New York needs a trifecta

Moves in New York require a political hattrick, a look at UK black market claims, day one at the WRB +More

Compliance+More

Feb 07, 2023

Good morning. On today’s agenda:

Legislative movement in New York relies on reconciling competing views.
How much of a threat is the black market to UK punters?
The latest from the World Regulatory Briefing at ICE.
The UK publishes proposals to regulate crypto.
The NBA joins the opposition to use of the term 'risk-free' in ads.

Just a New York conversation, gossip all of the time.

New York’s triple play

Three is the magic number when it comes to passing legislation in New York.

Three disparate ideas for iGaming: New York has a smorgasbord of gambling items on its 2023 menu. To pass a gambling bill in New York, you need three politicians on the same page:

Gov. Kathy Hochul, Sen. Joseph Addabbo, chair of the Senate Racing, Gaming and Wagering Committee, and Assemblyman Gary Pretlow, chair of the Assembly equivalent.

Silence please: When it comes to the two key online gambling items (the OSB tax rate and iGaming), they are not on the same page. Indeed, arguably, they’re reading different books. Hochul’s budget included $900m in tax revenue from sports betting and zero from iGaming. The two items signal Hochul is not interested in lowering the state’s 51% OSB tax rate or legalizing online gambling.

Addabbo is an iCasino supporter, waiting patiently to see Hochul’s budget before introducing a bill, and favors reducing the tax burden on mobile operators by increasing the number of licenses available.
Pretlow is skeptical of reducing the current OSB tax rate and, somehow, he has a different vision of iGaming. In January, he revived a familiar friend, filing a bill to legalize online poker (A 1380) by defining it as a game of skill. Last week he reintroduced a bill from 2022 to legalize online casino gambling (A 3634).

If you’re keeping score at home:

Hochul appears opposed to iGaming.
Addabbo supports iGaming.
Pretlow supports online casino and online poker, but is keeping them separate.

C+M will dive deeper into NY’s online poker and online casino bills in a subsequent issue.

** SPONSOR’S MESSAGE ** Your customers think your payment options suck. And you pay too much for them! Process payments with BTC, ETH & Stablecoins instead - fast, reliable and inexpensive. And never any chargebacks! Get set-up @ ICE by meeting CoinSmart - licenced and regulated in Canada by the Ontario Securities Commission, and in Europe. Your customers (and your CFO) will thank you.

Book a meeting or drop us an email at smartpay@coinsmart.com.

ICE crumbs

ICE 2023 kicked off at ExCel London yesterday with regulatory briefings ahoy, but little more than crumbs for UK parties waiting on the big one.

Wherefore art thou White Paper? “In the next few weeks”, per Sarah Fox, deputy director for gambling and lotteries at the UK Department for Media, Culture and Sport, who opened the event. Fox is the latest in a long line of public servants to have uttered those immortal words in connection with the review in recent years.

Seven months into the role, Fox has already seen three gambling ministers assume the portfolio and attempt to get themselves up to speed, which hasn’t helped matters.

Keep the faith: Billing it “the most forensic, holistic review possible”, Fox admitted it is likely to be polarizing, given the range of stakeholders, and called on the industry to stay engaged post-publication.

Concerns over the quality of the evidence submitted in regard to the public health aspects of the White Paper have been building steadily in recent months.
Given the likelihood major reforms will hang on health data, industry voices have concerns the government may be swayed by at best ill-informed and at worst hostile researchers when shaping any potential levy.
Fox insisted the methodologies at the heart of the document will be presented for all to see and that decisions had been taken on “the best evidence that is out there”.
“Gambling is far behind other public health issues in terms of evidence, which everyone agrees with, and there are gaps in the evidence” she said.

Further reading: The Liberal Democrats say their call for higher pay for social care workers would be funded by doubling the UK’s POC tax rate to 42%.

Windy Miller

The UK Gambling Commission has set its sights on unlicensed black market operators, unregulated crypto products and erstwhile hotbeds of illicit activity like, er, Reader’s Digest.

Miller time: Speaking at the same WRB event, Gambling Commission executive director Tim Miller said it was a reflection of reality that his office would take on more of an international remit, targeting “those looking to make money around the edges of regulation”.

“Products like non-fungible tokens (NFTs), synthetic shares and crypto are becoming more widespread, and the boundaries between products like these are increasingly blurred,” he said, recalling similar warnings handed to the video game industry over skins and loot boxes.
The Commission will up enforcement of non-GAMSTOP operations, which Miller said were “especially insidious” given their many sites and affiliates target self-excluded gamblers.
“Even well-known publications like the Reader’s Digest have promoted such sites through sponsored content and then ignored requests from us to remove them,” he said, promising sanctions “further upstream” in an effort to disrupt.

Somewhere out there: Operators licensed in the UK but who land in hot water in other jurisdictions may face further probing, Miller said, adding that the Commission will put pressure on offshore hubs to improve vetting.

While stating the Commission could not hope to be ‘world police’, he added: “It doesn’t mean we will ignore what a licensee is doing elsewhere, especially if it calls into question their suitability to hold a license.”
“Things that happen in other parts of the world are impacting consumers here. We cannot ignore that.”

Gimme the cash: Laying out his pitch for a bigger warchest to fund antitrust and enforcement cases (we’re looking at you, White Paper), Miller compared modern gambling firms to the Big Tech empire, noting the complexities of probing both.

“As a regulator, the big deals are becoming more expensive to investigate and unpick,” he said.
“The industry today bears many more similarities to Big Tech in terms of R&D, products and multinational approaches.”
“That will clearly have implications on how they operate and impact on consumers, and how we as regulators do our jobs.”

North America notebook

Wisconsin tribes have launched retail sports betting, but industry chatter points to Wisconsin lawmakers introducing an OSB bill in late February or early March. It will take a Herculean effort to pass, requiring the legislature to pass the bill in two consecutive legislative sessions, followed by a ballot referendum.

Disparate RG

Do better: A recent report commissioned by the National Council on Problem Gambling looked at the disparate RG policies in the seven US iGaming states. The NCPG called out four states for their lack of mandates.

Responsible gambling consultant Jamie Salsburg, founder of Dyve Agency, called the NCPG research a “great initiative to identify gaps in protections and spark conversations for improvement”.
“Simplifying the data into an easy-to-read comparison chart provides advocates, operators, legislators and, most importantly, consumers with a valuable reference point. Competition is a great driver of innovation.”

NBA’s risk-free edict

Risk off: The future of ‘risk-free’ betting ads looks very uncertain after the NBA became the latest body to ban the phrase on league and team-controlled platforms. The NBA has determined it is a “problematic term” and “runs counter” to the sports body’s messaging and education around sports betting.

“We just feel it’s the right move for us,” Scott Kaufman-Ross, the NBA senior vice-president, told SBJ.
The term has recently been the focus of regulator push back, with both Massachusetts and Ohio moving to ban it.
FanDuel and Penn Entertainment have said they are no longer using the wording.
Casey Clark, senior vice-president at the AGA, told SBJ he didn’t think there was much, if any, distance between “where the leagues want to be and where the operators are”.

UK black market threat

How much of a threat is the black market to UK punters? As operators and regulators take opposing sides, it’s all a matter of perspective.

Going underground: The number of UK gamblers visiting unregulated online black market sites tripled during the World Cup, according to new research by the Betting and Gaming Council (BGC), prompting further calls for the regulator to intervene.

In December, 250,000 people visited unregulated sites compared to around 80,000 during the same month the previous year, with a similar jump in November.
Overall, UK visits to black market websites increased by 46% in 2022, with around 148,000 customers accessing illicit sites each month, according to research by Yield Sec for the BGC.
Analysts also found a large spike in online traffic to sites advertising services to problem gamblers who had self-excluded from UK operators.
“Non-GAMSTOP sites have generated 82.68% more visits from 26.88% more unique customers during Nov-Dec 2022 compared to the previous two-month period, spending on average 78% more time on site,” Yield Sec said.
During those two months, over 64,500 vulnerable players circumvented GAMSTOP to seek out black market sites.

Makin’ some noise: “This research exposes the dire threat the growing unsafe, unregulated black market poses to punters,” said BGC boss Michael Dugher, adding there is “too much complacency” from officials.

He said the government and regulator should “tread extremely carefully” with its imminent review and “resist blanket, intrusive affordability checks” that push punters underground “rather than dismissing the problem”.
Publicly, the GC’s position on black market sites amounts to ‘nothing to see here’; deputy CEO Sarah Gardner recently said in a speech to Danish counterparts that matters are often “overstated” without evidence.
C+M understands privately there are qualms within the regulator about its positioning. However, the GC did not offer comment when approached.

Don’t go there: The regulator’s annual enforcement report is overdue, but last year’s section regarding illegal lotteries on social media noted a large rise in numbers. Facebook was far and away the biggest culprit, with the GC noting that lotteries on the social networking site are “evolving in volume and complexity”.

Last April, Cleveland Police froze £140,000 from one of the perpetrator’s bank accounts.
A top gambling lawyer told C+M they are being inundated with enquiries from individuals wanting letters addressed to Facebook to say they don’t need a license, despite not meeting the exemption tests.
“There’s actually huge evidence of illegal lotteries on Facebook, which is a homegrown black market,” the lawyer said.
“The BGC say the affordability controls will drive people to these problem sites, while the GC and government say they will not, so the forthcoming gambling review has to strike a balance.”

** SPONSOR’S MESSAGE ** Department of Trust's mission is to turn affordability, AML, EDD and safer gambling checks from being a challenge which erodes trust, consumes resources and complicates operations into a value-add which enhances your relationship with your customers and supports your business. That's why we're proud to have such strong support from players and operators alike. Visit: www.dotrust.co.uk/

UK’s crypto oversight bid

The UK has unveiled a series of proposals to regulate crypto in the hope of becoming the jurisdiction of choice for digital finance business.

Clean up this town: A long-awaited consultation published last Wednesday outlined how the government intends to stamp out bad actors in the “turbulent industry” after a rollercoaster year in which the value of crypto assets has tanked 75% from their peak of about $3trn in November 2021.

Businesses located in the UK or serving clients within the region will be subject to a new licensing regime, meaning some firms will have to jump through hoops again.
The framework will bring centralized crypto-asset exchanges into financial services regulation for the first time.
Overseas trading venues could be forced to set up a subsidiary in the UK given their “critical role in the crypto asset value chain”.
Similar rules would cover the sale of utility tokens and non-fungible tokens (NFT) if used for financial services such as lending, payments or investment.
A new market abuse regime would be created to stop illicit activity and punish practices that manipulate prices via pump and dumps, wash trading or front running.

Renegade runaway: To stave off a repeat of the Celsius Network, Voyager Digital and BlockFi collapses, crypto lenders must strengthen contractual terms and prove they have adequate financial resources. Crypto companies must register, follow FCA regulations and meet a higher barrier of anti-financial crime guidance than existing money laundering regulations.

Lengthy delays have already caused some within the sector to complain about the licensing process.
Only 41 companies out of 300 applicants under the existing system won regulatory approval and will now require additional authorization.

Dream police: The government also noted the problems inherent in trying to supervise decentralized finance, where borders mean little and often central entities do not exist. Ideas mooted include regulating people who establish or operate a protocol, or code audits.

However, the Treasury said it wants to wait for international input and greater legal clarity to emerge in this area.

A little too much: Industry reaction to the consultation has been mixed. International exchange Binance welcomed the plans and said it “vocally supported the need for effective and appropriate regulation to help with mainstream adoption of digital assets”.

The proposed registration requirements appear too onerous and would mean the UK “takes baby steps while the EU and US surge ahead”, according to Zoe Wyatt, partner and head of crypto at tax advisory firm Andersen LLP.
"By the government’s own admission it will be two years before any meaningful change to the UK regulatory regime for crypto assets and we fear that the UK’s desire to be a global crypto hub will be usurped by another faster-acting jurisdiction,” Wyatt said.
Bankrupt crypto lender Celsius’s misuse of customer funds for years to prop up its own coin was proof the UK needed to act fast, said Richard Cannon, partner at Stokoe Partnership Solicitors.
“In time, the industry will either have to conform to regulation or be treated as outlaws,” he said.

European notebook

Lottoland: A German regional court in Koblenz has found that the German regulator had no legal basis to order a provider to block the Malta-based online lottery business.

The European Commission has been notified of Sweden’s gambling ordinance reforms submitted to further safeguard the country’s online gambling marketplace.

The Dutch regulator, the KSA, has said in its agenda for this year that licensees must ensure all efforts to maintain “safe play and safe environments” for consumers..

Global notebook

Australia: The New South Wales government could introduce reforms that would see all poker machines in the state go cashless within five years, according to The Sydney Morning Herald, which says the coalition government cabinet passed a proposed measure this past weekend.

What we’re reading

Munger games: “It isn’t currency. It’s a gambling contract with a nearly 100% edge for the house,” says Charlie Munger, who suggests the US authorities should move to ban crypto.

Calendar

Feb 7: World Regulatory Briefing at ICE
Feb 7: Wiggin Betting & Gaming Seminar
Feb 8: Gaming in Germany breakfast

An +More Media publication.

For sponsorship inquiries email scott@andmore.media.