Identify Yourself
On the heels of a betting investigation into Iowa and Iowa State, regulators are considering stricter policies to prevent account-sharing and underage betting. But will those policies change anything?
The Bulletin Board
NEWS: Iowa regulators propose stricter policies on account sharing.
BEYOND the HEADLINE: No policy you implement will stop account-sharing.
NEWS: Fanatics makes inroads toward launching in Pennsylvania, New York, and New Jersey.
NEWS: Sportsbooks are learning the hard way that engagement doesn’t lead to revenue, as a social media-first approach has (thus far) been a dud for operators.
AROUND the WATERCOOLER: The great DFS debate.
STRAY THOUGHTS: Black markets.
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Iowa To Beef Up Account-Sharing Controls
With the state’s two major universities caught up in a criminal investigation centered around student-athlete betting, Iowa regulators have proposed stricter policies to cut down on account-sharing and underage betting.
The first line of defense regulators are calling for is the prominent display of already existing rules:
Account sharing is prohibited.
Persons under the age of 21 are prohibited from wagering.
In addition to prominently displaying the above, the newly proposed rules (currently in the public comment phase) would force operators to institute new procedures.
Per Steve Bittenbender of Iowabets, the IRGC wants operators to:
Institute stricter KYC checks at registration, including knowledge-based questions and/or photo ID.
Use geolocation activity to monitor for potential fraudulent activity.
Require multi-factor authentications at least every seven days for “each unique device” used by an account holder.
Verify the account holder is an authorized user of the banking account, card, or other funding source.
Beyond the Headline: Unenforceable Rules
The online poker space has always had a problem with ghosting (someone giving a player advice while they play online), even though there are rules against it. The issue is it’s hard to detect and even harder to prove. The people involved have to make a bumbling mistake for ghosting to be discovered.
This is what I call an unenforceable rule. Most of the policies Iowa is considering fall into this category. Rule followers will abide by it. Rule breakers will ignore it.
A more common example is purchasing alcohol or cigarettes for an underage individual. What isn’t common is hearing about someone getting busted for breaking this law. Everyone knows this is common, but only a tiny fraction get caught.
When you do, it’s a rare instance of something crazy happening at a house party where adults either facilitated or turned a blind eye to what was happening or because of a sting operation by law enforcement similar to sending minors in to drink in a bar or a prostitution sting. The law exists. It’s just really hard to detect it “in the wild.”
What Iowa is proposing is adding an extra hoop (that makes detecting account-sharing more difficult) for rule breakers to jump through. That isn’t a big deal since they are already jumping through a few other hoops to break the T&C of the sportsbook. At the same time, it adds another annoying friction point for rule followers.
Fanatics Lights the “Coming Soon” Sign in 3 States
Fanatics has been given a preliminary go-ahead in Pennsylvania after state gaming regulators unanimously approved Fanatics’ ownership of PointsBet. When Fanatics will be cleared for launch in the Keystone State is unclear.
Per SportsHandle, “A gaming board spokesman said that in order to proceed in Pennsylvania, Fanatics will still need to obtain interim authorization from the board’s executive director and then sign a Statement of Conditions and Indemnification agreement.”
Meanwhile, in New Jersey… Robert Linnehan spoke with the New Jersey Division of Gaming Enforcement about Fanatics process in the Garden State:
In New York, Gaming Commission chair Brian O’Dwyer said Fanatics will not be rubber-stamped and must undergo a complete Commission review before it will approve the transfer of the PointsBet license. That determination will likely have to wait until September.
Fanatics is up and running in four states: Massachusetts, Maryland, Ohio, and Tennessee.
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Social Media and Sports Betting = Oil and Water?
When it comes to creating a successful sports betting company, social media seems about as overrated as Dan & Dave from the 1992 Barcelona Olympics.
This comes down to something I call “wish vs. goal.” For those who may not know, I’m a martial arts instructor. Every student says they want to be the best they can be, but only a small percentage actually put in the work and effort to make it happen.
It’s the difference between what people say (a view) and what they mean (a conviction). At the end of the day, don't put much stock in what people say they will do until they do it. In business, that is when they open their wallets and pay.
I’ll use a fictional gambling survey as an example. A typical poll will find around 50% of people support legal sports betting. But, within the 50% who support it, it’s only about 5-10% that truly care about the topic. The other 40-45% or so are only thinking about it because they were asked. These people are largely indifferent. The same can be said for those who oppose legalization. Most people (80-90%) simply don’t care but will answer if asked.
Circling back to social media and sports betting, influencers aren’t having an impact. Jake Paul can clearly sell boxing matches, but his influence doesn’t seem to reach into the betting world. Barstool drives a lot of betting, but it wasn’t able to push that betting to its own sportsbook.
One of the issues is likely that most of the people influenced by influencers are not loyal to that influencer. What that means is Barstool personalities or Jake Paul might be relaying the legality of sports betting and recommending their company, but what their audience is hearing is slightly condensed. The audience is hearing, “sports betting is legal.” And they are hearing that from Barstool, Betr, DraftKings, FanDuel, and every other sportsbook. The influencer might be able to get people to bet, but once they open their wallets, they become more discerning.
For example, Betr is touting that “over 20% of Betr Media's estimated Ohio audience already converting to real money gaming customers for Betr Gaming.” That seems impressive, but as Dustin Gouker pointed out in a Closing Line post last week:
“Let’s assume that the above is true for a moment. You’re telling me that 20% of Betr’s audience converted in Ohio and they are handling less than half a million dollars in a month? That’s… not great. Either they are converting almost no one or those customers aren’t valuable, or both.”
To be fair to Betr, founder & CEO Joey Levy recently said the following about the company’s customer acquisition strategy moving forward:
“…we plan on spending more capital on paid customer acquisition and retention initiatives than we have allocated towards investing in Betr Media over the next year. Furthermore, Betr Media is on track to pay for itself with sponsorship and advertising dollars from other brands within the next couple of years, meaning that whatever organic audience we convert to product will ultimately be gravy for us…
Like the lack of success with sports betting-media mashups, no one has figured out how to synthesize sports betting and social media - although, I would point out some people have figured out how to make sports betting content and social media work. Maybe Betr is that company. We just don’t have any evidence yet.
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Around the Watercooler
Social media conversations, rumors, and gossip.
There is some disagreement over the legality of “modern” DFS, which attorney Darren Heitner opined about in a recent column for Action Network (Underdog is a sponsor of this newsletter):
The article is (not surprisingly) being discussed on social media.
And here’s why this fight is taking place, courtesy of Vixio’s Chris Sieroty, who notes, “PrizePicks surpasses DraftKings, FanDuel as number one U.S. operator; Company claims 50+ percent share of revenue in Arizona, Massachusetts, and Michigan as regulatory tensions rising over pick ‘em games critics say are sports betting”
Stray Thoughts
Since the onset of legal betting in the US, there has been an increased focus on the black market and, more to the point, stamping out the black market.
There has always been a black market, and there will always be a black market for just about anything your mind can imagine.
First, there are two black markets. One is for illicit and prohibited goods and services. The other exists alongside a legal alternative, selling everything from discounted razors that fell off a truck at a flea market/swap meet to marijuana in states with legal pot dispensaries.
Sports betting falls into both. And even if legalized worldwide, some money will never shift from unregulated to licensed online gambling sites for a variety of reasons. In a 2021 column, I listed 10:
Offshore sportsbooks have far less overhead, allowing them to provide better odds and promotions.
Regulated markets are less convenient and require customers to jump through hoops that aren’t present at offshore sports betting sites.
Offshore sportsbooks and black market sports betting sites often provide credit betting [or cash-only betting] to their customers.
Because of points two and three, there’s a level of anonymity at offshore books and with neighborhood bookies that allows bettors to hide their activities from spouses or family – no credit card transactions or deposits into bank accounts and no tax forms.
Competing interests (states, operators, sports leagues, and other entities) will chip away at the efficacy of the laws and produce suboptimal legislation.
Because legalization is happening at the state level, a crackdown on offshore operators, which would require federal action, is unlikely.
Licensed sportsbooks haven’t raised the bar and have proven capable of some less-than-honorable activities that the consumer was promised would be eliminated through regulation.
The rush to legalize has not only led to flawed legislation but it’s also given us some downright dreadful legislation in a handful of states that has led to terrible PR and undeliverable promises.
Despite evidence that bettors prefer legal, regulated sites, there’s an education gap and a failure to differentiate between licensed and unlicensed operators.
Licensed operators have failed to win over or even appease the professional bettors who drive a lot of the conversation on social media and sports betting podcasts.