There were two major news developments for the gambling sector this month: the repeal of the sports betting ban in the US (huge) and the reduction of FOBT stakes to £2 by the UK government (less huge, but still very significant for the UK sector).
First to the US. Without doubt the US Supreme Court’s repeal of the Professional and Amateur Sports Protection Act (PASPA) is the biggest news to hit the gaming and betting sector since, well… one would have to say 2006’s Unlawful Internet Gambling Enforcement Act (UIGEA), which effectively banned online gambling in the US as part of a last minute Congressional add-on to a must-pass bill called the Safe Port Act, which focused on US port security and the fight against terrorism.
Some former US-focused operators still haven’t got over it… Anyway, UIGEA put paid to sites like PartyPoker, which had around 60% market share at the time and made PokerStars into the company it is today. Such are the vicissitudes of new regulations and business decisions taken in response.
But back to the here and now; and since the PASPA repeal news is positive for the industry (for once), let’s focus on that. The saying goes that everything is bigger in the US, but this time the old proverb might well turn out to be true. Still, many stars need to align for the US industry to take off and the long-term outcome cannot be predicted with any certainty. Nonetheless, it is major news and will impact the sector worldwide in a major.
PASPA came into force in 1992 and made betting on sports illegal in the US, with the exception of Nevada and a carve out for horse racing. Other than that, Americans were not allowed to bet on ice hockey, baseball, basketball or American football unless they found themselves in Las Vegas or some other Nevada city. The reasons for the ban were historic as much as anything: to fight the mob’s illegal bookmaking activities and match-fixing (the ‘Say it ain’t so Joe/White Sox World Series scandal of 1919 had a lasting impact on the US psyche).
However, the result of these measures was the development of a substantial illegal gambling business, online and off, with agents dotted around the country and a major online industry working out of Costa Rica and other jurisdictions such as Aruba and Curacao.
Politicians and lobbies
Such a set up might sound weird to outsiders. After all, just about anyone over the age of 16 can go into a shop in the US and buy a deadly firearm as long as they pass what many people would generously describe as ‘basic’ ID checks; and never mind criminal background checks or anything more demanding. But when it comes to betting on sports, millions of Americans are unable to place a wager during a baseball or basketball match and have ended up betting via illegal sites or street-corner bookmakers.
The reason the situation remained unresolved for so long was down to anti-gambling politicians and lobbies. If we focus on the latter, in terms of trade bodies the American Gaming Association (AGA) represents the country biggest casinos and is by far the most powerful gambling lobby in the country.
Officially it maintained a neutral stance over online gambling and betting for many years, but in reality opposed it because its members, brands such as MGM, Las Vegas Sands and Caesars, were not allowed to operate online legally and therefore did not want online-only operators to be given a free run at it what they considered to be an unfair advantage.
As mentioned, the result was a state of stasis, and some unlicensed companies built up huge businesses (the industry is valued at more than US$150bn according to the AGA).
The Supreme Court’s decision now means that major US casinos, lotteries and racetracks will be gearing up to offer sports betting with a high likelihood that online and mobile betting will also be allowed.
Factors at play
So the US status quo has finally shifted. More difficult will be working out who the winners and losers will be. It’s too early to be able to say but a number of factors will play a role in deciding which of the many entrants launching new betting and gaming solutions onto the market will be successful.
Brands: there is no doubt that the bigger the brand, such as MGM, Caesars, Golden Nugget etc., the easier it will be to attract players. US punters enjoy betting with companies and brands that they know and recognise. European companies have tried to launch their own brands, Paddy Power in New Jersey was one of those, and it did not work out for the Irish bookmaker.
Reach: some casinos operate a couple of establishments in one or two states, while the biggest work across multiple states. Clearly the latter’s reach will enable them to market their new products to more people, more widely and with greater emphasis.
Speed to market: the companies that are first to promote their new sites or betting offers will likely make most hay while they can. Any operator coming to market too late will find it very difficult to have much of an impact in terms of recruiting customers.
Know-how: as opposed to what has been going on in Europe for many years, it is debatable how much expertise is actually US-based when it comes to marketing, trading or risk management, fraud management or KYC procedures. Simple issues around staffing and finding the right personnel might be harder to resolve than previously imagined.
FOBTs: return to bookmaking?
After months of rumour and couter-rumour, the UK government ruled that the maximum stake on fixed odds betting terminals should be reduced to £2. Thus finally plucking up the courage to stand up to the gambling lobby, or caving in to the doom-mongering anti-gambling campaigners, depending on your perspective.
Cue loud complaints from the UK’s biggest bookmakers and warnings about thousands of jobs being lost as they are forced to close hundreds of betting outlets (and never mind the fact that those shops are only open because of the presence of those machines…).
The authorities said they would make up for the fall in tax revenues by raising the remote gaming duty (gross profits tax) on the online industry. Cue more complaints, this time from the online bookies and casinos based in Gibraltar who have vowed to fight the new measures, which could cost them up to £200m.
The outcome isn’t good for the online industry and it should also expect further scrutiny regarding the lack of social responsibility features on its online casino products, where players can bet with minimal set limits and are often encouraged to chase their losses with ‘double down’ offers. These are bound to come under scrutiny as operators have shown no sign of toning them down.
For the FOBTs meanwhile, the lowering of the maximum stake to £2 might actually get the bookies back to what they should have been focusing on all along: bookmaking and offering innovative sports betting products.