Fear and loathing over skill gaming
Skill gaming machine debate, BetMGM outages, NY bans pick’em games, Fanatics gains a NY license +More
Good morning. On today’s agenda:
Games posing as slots is as polarizing an issue as any other in US gaming.
Now BetMGM appears to be suffering from unexplained outages.
PrizePicks and Underdog Fantasy lose the NY pick’em battle.
It turns out Dave Portnoy was less than honest about Penn’s licensing battles.
So when you gonna tell her that we did that, too?
Skill gaming machine debate
The industry loathes them and regulators are trying to capture them.
Skill or cure: Slot machines and games that mimic slot machines at non-gaming establishments have become a polarizing topic in several US states. This category includes video gaming terminals (VGTs), video lottery terminals (VLTs) and skill-based games.
In Pennsylvania, there is a battle between casinos and manufacturers of so-called skill-based games common in Pennsylvania bars and taverns.
The Virginia legislature passed legislation prohibiting skill games in 2021, but the machines are still widely available amid an ongoing legal fight.
Missouri’s sports-betting efforts have been derailed by VGT supporters who refuse to expand gambling without the legalization of the machines.
What’s all the fuss about? These machines aren’t massive moneymakers as a standalone. Each machine in Illinois averages just $5,000 of net revenue per month, with just over a third of that going to the state as tax revenue. The value is in the sum of the parts.
Illinois has more than 46,000 machines in more than 8,000 locations around the state.
In August, those machines collectively generated $236.9m in revenue, with the state receiving $80m in tax revenue.
By comparison, Illinois’ 14 commercial casinos generated $124.4m in revenue, with $37.8m going to the state as taxes.
Those numbers help explain why:
Casinos loathe VLTs-VGTs-Skill Games.
Lawmakers are interested in regulating the industry.
The VLT-VGT-Skill Game lobby is so strong (in addition to the manufacturers, 8,000 small businesses are benefiting from VGTs in Illinois).
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PA skill games debate
Each state deserves an entry, but today we will focus on Pennsylvania.
Penn to paper: In August, Penn Entertainment’s chief compliance officer Chris Soriano published an op-ed on TribLive calling for the state to take action against skill games. Soriano pointed to three arguments against skill games:
They are untaxed and unregulated.
They have an extremely high hold compared to casinos.
They are magnets for crime.
Commonwealth games: On the other side are small business advocates, with Pennsylvania State Rep. Aaron Bernstine laying out the case for skill games in a recent op-ed on PennLive. Per Bernstine, the debate is about controlling gambling in the state.
“Stop pretending that this issue is about anything other than creating a monopoly for casinos,” Bernstine wrote.
“Too many of my peers in Harrisburg have made it their mission to jeopardize small businesses – the backbone of our economy – and threaten the very livelihoods of their own constituents.”
“Some of those same politicians have put the wishes of big, internationally owned casino conglomerates over the best interests of our local VFWs, American Legions, volunteer firefighters and other fraternal organizations.”
“Skill games are not gambling machines… Every court in the commonwealth that has evaluated the games has ruled that they are legal.”
Why not regulate skill games: Interestingly, as Bernstine noted, the skill game industry wants to be regulated – which would cut off one of the three arguments against the machines. “The very entities that complain about skill games being unregulated are also the ones who have stood in the way of regulation,” Bernstine said.
However, it’s never that simple. Pennsylvania has a glut of casinos, 17 in total. Each of these casinos has delivered millions of dollars in licensing fees and many millions more in taxes to the state, with the understanding that competition would be limited geographically.
When Pennsylvania authorized “mini-casinos” in 2017, there was a stipulation that they could not be within 25 miles of an existing casino.
Skill game legislation would be an ugly fight requiring concessions on where and how many machines a location could offer.
BetMGM issues
Weeks after a major hack took down MGM Resorts’ Vegas computer systems, customers with BetMGM report drained accounts.
Déjà vu all over again: BetMGM’s customer support team was responding to claims through a dedicated social media account on Wednesday, as punters took to online forums to share their experiences, claiming that hackers have stolen funds and sensitive account data.
One user alleged that the email address on her BetMGM account had been altered without her knowledge before two new credit cards were added.
She claimed she had been “fighting with BetMGM to regain access since then” but believes her account is empty.
Another said their account had an updated unfamiliar phone number and all funds had been taken following a withdrawal to a Visa debit card. The post also claimed the BetMGM team refused to help.
Last month, a mammoth cyber attack lasted nearly a fortnight before the US casino giant confirmed to the market it had resolved the issue.
Hackers warned they would leak the sensitive data of customers if MGM Resorts – and rival Caesars, which was also affected – did not pay a ransom.
A little local difficulty: A spokesperson for BetMGM told LegalSportsReport.com: “We are aware of a technical issue earlier today that resulted in some customers experiencing delays or difficulty accessing their accounts. That issue has been resolved.”
Pick’em loss
The New York State Gaming Commission adopts a pick’em ban.
Heat: The pressure on fantasy sports operators that offer pick’em games intensified this week after a meeting of the New York State Gaming Commission agreed to adopt new rules banning the player prop-style of offering.
The move came despite a last-minute effort led by the PrizePicks and Underdog Fantasy-backed Coalition for Fantasy Sports.
The effort included a write-in from 4k players with UF asking for props-style DFS not to be banned.
Recall, in a submission ahead of the meeting, the Coalition said the move to ban pick’em games would “serve to solidify the market domination by DraftKings and FanDuel”.
Pressure point: The New York move adds more pressure on providers of pick’em contests following the move by the authorities in Florida to issue a cease-and-desist order against PirzePicks, Underdog Fantasy and Betr.
In statements, both PrizePicks and Underdog Fantasy stuck to their guns, with the first saying it was meeting regularly with the NYGC to discuss the future of fantasy sports in New York.
Underdog Fantasy said it would “continue to work with the gaming commission to ensure we operate under the finalized fantasy sports rules”.
The bad news keeps on coming: Also yesterday, the Michigan Gaming Control Board’s joint committee on administrative rules duly let the proposed rule changes to ban pick’em games get the go-ahead, meaning they will now be adopted.
In a press release, the Coalition said the MCCB had moved ahead despite a write-in campaign by Michiganders calling for the rules to be rejected.
State Senator Jim Runestad was quoted as saying the MCCB “bent to the will of big donors and corporate interests”.
The innovation challenge: Alex Kane, founder and CEO at Sporttrade, posted on X that “there must be a solution that allows companies to continue to innovate DFS-like or even sports-betting offerings that doesn’t involve $25m licensee fee, $5m/yr and 60%+ effective revenue tax”.
See Earnings+More’s The Startup Month from Tuesday on how regulatory structures make it difficult for startups to make their mark.
Fanatics gets the nod
Transfer day: At the same meeting, Fanatics was officially approved as a licensee taking over from PointsBet, which it acquired in the summer. The company didn’t give a timeline on its launch.
In a statement, PointsBet said the ownership of PointsBet Wyoming has also transferred to Fanatics Betting & Gaming.
US notebook
Portnoy’s porkies: At a meeting of the Massachusetts Gaming Commission, Penn Entertainment denied claims from Barstool Sports owner Dave Portnoy that it was denied licenses due to the company’s ownership of the social media outlet.
The aforementioned Chris Soriano said the company was “not denied any licenses” due to its Barstool connection.
Recall, in a post-disquisition ‘press conference’ posted on X, Portnoy said he and Penn “underestimated just how tough it is for myself and Barstool to operate in a regulated world”.
“Every time we did something, it was one step forward, two steps back,” Portnoy added. “We got denied licenses because of me.”
Soriano also told the MGC that the rebrand of its Barstool Sportsbook to ESPN Bet is purely cosmetic and won’t affect the technology stack.
He added that the only changes would be to expand the capability of the backend and remove references to Barstool Sportsbook, which would take effect in November.
Compliance M&A
US Integrity and Odds On Compliance announce a merger to form a global compliance and integrity solution.
Tying the knot: The merger of the two companies comes a matter of months after the launch of the ProhiBet joint venture. The two said by coming together they would create a “powerhouse of expertise” within the compliance space.
Matthew Holt, founder at U.S. Integrity, will remain as CEO of the combined entity, while his counterpart at Odds On Compliance, Eric Frank, will be president.
"This merger is a testament to our joint commitment to helping the industry navigate the complexities of this rapidly growing and highly regulated sector,” said Frank.
Victoria’s reform plan
Australian state Victoria publishes a gambling harms bill, which brings in curfews on the use of pokie machines, load limits and slow spin speeds.
Hokey pokie: The Gambling Legislation Amendment Bill 2023 has been presented to the state’s parliament and will now be debated by ministers. If successful, the reforms would enter force at the majority of Victorian electronic gaming machine establishments from mid-2024.
Hotel and bar patrons would be banned from accessing pokie areas between 4am and 10am, with only casinos allowed to let punters play between these hours.
The bill was first announced in July following a series of high-profile scandals at Australian casino giant Crown Resorts’ Melbourne property.
It also contains proposals to broaden the powers of regulators and their ability to intervene where they consider player harm to be amplified, with more scope for the Victorian Gambling and Casino Control Commission to punish casinos.
Australia notebook
The Lottery Corporation has asked to be exempted from the potential ban on credit cards that is included in the Interactive Gambling Amendment Bill 2023, arguing it shouldn’t apply to lottery transactions due to their “low-harm nature”.
However, Financial Counselling Australia and the Alliance for Gambling Harm told parliament that lotteries shouldn’t be exempt from a ban on using credit cards to gamble, according to The Guardian.
The FCA’s policy director Lauren Levin said in a submission to the government inquiry that lottery products “cause serious gambling harm and should also be subject to the same consumer protection legislation as other online forms of gambling”.
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Europe notebook
Mob rule: Romania’s Prime Minister Marcel Ciolacu said his government will not be intimidated by threats coming from the “slot machines industry” over proposed tax changes. According to Romania-Insider.com, operators headquartered in Transnistria – an unrecognized self-regulated pro-Russian region in Moldova – are the cause of the grief.
Ciolacu alleged that during the pandemic the “gambling mob" was able to influence politicians to favor the operators.
Malta: The fantasy sports operator Zweeler has stopped serving the Netherlands following a warning by the Dutch regulator. Kansspelautoriteit threatened a fine of up to €850,000 unless Zweeler obtained a license, which the firm said it is exploring.
UK: Two app-based games that contain loot boxes and virtual currencies were misleading and must not reappear, the UK’s advertising regulator has warned developer Hutch Games.
The Advertising Standards Authority upheld a pair of complaints against the maker of Rebel Racing and F1 Clash - Car Racing Manager, stating that ads promoting the games did not make clear they contained loot boxes, but only that “in-game items can also be purchased”.
The Netherlands: The KSA has issued a new online gambling license to Hommerson Amusement. The license permits Hommerson to offer online games of chance to the Dutch regulated iGaming market. It is not yet clear which brand the company will use to operate iGaming in the country.
Calendar
Oct 9-12: G2E Las Vegas
Oct 16: Gaming in Germany, Berlin
Oct 26: Reputation Matters, London
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