The Fuse Is Lit

The AGA and the regulated gambling industry are taking aim at sweepstakes operators and all of the other gray and black-market products.

The regulated gambling sector has had enough.

In the organization’s harshest rebuke to date, American Gaming Association President and CEO Bill Miller went on the offensive against gray and black market operators during the AGA’s annual State of the Industry address, juxtaposing the unregulated industry with the regulated industry, as seen in the chart below.

Miller specifically targeted the sweepstakes industry, indicating an escalation in the battle between the regulated industry and sweepstakes operators.

Previously, Light & Wonder and a few other companies were involved in the battle. However, the industry now appears united in opposition to sweepstakes and other gray market products.

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Shots Fired

While this column will focus on sweepstakes and prediction markets, Miller criticized all manner of gray and black-market operators, including the unregulated skill games and VGT operators.

“They sneak in through the back door, circumventing gaming laws and operating in the shadows outside of regulatory oversight, exploiting legal loopholes to force their products on unsuspecting communities. They’re targeting vulnerable communities, generating zero tax revenue to support local services, attracting crime, and exploiting people who confuse them with legitimate gaming machines.”

He then turned his attention to the sweepstakes and prediction market industries.

“Then there’s the newer categories of unregulated actors that appear to bypass or circumvent state gaming [laws]. From currency exchanges to digital asset platforms, these entrants deploy legal acrobatics to avoid calling themselves betting or gambling. Only they offer products that most would most universally agree are gambling; without the safeguards and regulatory constraints that build consumer trust, promote responsibility and support state budgets.”

Miller didn’t namecheck sweepstakes, but the Social and Promotional Games Association (SPGA) felt his statements were targeted enough to require a rebuttal.

The social sweepstakes trade group called the AGA’s accusations “The same tired canards” that critics have used for months, claiming the AGA is acting as a “cudgel for a narrow band of protectionist stakeholders” instead of listening to consumers and “standing with a legion of innovative entrepreneurs who are expanding the appeal of gaming.”

The SPGA went on to say:

“The AGA knows the facts: properly operated sweepstakes are legal in almost all states. SPGA members operate within well-established legal frameworks that contrast starkly with black-market offshore sportsbooks and casinos.

“The AGA also knows that social sweepstakes sites don't directly compete with traditional real-money online casinos, a fact supported by research from both Eilers & Krejcik Gaming and Macquarie and by the AGA's reporting showing 29% year-over-year growth for U.S. online casinos - another "record-setting year" for online casino. That's hardly the trajectory of an industry under dire competitive pressure.

“Finally, the AGA knows its claims of irresponsible operation by social sweepstakes sites are misleading. SPGA members operate under a published Code of Conduct requiring age verification, location verification, KYC systems and processes, and AML policies and processes, often employing the exact same technology as AGA members. And most social sweeps sites have tools in place to allow consumers to control their play and pay some form of state tax, such as sales or corporate tax.

“The AGA willfully ignores these facts because of a small but vocal cadre of members who are anti-competitive and resistant to innovation.

In an interesting twist, the SPGA also brought up prediction markets, which it called the real threat to the regulated industry:

“Ironically, the regulated real-money gambling industry is under threat - but not from social sweepstakes sites.

“A new, aggressive federal administration has upended nearly every long-held assumption about the primacy of states in regulated gambling and threatened to open a 50-state federal sports betting market without ever holding a hearing or passing a bill. And that's just in the first 30 days.

“We urge the AGA to focus on matters such as these that are genuinely relevant and pressing to the industry instead of wasting resources mischaracterizing an innovative category.”

Friend or Foe

The emergence of prediction markets didn’t go unmentioned by the AGA.

In addition to imploring the Trump administration to crack down on illegal operators (foreign and domestic), Miller discussed the emergence of prediction markets and an expected decision from the Commodity Futures Trading Commission (CFTC) on these products. Miller called the recent developments “of great concern” and said the AGA is following them closely.