The Colorado Limited Gaming Control Commission (CLGCC) decided to postpone approval for a variant of sports betting that uses a stock exchange-type format. The commissioners agreed to delay a decision and give the Colorado Division of Gaming time to revise its proposal.
The commission, which is responsible for regulating gaming in the state, voted 3-1 to take no action on a proposed rule change to allow exchange wagering. If regulators had approved the plan, Colorado would have joined New Jersey as the two states in the U.S. offering the unique, but controversial, form of gambling.
Exchange wagering is different from traditional sportsbooks in that it doesn’t have an oddsmaker set lines for sporting events. Instead, it is a marketplace where one bettor can compete against another bettor, thus taking the sportsbook out of the transaction.
For example, let’s say the Buffalo Bills are facing the Miami Dolphins. One bettor may post that he thinks the Bills should be favored by 3.5 points. Another bettor may like the Dolphins and accepts the bet with the first bettor. The hosting company doesn’t take a vig; instead, they take a percentage of the transaction amount, usually between 2 and 2.5 percent. That usually translates into a lower cost for the customers.
Prophet and Sporttrade launched in New Jersey, the only state that allows exchange wagering, in 2022. The one issue as to maybe why it hasn’t caught on is that bettors can only wager with other people in New Jersey. The Federal Wire Act of 1961 prohibits the transmission of gambling info across state lines.
Mark Miscavage, an executive at London-based betting exchange Smarkets, told Casino.org three years ago that the betting pools are smaller because of the Wire Act.
“The biggest hurdle for us would be able to pool liquidity, in this case, between all the states,” Miscavage said at the time. “I don’t know that there is one state that’s quite big enough to provide the liquidity and volume needed to run an effective exchange just for one state.”
Members of the CLGCC had additional concerns about betting exchanges, including that the new rules would create a tax loophole for some who play the exchange.
Richard Nathan, the commission’s chairman, said he worried the possible loophole would go against the state Legislature’s intent that gambling operators pay a 10 percent tax on their profits.
Another area of concern for commissioners is oversight. They questioned whether state regulators have enough resources to provide it.
“There aren’t any rules in place in the nation, or probably the world yet, so we need to proceed carefully,” Commissioner Justin Davis told the Denver Post. “I know the division has done a lot of research to make that happen. But we’ve had a lot of issues raised. I think it’s important to proceed carefully.”
