Warning: Over-Regulation Will Push Sports Bettors To The Black Market

JohnWallStreet

A recent study published by PWC (backed by William Hill and QVC) indicated that it’s getting increasingly difficult for high-stakes bettors in the U.K. to place wagers. Regulations designed to stop problem gambling (think: showing pay-stubs, cutting off accounts) - and operators’ desire to ensure profitability - have increased the friction associated with laying money down on games. As a result, more bettors are taking their action ‘off-screen’ (200,000 U.K. gamblers used black market sites in 2019). Of course, that result runs counter to “the primary goal in any regulated gambling market [which] is channelization.”

Howie Long-Short: The U.S. regulated sports betting market has yet to place an “intense focus on responsible gambling”, but LegalSportsReport.com's Brad Allen believes a push is on the horizon. “The U.S. is at the stage that the U.K. was at five years ago. Sports betting has been deregulated, investment capital is pouring into the space, there is a lot of money being spent on advertising [in an attempt to gain market share]; basically, it’s a free-for-all.” But the tide turned in the U.K. when the local media began focusing on the devastation caused by gambling addiction (think: families that lost everything, suicides) and politicians were ultimately pressured into placing tighter restrictions on operators to protect losing players. Back in 2015, the NY Attorney General shut down DFS in the state on the heels of an advertising blitz that was anything but ‘responsible’. One certainly doesn’t have to stretch the imagination far to see the need for - and implementation of - additional regulations as the U.S. market matures.

Allen welcomes the steps the U.K. betting industry has taken to protect customers from themselves, but warns U.S. states considering legislation to avoid over-regulation. As licensed operators become increasingly unattractive to bettors, the percentage of those wagering off-shore or with their local bookie will only increase (as opposed to within the regulated market which is taxed).

Licensed operators in the U.S. already face headwinds in their efforts to convert serious black-market bettors into clients. Bookies and off-shore casinos enable gamblers to bet more money, on more events (think: Nathan’s hot dog eating contest or the color of a Gatorade bath); often on credit (as opposed to having to fund an account). Allen explained that “unless a licensed operator can give the bettor a good reason to change from what they’ve always done, the power of continuity will prevail.”

To be clear, there are certainly benefits to a recreational gambler establishing an account at a regulated sportsbook. Aside from the lucrative sign-up bonuses available to new players, punters will likely find it easier to both deposit and withdraw funds. Of course, knowing you’ll get paid is also a convincing reason to bet with a legal operator. Allen reminds, “there’s been no shortage of off-shore books that have disappeared over the years and left customers holding the bag.”

While it’s difficult to find individuals (who don’t own a casino) who oppose cutting off potential problem gamblers, one could certainly argue that it’s unfair sportsbooks take measures to avoid “big money [bets] from smart people” (think: small bet limits or requiring a bettor to prove the origin of funds). But Allen doesn’t see it that way. He says that “at the end of the day, these are entertainment companies. Ultimately, their purpose is to enhance the fan’s game viewing experience - not to pay their living. If a casino can ban a card counter, why shouldn’t a sportsbook be able to ban a professional bettor or a gambling syndicate?” It’s worth mentioning that as it currently stands, “unless a bettor is [using technology] to arbitrage a slow moving book” or the individual is “very very sharp - among the best one percent in the world” - U.S. operators “are giving [the customer] a fair chance.”

Any restrictions that push bettors - be it sharps or problem gamblers - to the black market should be concerning to pro sports leagues predicated on their games' integrity. As well documented, corruption is far easier to spot in a regulated market. Unfortunately, Allen says there isn’t a ton that the leagues can do. It’s simply not realistic to expect a gaming operator to take bets (or clients) that are bad for business and it’s not as if they can disobey the government. “If sportsbooks are forced to remove all restrictions [in an effort to ensure all bets are placed legally], they won’t be profitable and they’ll cease to exist.” 

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