A recent U.S. Supreme Court ruling reverses the ban on sports betting, putting the matter squarely in the jurisdiction of each state. This opens the door to a potentially huge market. Estimates of the total amounts wagered on sports betting in the U.S. range from $150 to $400 billion annually. Given that the vast majority of the total was previously illegal, the exact number is unknown. For businesses operating or entering the space, one estimate puts the size of annual gross gaming revenue (GGR) for the legal sports betting market at over $6 billion by 2023.
Although the ruling is less than a month old, states have already begun to act. In Delaware, sports betting is now legal, making them the first state to take advantage of the ruling. Delaware did have an exemption which allowed multigame bets, but now people can bet on individual games at one of three existing race tracks/casinos.
New Jersey is expected to consider legislation on the matter right away. It’s estimated that up to 30 states will present legislation in 2018 and up to 10 other states will permit legal sports betting this year, namely Illinois, Indiana, Kentucky, Massachusetts, Michigan, New York, Ohio, Oklahoma, Rhode Island and West Virginia.
While, initially, sports betting might be restricted to existing facilities to ensure a smooth transition, the opportunity for lucrative tax income could drive expansion. One comparisons is the U.K., where sports betting flourishes and there a lot of commonalities with American consumers. Corner betting shops are common, advertising is prevalent and 16 percent of the population partake.
Online Sports Betting
Another anticipated trend is the growth of online sports betting. A 2011 Justice Department legal opinion cleared the way for online gaming within state borders. While that opinion was specific for online lotteries, combining that opinion with the new sports betting ruling enables willing states to facilitate online sports bookings.
Already in Nevada, where online sports gaming is permitted, 60 percent of sports book bets are placed with Nevada’s mobile gaming app. As in other fields that have gone mobile, the ease and convenience of using their phone to place bets syncs with using them to follow games and sports news, as well as discussing sports over social media.
Consider the success of online fantasy sports; nearly 60 million people in the U.S. and Canada participate, 23 million of them using their mobile device. After the Supreme Court ruling, Paddy Power Betfair purchased FanDuel, the second largest US fantasy sports site. While not technically sports betting, the audience is an excellent match for actual betting. According to Fortune “the merger is the first in a new wave of possible U.S. deals involving gambling companies. FanDuel already has plans to capitalize on this new opportunity by launching its sports betting offering as soon as this NFL season.”
The big question is, how will states set up their legislation? At least seven states will include online gaming in their legislation. While each state will have different standards and regulations, the remote nature of online gaming will warrant extra scrutiny. The players need to be properly vetted and verified to ensure that they are legally allowed to play. The operators need to demonstrate that the games are legitimate and the bets are secure and trustworthy. Legislation must protect both players and operators from fraud, theft, money laundering and other illegal activities.
For any operator considering offering online sports betting, they need to have systems in place that ensure players are legal. Two vitals factors being geo-location and age verification.
As interstate betting is a federal crime, operators must ensure that they do not allow any cross-border bets. Ways to check and block out-of-bounds IP addresses, VPNs or proxies and other location spoofing techniques are necessary.
Another requirement will be age and identity verification. There are very strict laws forbidding underage gambling and money laundering, so online gaming operators need to ensure they run proper checks to know who their players are.
Infrastructure & Regulatory Technology
While sports betting might be new to many states, the technology behind it won’t be. There are many existing systems that provide the necessary infrastructure, smart technology, and software platforms to handle day-to-day operations, detect and reduce fraud, and stay compliant with the legislation. In many cases, local operators can utilize plug-and-play technologies into their operation.
Advancements in regulatory technology enables automated processes to replace slow, laborious customer onboarding. As a result, the sports bettor enjoys a better experience and compliance workflows are streamlined and optimized.
As this is such a new opportunity, there’s lots of excitement across the industry. The exact future is unclear, except that strict regulatory requirements will be in place and having appropriate solutions in place will help expedite licensing, operations and the onboarding of new sports bettors a much smoother process.
