Emails started coming in late last March, and perhaps even before then.
The Massachusetts Gaming Commission (MGC) had put up a Bat-Signal of sorts for players who had been limited by sportsbook operators – restricted in how much they were allowed to wager – and what they heard back was enough to prompt concern.
“To prey on certain gamblers for large amounts and then limit other gamblers to $3 on bets is just ridiculous,” wrote one person, who called themselves a "normal" player in an email to the commission.
“When I was a losing bettor and continuously depositing large sums of money I could bet 3-4 thousand dollars on a prop bet,” wrote another, now-winning sports bettor. “Once I became profitable on the site my limits have been cut to $100 a bet. I have also lost contact with my VIP host. I went from being offered everything under the sun to not receiving a text from this host since November.”
There's something happening here ...
From there it was off to the races for the MGC, which must conduct its work in the light of day – a sometimes-tedious practice, yet one that has prompted one of the more interesting conversations going in the legal sports betting world. And I say that as someone who watches a lot of these regulatory meetings, so you don’t have to.
In May, the MGC tried to convene a meeting of Massachusetts sports betting operators regarding wager limitations, and no active books showed. That was never going to sit right with the regulator, and so, in September a second, more in-depth roundtable was held. Both sides were heard, so to speak, that of the player and that of the operator.
But what the MGC recognized, and in public, no less, was that there’s a problem if people are free to lose as much as they want and yet capped at how much they can win. That is true if it’s only a perception or half-truth, and not a reality as plenty of folks are willing to argue.
“We're trying to solve a problem,” said then-interim and now-full-time MGC chair Jordan Maynard. “We're not here because we woke up one day and said we really, really want to cause an uncomfortable conversation with the operators.”
... but what it is ain't exactly clear
The MGC is still probing the problem with limiting, which operators argue affects a small percentage of the betting population, and for good reasons, such as abusing bonuses, “courtsiding,” and trying to prey on bad lines, among other things. Limiting some allows for more betting markets for most, the companies argue.
Still, as Maynard noted, limiting presents a problem. And it’s not a problem that revolves around advertising or whether it’s acceptable to wager on a certain event or aspect of a sport. It’s a different kind of “consumer protection,” which is what legalized and regulated sports betting was supposed to provide.
It’s also a problem that exists as regulators continue to wrestle with and try to subdue offshore and illegal bookmakers who pick up business from sharps and “whales” who can’t get down at legal sports betting sites.
What’s more, the need to find a solution may be more pressing than ever, as state-regulated sportsbooks have suddenly found themselves facing a new and federally regulated form of wagering that may be able to stomach bigger and sharper bets: so-called “prediction markets.”
Although that avenue of de facto event wagering is still under a bit of a legal and regulatory cloud, it represents fresh competition for online sports betting sites.
BetMGM's Jeremy Kolman says they limit a "very small minority," or approximately one percent, of advantage players. BetMGM looks for patterns like capitalizing on errors in odds, "syndicate betting" by groups, wagering inconsistent amounts.
— Geoff Zochodne (@GeoffZochodne) September 11, 2024
So, yes, telling someone a bet is “risk-free” when it isn’t is a consumer-protection issue. Allowing people to wager on a league with shaky or non-existent integrity is another.
But, as it turns out, some consumers are good at betting on sports. If they’re not allowed to bet, is that consumer protection?
“I’m a recreational bettor making bets of about $40, and can’t imagine what reason there would be to curtail my account,” one Massachusetts resident wrote to the MGC. “I feel like the gaming commission should address this issue for the fairness of all players involved.”
This is just in Massachusetts, too, a significant but not massive market. If bettors are complaining there, it’s safe to say they’re complaining in other states as well.
The new regulation
If that’s the case, sports betting has something of a “winning” problem. It could very well be that the problem is overblown, merited, or misrepresented (as some operators insist) or perhaps underappreciated (as some players believe), but a lack of attention or clarity isn’t helping.
In this regard, the MGC’s work is an evolution of regulation, one that focuses on the operator-player relationship in a way that, yes, could be a bit awkward. But it’s the kind of conversation you can have with a regulated market, and one you would have no insight or say over if that regulation didn’t exist.
And, frankly, maybe it’s a conversation that’s worth having in other jurisdictions, as well as conversations like it that have more to do with how players are treated – or protected, if you will. Regulation 1.0 was standing up sports betting; Regulation 2.0 revisited advertising rules, betting markets, and tax rates; Regulation 3.0 could center on the player. The limiting debate is an example of where regulation can go, if you choose to take it there.
Some research even suggests limiting winners is driving them toward the unregulated market, undermining one of the goals of regulating sports betting in the first place.
“Sharps/whales (more educated bettors) are getting boxed out of the legal market as gaming companies have improved technology, and these players are migrating offshore at a higher rate compared to pre-2021, targeting faulty lines and fewer restrictions,” Citizens JMP analyst analyst Jordan Bender warned back in 2023.
Writer David Hill also told the MGC last year that he had spoken to bookmakers in Costa Rica who told him that the business they lost following the 2018 Supreme Court decision that paved the way for widespread legalization of sports betting was coming back.
“They said it was because players are being limited, and that now they're seeing the way to capture business is to market themselves as a place that will not limit you and will take your bets, and that they're feeling optimistic that the business may come back to them,” Hill told the commissioners. “So to whatever degree this is all about stemming the unregulated gray and black markets in sports betting, this, at least anecdotally, is not helping.”
Whales migrating offshore may sound like a natural phenomenon, but it represents a big chunk of sports betting happening outside of the regulated channels that lawmakers envisioned it would go.
“Supporters argue that legalization will produce revenue for the States and critically weaken illegal sports betting operations, which are often run by organized crime," U.S. Supreme Court Justice Samuel Alito wrote in the majority opinion in Murphy v. NCAA, the landmark sports betting decision.
Predicting the next problem
So, if legalization is turning away bettors and putting them back into the unregulated market, is it achieving one of the goals its proponents once pushed? Probably not.
It doesn’t seem unreasonable, then, for state regulators and lawmakers to consider finding a home for sharps and wayward whales who are going to get down no matter what. While cease-and-desist letters have proven effective in getting some offshore bookmakers to knock it off, they haven’t extinguished the unregulated market.
Furthermore, the consideration for sharps and whales could and perhaps should ramp up now that there is a fast-growing federal alternative to online sportsbooks in the form of prediction markets offering sports event contracts.
$1,000,000
— Tarek Mansour (@mansourtarek_) January 28, 2025
That's reportedly the largest SB bet placed this year (by @stoolpresidente ?)
I'm surprised by how small this is (we had much bigger election trades)
If you're looking to place a trade of this size, or larger, DM me.
Can trade in all 50 states with Kalshi
Kalshi is leading the push there, and it doesn’t look like the second Trump administration intends to crack down anytime soon, especially not with a Trump advising the company. The company’s CEO, Tarek Mansour, even recently sounded a whale call on Twitter for Super Bowl bets, soliciting trades of $1 million or more from anywhere in the U.S., not just ones with legalized sports betting.
Why bet with a sportsbook? Come our way, Kalshi is saying. The prediction market has even tried to open a new avenue for its wares via a partnership with Robinhood. While there may be some regulatory pushback that's reemerging, it’s unclear where the lines are now drawn. It's also possible more and deeper-pocketed players get into the same business.
Therefore, state-regulated bookmakers who don’t want winners could soon be sending those players back offshore or even keeping them at home, albeit with a rival that doesn’t abide by the same set of rules. And, depending on the direction of the U.S. Commodity Futures Trading Commission, the playing field could widen for prediction markets.
As a result, state lawmakers may need to start thinking less like legalization is a gift for bettors and they should be happy for it, and more like this is one big competition, which is what it’s arguably always been. If you don’t take the bet, someone else just might, and then you get nothing: no oversight, no tax revenue, and no credit.
The Massachusetts Gaming Commission will meet this morning and receive an update on its work on sports bettor limiting.
— Geoff Zochodne (@GeoffZochodne) November 21, 2024
Commission staff outlined some "recommended next steps" in a memo to commissioners, starting with data collection, then analysis, then potential regulations. pic.twitter.com/5ZF7j6p8Ip
What to do, then? “Nothing,” is probably the wrong answer, but I stand to be corrected.
The price of admission to some legal sports betting markets has proven prohibitive for bookmakers that will take the bets that more recreational operators won’t; Massachusetts, for instance, has no Circa or Prime Sports. Other brands such as Betfred and SuperBook, which have operated for decades elsewhere, have been forced to pull back in the U.S.
High tax rates and million-dollar licensing fees can have that effect, and a gentler cost of entry could stoke competition and innovation by drawing in more operators. Any tax tweaks, though, would be for legislators to make, not regulators. There is also a feeling among lawmakers right now that perhaps the industry is paying too little, rather than too much. Ohio’s governor, for instance, is again proposing to double the state’s sports wagering tax rate.
Yet regulators have some levers they could pull as well, such as requiring limits to be posted before someone makes a bet, so they know if their action would even be welcome. Like the MGC, they could also seek data that illuminates how big the limiting problem actually is and look more closely at VIP betting programs.
There’s also the nuclear option: if they chose to be so bold, regulators could set a minimum amount that operators must let bettors get down on any given market.
“The way the industry has shifted is that we are no longer in the risk management business,” Richard Schuetz, a former gaming industry executive and CEO of the advocacy group American Bettors’ Voice, told the MGC last September. “It seems to be that we are in the risk avoidance business. And the risk avoidance business means that if you've got someone that can jeopardize your bottom line, you're gonna blow him out of the building.”
As our work this week hopefully shows, all bettors aren’t created equal. Some want to bet a lot, others want to bet less, and others still want to bet a little to try to win a lot. There is no one-size-fits-all solution.
What me, worry?
So why worry at all? It’s almost contradictory: At a time we’re worrying about people betting too much, should we be concerned some aren’t allowed to bet enough? Surely not, right?
Nevertheless, a possible resurgence in offshore activity – perhaps checked at times by cease-and-desist letters, but still there – and the potential of strong, federally regulated competition, suggests there is work to be done if states want to keep the turf they won through the courts.
However, thanks to legalization and regulation, it’s work that can be done. Or that’s at least what the MGC’s letter-writers have been led to believe.
Part I – Negative Effects of Gambling Legalization Overblown
Part II – The Average American Sports Bettor Gambles Infrequently
Part III – Gambling Isn't Ruining the Game
Part IV – Whither the Winners?
Part V – Integrity (Thursday)
Part VI – Wish List (Friday)
