Sports betting regulators confront licensing quirks

THERE’S AN ODD quirk in the law legalizing sports betting in Massachusetts. The Massachusetts Gaming Commission is allowed to license seven mobile sports betting apps, in addition to mobile apps that are tied to in-person gaming facilities like casinos and racetracks. But the law also lets the commission give an unlimited number of temporary mobile licenses, which would cost a $1 million fee and could last for up to a year. 

The temporary licenses were apparently intended to let sports betting begin sooner, while the full regulatory and licensing process is pending. Practically, however, regulators are saying that approach could lead to a scenario where multiple mobile apps are allowed to start operating sports betting, then are forced to shut down months later if they fail to obtain a permanent license. There are 42 companies that have expressed interest in applying to the Gaming Commission for a sports betting license, and all but a handful of them are seeking a mobile or digital license. 

At a hearing Thursday, several online betting companies urged regulators not to issue more than seven temporary licenses – if they issue any at all. 

Justin Smith, legal counsel for Bally’s North American Interactive, said the problem with a short-term license is customers often place wagers on games months in advance. Operators would need to figure out how to manage their operations so they can repay account balances and payments on future bets if they are forced to shut down. “This would be difficult to manage,” Smith said. 

Cynthia Hays, vice president of compliance for Betfred, said that initial cost can be “prohibitive.” A short-term license, she said, would let customers take advance of sign-up offers, but companies won’t be around long enough to recoup the money by turning those players into long-term customers. 

Fox suggested that the usefulness of temporary licenses would be mainly to let companies that are on track for final licenses get started earlier, while regulators are still conducting their final checks. 

Joe Casole, a consultant for NOVABET, said allowing more than seven temporary licenses would give a significant advantage to large established companies that can quickly scale up to add Massachusetts operations, hurting smaller companies that would have to set up equipment testing labs or train staff on the hope that they will be allowed to continue operating. 

Casole, speaking on behalf of another consulting client, MaximBet, said if regulators do allow temporary licenses there needs to be a clear timeline from the start, along with clear rules that make customers feel confident they will get any money they are owed back if a company shuts down. “Requiring companies to do everything required to launch only to have a license revoked before a year feels overly draconian,” Casole said. 

Several companies did say they would apply for a temporary license if one became available. For example, the new app company Betr is trying to get a foothold in the market for its concept of microbetting, which lets players bet on individual moments in a game – a baseball pitch or a football drive. Other larger companies are reluctant to give up the advantage of being among the first to open in Massachusetts, even if that carries a large financial risk. 

The Massachusetts Gaming Commission also asked potential license applicants to weigh in on whether there should be a single launch date, where every licensee who is ready can begin operations, or staggered start dates depending on when each company’s license application is approved. The commission could also consider having different launch dates for different types of operations – for example, letting on-site sports betting at casinos begin before mobile betting. 

Several companies’ representatives urged the commission to have a single universal launch date in order to level the playing field and avoid giving the first companies to enter the market an unfair competitive advantage. 

“In other states, the operators who launch first have a significant sustained market share versus those that launched a few weeks later,” Fox said. 

A DraftKings representative said his company also favors a simultaneous launch of all companies that are ready.