I Do My Little Turn On The Catwalk

My thoughts on the recently unveiled NCLGS Model Legislation draft. The good, the bad, and the not so ugly.

Dec 11, 2024

NEWS: Sizing up the NCLGS Model Legislation for online casinos.
BEYOND the HEADLINE: States need to avoid handcuffing regulators with policies that are difficult to unwind.
NEWS: The US Senate Judiciary Committee will put the sports betting industry under the microscope next week.
AROUND the WATERCOOLER: The growing anti-online gambling sentiment.
STRAY THOUGHTS: Be the best version of you: A US sports betting story.

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NCLGS Model Legislation: Good, Bad, or Somewhere In-Between

The National Council of Legislators from Gaming States (NCLGS) is in New Orleans this week for its annual winter meeting. One of the big topics of interest is the recently revealed draft for model online casino legislation.

The model legislation was meant to provide a framework for states considering legalizing online casinos. For the most part, it does just that, and I would classify 90% of the policy recommendations as solid, albeit that 90% is somewhat boilerplate. Remember that this is a draft that will undergo revisions, so any critiques might well be addressed.

Where the model legislation does take some risks, it goes well beyond a framework and into the realm of strangely specific policy that, whether you agree with it or not, has the industry’s fingerprints all over it.

The result is “Model Legislation,” which primarily consists of policy recommendations that are common sense and already universally accepted and a smattering of ideas that either reek of special interest groups or throw table scraps at the responsible gambling crowd.

As such, I’m not sure what legislative roadblocks it’s supposed to remove. It feels more like a lecture than a policy recommendation from a peer.

I understand how it happened, as you can’t put that many policymakers and industry folks into a room and not expect a litany of “safe policies” and the occasional special interest and pet projects to creep into the legislation.

Some examples of the industry’s fingerprints include the moderate tax rate proposal of 15-25%, the express authorization of temporary licenses, the sweepstakes language, and a $20,000 limit on deposits in a 24-hour period.

The first three can best be classified as industry asks, and the third is the proverbial bone to the responsible and problem gambling crowd (as is another specific policy, which I’ll discuss in the Beyond the Headline section below).

The daily deposit threshold is so high that it cannot possibly have an RG impact. It would have been better to say nothing about a daily deposit limit than to recommend such a ridiculously high threshold ($20,000 in a 24-hour period).

First off, it’s useless. Every licensed operator would (or should!) run a source of funds check on a customer trying to deposit $20,000 in a single day. Under the NCLGS model legislation, a person could still deposit six figures weekly.

I would argue that this policy could have a negative, unintended consequence. Operators could conceivably use the $20,000 limit to raise their source of funds threshold checks.

So, what should model legislation look like?

First, it should either be a fully formed bill or no more than a page or two of the best practices states can consider.
Second, it should avoid painting itself into corners with policies it cannot easily unwind.

Beyond the Headline: Talk About Your All-Time Backfires

Of all the recommendations in the model legislation, none caught my attention more than the prohibition of credit cards.

Prohibiting credit cards sounds like a robust responsible gambling safeguard, but evidence (where available) suggests the policy has zero impact and possibly exacerbates the problem amongst at-risk gamblers.

Consider the 100-plus page report on Great Britain’s credit card ban from The National Centre for Social Research (NatCen) that I previously reported on:

“What the report found is people experiencing no or low levels of problem gambling were more likely to have reduced their credit card usage. In contrast, gamblers with moderate and high levels were more likely to use a credit card for gambling after the ban.
“Even though the report found positives, it didn’t achieve the credit card ban’s overarching goal of reducing harm among at-risk and problem gamblers.
“So, what has the ban accomplished? It appears that the prohibition added an additional layer of responsibility to responsible gamblers and pushed bettors at moderate and high levels to find workarounds to the ban.”

Juxtapose that with the funding recommendations of the model legislation: online and mobile payment systems, debit cards, digital wallets, prepaid cards, bank wires, Cash, and “any other form approved by the Regulatory Authority.”

So again, I don’t see how a credit card ban prevents someone from depositing money they may not have. To put it in the words of Jamie Salsburg:

I fear that the model legislation could be painting states into a corner. Meaning that the state and the industry get stuck with policies that don’t work, and regulators are handcuffed by policies that no longer apply in the rapidly evolving world of gambling.

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Welcome to the Jungle

On Monday, I mentioned that last week was a bad one for the gambling industry. This week hasn’t been any better, and next week could be even worse.

In yesterday’s newsletter, I foreshadowed more federal action (besides the GRIT Act, the SAFE Bet Act, the legal case over election betting, and a recent inquiry to examine DraftKings and FanDuel for anti-trust violations).

Soon after I hit publish, the Senate Judiciary Committee announced that it would hold a hearing on sports betting on Tuesday, December 17, at 10 a.m.

This will be the second hearing on the topic, with the first coming soon after the PASPA repeal in 2018 from Senators Orrin Hatch and Chuck Schumer.

The big question is this: Will the hearing (held during the lame-duck session) have any teeth, or will it be, as I said yesterday, like most congressional hearings, a dog-and-pony show?

Also, before anyone gets too worked up, industries are hauled in front of Congress all the time.

Around the Watercooler

Social media conversations, rumors, and gossip.

As noted on Monday, when the zeitgeist changes, you need to listen to it. The level of sports betting discourse (and specifically where the discourse is coming from) should be quite alarming to the industry (here, here, here, and here):

And then there is Saagar’s monologue from yesterday’s Breaking Points show on online gambling, which he called the next opioid crisis:

More on the monologue in tomorrow’s newsletter.

Stray Thoughts

It’s nice to know DraftKings CEO Jason Robins is a fan of the newsletter (or at least appears to be a regular reader based on these recent comments at the Craig-Hallum Online Gaming Conference:

“I think you’re going to see more consolidation to the top in shares, but I also think that a lot of companies as this market continues to evolve that are losing money now will figure out how to survive at smaller levels of scale.”

This is something I’ve touched on several times:

As I’ve been emphasizing for some time, most sports betting companies are trying to out-FanDuel FanDuel (or DraftKings), which is simply not a viable strategy.
From January: “Trying to compete with companies possessing bottomless war chests causes you to spend more money for the same results.”
From April: “I have also been perplexed by the strategy of second and third-tier operators for quite some time. They utilize the same strategies as DraftKings and FanDuel but without the product or the war chest to compete.”
From earlier this month: “As Geddy Lee sings in Subdivisions, “The future pre-decided.” That’s what an industry-wide focus on bonuses is; whatever operator can withstand the most pain and the biggest losses will come out on top, as competitors die a slow death of a thousand cuts by trying to compete with them on the bonus front.”

I also talked about this phenomenon at length with Chris Altruda during Episode 13 of the podcast:

“I don't think anybody has quite figured out how to live in the second tier. I feel like they're either struggling to stay afloat or they're assuming that they're going to get into the first tier and playing that strategy.
“An example of a company in this space that understands what it is, is Prime Sports. They understand what they are and what they're not, what they're capable of, and what they're doing.”