The legal sports betting business is tough and not every operator will survive. On Thursday, the Massachusetts Gaming Commission approved rules for sportsbooks seeking to exit the business.
Members of the MGC approved an emergency regulation regarding “sports wagering operator cessation,” which will kick in if and when sports betting sites want to shut down in Massachusetts.
MGC staff recommended the adoption of the cessation rule as an emergency regulation, “given the rapid advent and developing nature of the sports wagering industry,” a memo to the commission said.
It's hard out there
The Massachusetts sports betting market and the U.S. wagering business overall are indeed fiercely competitive, and several bookmakers have either pulled back or shuttered their consumer-facing operations, such as MaximBet. Additional shutdowns could happen, and regulators like the MGC are trying to have a plan in place when they do.
“Let's hope we don't see too many of these,” MGC Chair Cathy Judd-Stein said during Thursday’s meeting.
The rules adopted by the MGC on Thursday are still subject to change if regulators see a need. For now, though, they lay down the framework for what happens when sportsbook operators want out of the business in the commonwealth, which has 10 licensed mobile operators, albeit only eight that are taking bets.
Interesting rules being proposed and discussed today by the Massachusetts Gaming Commission around what happens when a licensed sportsbook shuts down in the state. The MGC could, among other things, order an operator to stop taking new bets if they plan to exit the market. pic.twitter.com/lED1arfIzL
— Geoff Zochodne (@GeoffZochodne) October 19, 2023
The regulation requires a sportsbook operator planning to cease business in Massachusetts to provide notice of that shutdown to regulators in writing at least 90 days before doing so. Once that notice is received, the MGC can order the sportsbook to stop taking new bets within five business days or more and appoint someone to run the business on their behalf in the state if need be.
Operators must also turn in a plan to the MGC regarding their exit, including how they intend to refund pending wagers and deposits. Furthermore, operators were already required to maintain a reserve to cover their wagering-related liabilities, but the MGC approved an amendment on Thursday mandating the reserve must either be "in the form of, or backed up by," an irrevocable letter of credit the regulator can also use if an operator shuts down. However, in the event of bankruptcy, federal rules could take precedence.
The commission heard other states have a “mix” of the rules the MGC ultimately approved but did not appear to have thought a lot about the bankruptcy issue, although they may require a reserve like Massachusetts does.
“I want to make sure that we're being as protective as possible because this is a pretty extreme situation if it comes to fruition,” Commissioner Jordan Maynard said Thursday.
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