Everybody Say Stop
States are using cease-and-desist letters to try to put a dent into illegal gambling, but are they sweeping up legal offerings in the process?
The Bulletin Board
NEWS: States continue to use cease-and-desist letters to go after what they believe to be illegal gambling operators.
LEGAL and REGULATORY UPDATES: MA rekindles research project; CO tax change referendum; NY Ad warnings; Brazil President issues warning.
NEWS: Election betting is no longer off-limits, and companies are jumping at the opportunity.
VIEWS: Defendants in the lawsuit brought by FanDuel founders tell their side of the story.
AROUND the WATERCOOLER: News and views from Day 1 of G2E.
STRAY THOUGHTS: Stay principled, but choose honey over vinegar.
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Cease-and-Desist Letters Are Flying Left and Right
A cease-and-desist letter sent to Bovada by Michigan in June has set off a chain reaction.
Bovada has received similar letters from the following jurisdictions: Colorado, West Virginia, Connecticut, Washington, DC, Ohio, Kansas, Louisiana, Pennsylvania, and most recently Massachusetts. The company had already pulled out of five states: Delaware, Maryland, New Jersey, New York, and Nevada.
Michigan has also targeted sweepstakes sites. That crusade is spreading, but not as quickly as the crackdown on Bovada, with Delaware and Connecticut joining Michigan in calling sweepstakes illegal gambling. Of note, all three are among the seven states that have legalized online casinos.
And now the net is expanding even further, as Michigan is targeting skill game operators that the Michigan Gaming Control Board believes are offering illegal gambling:
“The Michigan Gaming Control Board (MGCB) has taken decisive action against illegal gambling activities by issuing a cease-and-desist letter to Papaya Gaming based in Tel Aviv, Israel. This action follows an investigation initiated by the agency after receiving an anonymous tip.
“The investigation revealed that Papaya Gaming is operating illegal gambling by offering the following mobile applications within the state of Michigan: 21 Cash, Bingo Cash, Bubble Cash, and Solitaire Cash. These apps allow players to buy-in and win real money through gameplay.”
As Chris Grove noted, “This is not a social gaming w/ sweepstakes company, at least it hasn't been historically. It's a platform that offers skill-based games, similar to what Skillz offers and [checks notes] FanDuel offers with FaceOff (FaceOff is not live in Michigan).”
And then there are the C&Ds sent to Ace23 and Ace Per Head by the MGCB, which, as SBC Americas Jessica Welman reports, are not offshore sports betting operators per se:
“These two companies work as what are called “agents.” Essentially, the sites allow for a framework for individual bookies to set up an online betting site. It creates an infrastructure and support for bettors to fund accounts and place bets, but it is on the bookmaker, not Ace23 and Ace Per Head, to ensure payouts and provide financial backing.”
So far, the operators have complied (or, in the latest cases, opened a dialogue with the MGCB). Still, as Vixio (a newsletter sponsor) has noted, if the sites don’t abide by the C&D letters, state regulators don’t have a lot of enforcement options at their disposal:
The order was successful. Bovada stopped accepting Michigan-based customers soon after the MGCB took action… But if an offshore operator is determined to stay online, the next steps are not always as clear.
When laws are broken inside the U.S., enforcement is fairly straightforward. But offshore sites, by their nature, are outside U.S. jurisdiction.
“They can try to bring criminal actions,” Adam Berger, partner at law firm Duane Morris in Philadelphia, said. “The problem is, actually getting the people in court can be a challenge if they don’t really have a presence in the U.S. and you don’t really have a way to get them there.”
For more terrific insights like this, you can download Vixio’s latest U.S. Sports Betting Outlook for free here.
Legal and Regulatory Updates: MA Research Project; CO Tax Change; NY Ad Warnings; Brazil President’s Warning
Massachusetts moves forward with a research project that has been on ice for ten years: The Massachusetts Gaming Commission is resurrecting a problem gambling study that was created in 2011. The project was put on hold in 2014 until all the state’s casinos were open.
A minor sports betting tax change on the ballot in Colorado: Colorado voters will have the option to lift the current $29 million cap on the amount of sports betting tax revenue that goes to the state’s water project fund. The change would not affect the amount of tax paid by operators. Per the Colorado Sun, “The Taxpayer’s Bill of Rights, a constitutional amendment approved by voters in 1992, requires that money collected in excess of a tax’s projected revenue be refunded unless voters let the government keep the money.” Proposition JJ would do just that.
New York codifies gambling advertising warnings: New York Gov. Kathy Hochul has signed a bill mandating mobile gambling ads include warnings about the dangers of gambling. According to Gov. Hochul's press release, “The previous law states that each advertisement must clearly and conspicuously post a problem gambling hotline number. Legislation S1550/A1118 builds off the previous bill to clarify that mobile sports wagering advertisements are subject to the same conditions that apply to other gaming-related advertisements.” As many have pointed out, including NYSGC Chair Brian O’Dwyer, New York regulators already required these new rules, which are now simply codified into law.
Brazil President throws down the gauntlet: Brazil President Luiz Inacio Lula da Silva issued a warning to online gambling operators: Get your house in order, or I’ll pull the plug. Lula said he would ban online betting if regulation does not cure "addiction" by bettors. "If regulation doesn't work, I won't hesitate in putting an end to (betting) definitively," he told reporters.
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Election Betting in the US: Full Sprint Out of the Gate
Well, that happened fast. Following the appeals court's decision to lift the temporary stay on election betting, Kalshi resumed trading on election markets.
And it’s not just Kalshi.
Interactive Brokers launched its election markets on October 3. Per the press release, “This innovative addition allows US investors to trade their predictions on US political outcomes, alongside contracts on economic data releases and climate indicators, through the ForecastEx exchange.”
Here is a look at some of the markets IB is offering:
Will Kamala Harris win the US Presidential Election in 2024?
Will Donald Trump win the US Presidential Election in 2024?
Will the Democratic Party win a majority in the United States House of Representatives in the 2024 general election?
Will the Democratic Party win a majority in the United States Senate during the 2024 general election?
Will Kari Lake (R) win Arizona's United States Senate election in 2024?
Will Mike Rogers (R) win Michigan's United States Senate election in 2024?
Will Tim Sheehy (R) win Montana's United States Senate election in 2024?
Will Sam Brown (R) win Nevada's United States Senate election in 2024?
Will Bernie Moreno (R) win Ohio's United States Senate election in 2024?
Will Dave McCormick (R) win Pennsylvania's United States Senate election in 2024?
Will Eric Hovde (R) win Wisconsin's United States Senate election in 2024?
Defendants in FanDuel Founders Lawsuit Fire Back
One of the stories I’ve been tracking in the newsletter is the lawsuit filed by FanDuel founders against private equity firms they claim undervalued the company when it was sold in 2018.
FanDuel’s founders filed an amended complaint in August.
“… cofounders Nigel Eccles, Lesley Eccles, Thomas Griffiths, Robat Jones, and Chris Stafford—along with dozens of early investors and employees—claim that board members controlled by private equity investors KKR and Shamrock “secured for themselves and other preferred shareholders 100% of FanDuel’s equity in the new merged company along with the massive return it represented.”
According to a new filing, the lawsuit brought by FanDuel’s founders glosses over the company’s financial state at the time of the sale. The filing has one “Statement of Fact” titled “Lead Plaintiff Nearly Destroyed FanDuel.”
“The reality, as their new documents show, is that after Lead Plaintiff Nigel Eccles mismanaged [FanDuel Limited] into the ground, the Director Defendants were forced to step in, pursue a buy-out that Plaintiffs had facilitated, and accept the highest available offer—indeed, the only lifeline that would save FDL from collapse.”
“… FDL was in financial ruin, and Defendants undisputedly pursued FDL’s best and only viable lifeline so as to obtain the best result for FDL and all shareholders. Plaintiffs may be disappointed, but in reality, FDL was on its last legs and had no better option. There was no wrongdoing.”
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Around the Watercooler
Social media conversations, rumors, and gossip.
Here are a couple of interesting tidbits from Day 1 of G2E from Ryan Butler.
The West Flagler decision unlocked the door, but it’s not fully open:
Minnesota will be taking another crack at mobile betting in 2025:
Bill Speros reports that the days of “cathedral” sportsbooks (outside of Las Vegas) are over, as retail sports betting has become a “transactional experience. STTP Thoughts: Maybe companies aren’t investing the necessary time and resources to make these sportsbooks attractive destinations.
And some more news from G2E:
From CDC Gaming Reports: G2E: Nevada Gaming Board chair concerned about money laundering in Las Vegas casinos
Also from CDC Gaming Reports: G2E: Mergers, acquisitions still in vogue in the gaming industry
The news of the day (which will interest me and the small group of people who cover the space) was an announced merger between CDC Gaming and Inside Asian Gaming (IAG). Full details are here.
Stray Thoughts
“Fight for the things that you care about, but do it in a way that will lead others to join you.” ~ Ruth Bader Ginsburg