambling sites originating from other countries; it is something regulated operators hope will see federal intervention.
In absence of international law enforcement efforts, Rogacki reflected the panel's consensus that the best federal move in coming years would be to stay away and let state-level officials handle it.
“The best-case scenario is that, come 2030, the industry looks and is regulated very similarly to how things are now,” Rogacki said.
