Open Letter to US Sports Betting Legislators and Regulators

Alex Kane, the CEO and Founder of Sporttrade calls for changes to the regulatory framework to foster innovation and entrepreneurship.

Thursday, March 13, 2025

Alexander Kane

Sporttrade Inc

2 Aquarium Loop Drive, Suite 140

Camden, NJ 08103

Dear Reader,

My name is Alex. I’m the CEO and Founder of Sporttrade. Sporttrade is a US-based, venture-backed startup operating in New Jersey, Colorado, Iowa, Arizona, and Virginia. In this letter, I will address an incredibly important issue: the lack of entrepreneurial participation in your regulated market amidst continued growth of alternatively-regulated options.

Thirty-eight states have decided to create a regulatory framework specifically for sports betting. I would suppose that the intent of such efforts was to have as many players as possible participate in your regulated market.

Since PASPA, we’ve seen a number of new alternative regulatory models emerge as a direct result of the overburdensome nature of how you’ve decided to construct your regulatory frameworks. If your goal is to maximize participation in your market, something must change: players are increasingly flocking to venues that exist outside of your oversight.

While there’s been plenty of commentary on how to potentially “reign in” operators that are offering online sports betting outside of your regulatory oversight, this letter isn’t about that. Instead, this letter introduces more effective and far more sustainable ways for you to achieve your goal.

Let’s talk about the player. After all, without the player, there is no industry. I’ve had the great privilege of speaking with thousands of sports bettors at this point, and I can’t recall one instance where that player makes any meaningful distinction between a sports betting platform regulated by a gaming commission, and one that is not, when deciding where to play.

They simply do not care.

And I don’t blame them, would you? After all, no platform bills itself as “an illegal betting site.” Instead, players go to where they get the best product, best service, and/or best prices. Whether the platform is regulated by a gaming commission or not has no impact on where a player chooses to play. This may sound harsh, this may surprise you, but you need to hear it.

I’ve simply lost count of the number of conversations I’ve had with players where they’ve compared Sporttrade to other “books” (players’ words, not mine) such as Bovada¹, Pinnacle, Polymarket, Fliff, PrizePicks, ProphetX, Novig, Kalshi, etc. To the player, there are no “unregulated options” versus “regulated options”. There are simply “options.”

If the goal is to have as many players as possible choosing to play in your regulated market, there must be significant changes to your regulatory approach. You must consider making a sincere effort to welcome innovative companies into your regulated market.

I would endorse and support an effort to create a regulatory framework that both a) encourages startups and innovative ideas into your market, and b) enables those companies making the investment to opt-in to your market to have the toolchest to compete with alternatively-regulated options.

The following suggestions would serve as a foundation of a new approach that will help you achieve your goal:

1. Look at innovation with an open mind. Create cost-sensible pathways for startups and innovative companies to enter your market. Sports betting absolutely should not be a “one size fits all” licensing, taxation, and especially “market access” approach. And when startups do come to you introducing a new product or way of offering sports betting, remember that they’re making a choice to enter the market with your permission. Find every way possible to say Yes. Startups will invent new forms of sports betting, and you should want those products and experiences in your regulated market.

2. When a company wants to get started in your market, evaluate what is truly necessary from a technical, product², and background/investigation perspective for operators and vendors. What may be required for a group of people operating a physical casino should not be expected of people aiming to offer a digital platform more akin to the stock market than a roulette wheel. The current licensing and registration approach has made venture investment in companies opting into your regulatory regimes excruciatingly difficult in some states, and downright impossible in others.

3. Lean into risk-based regulation³ versus rules-based regulation. New products and ideas will almost never fit exactly under testing criteria written years ago. If new and exciting forms of sports betting aren’t welcomed by virtue of your rigid rules-based approach, those innovative ideas will instead flourish under alternative regulatory frameworks, pulling increasingly more players out of your market. Put simply, your market can’t appropriately expand under a rules-based regime.

4. And finally: urge your colleagues and or representatives in the federal government to repeal the Federal Excise Tax. Operators that invest tens of millions of dollars to opt-in to your regulatory framework pay this tax, yet alternatively-regulated competitors do not. Many innovative ideas are inspired by the notion that current sports betting options are too expensive, and thus introduce lower-cost alternatives. The Federal Excise Tax unfairly taxes companies taking more of a “pro-consumer” approach.

As I stated above, something absolutely needs to change in how you approach achieving your goal. The data shows that next to no new companies, new ideas, nor venture capital are coming into your markets. Instead, the incredible phenomena that is American ingenuity is skipping your frameworks entirely, and going to where it’s more fair, welcome, and open. Just ask yourself, how many venture-backed startups operate in your regulated market?

Let me say in no uncertain terms: without an overhaul that creates a realistic pathway for entrepreneurs to participate in your market, you will cede more tax revenue, jobs, venture capital, and player participation to alternative regulatory frameworks.

On the other hand, changes like these, among others, will encourage a strong and growing industry where entrepreneurs are welcomed to build inside of your market, and operators with your licenses are empowered to offer experiences that are superior to those of operators who don’t. I see alternatively-regulated operators choosing to opt-in to your framework, and that’s a great thing. It achieves your goal.

After all, players are going to go where they’re offered the best service. Create a welcome and open regulatory framework, empower your licensees to consistently introduce new and innovative ideas, then let the market take care of the rest.

Alexander Kane, Founder and CEO of Sporttrade

1. I am not opining on what I think is and isn’t ‘legal’ here, I am simply demonstrating the breadth and diversity of options truly exist for players and thus are ‘competitors’ of operators that you regulate.

2. The licensing, investigative and certification costs of operating across States are entirely duplicative, don’t enhance player protection, and only serve to push innovators and investors across the product stack out of even considering your regulated path.

3. The AGCO of Ontario is an excellent example of regulators balancing regulatory requirements with the realities of the unregulated market and have created perhaps the most fair, open, and competitive online sports betting in North America as a result.