Geolocation powers much of the legal online gambling industry. Anyone who signs into their sportsbook account is subject to a location check, confirming they’re in a legal market and outside of any prohibited jurisdictions.
While GeoComply is currently the top dog in the U.S., companies like Xpoint are making the case for more diversified geolocation providers. Xpoint was founded in 2019, and is approved in 19 U.S. states and Ontario, Canada. It is live in 13 states, and provides geolocation services to several recognizable digital sports betting and fantasy platforms, including bet365, PrizePicks and Sporttrade.
GGB News’ Cole Rush spoke with Xpoint’s CEO, Manu Gambhir, about the evolving geolocation market and the technology’s secret superpowers.
Q: What challenges do iGaming companies face in meeting geolocation requirements in the U.S., and how can they overcome them?
A: iGaming companies in the U.S. face three key challenges regarding geolocation. The first is a dependency on a single geolocation provider. Unlike other parts of their technology stack, such as KYC (know your customer), payments, and data, geolocation lacks redundancy. This creates risk, especially as companies scale. For tier-one operators, even a few minutes of downtime can lead to substantial financial losses, making reliability critical.
The second challenge is cost. As companies focus on profitability, they are closely reviewing external expenses, and geolocation services consistently rank among the top three costs. Geolocation became expensive early on due to a reliance on a single provider. As more providers enter the market, significant savings can be reached through renegotiating contracts.
The third challenge is that geolocation is expanding beyond compliance. Anti-fraud teams increasingly rely on geolocation data to identify suspicious behavior, adding to its value. Companies now see geolocation as a tool for fraud prevention, requiring systems to adapt and provide detailed reports and insights. Addressing dependency, cost, and this expanded role is essential for navigating the U.S. regulatory landscape.
Q: What are other use cases for geolocation beyond compliance?
A: Beyond compliance, geolocation is proving valuable in several areas. One of the most significant is anti-fraud. Fraud in sports betting and iGaming, especially bonus abuse, is rampant. It ranges from individuals trying to exploit promotions to sophisticated syndicates using stolen IDs and fake accounts. Fraudsters often attempt to spoof their locations to match fake accounts. Geolocation technology can help detect these mismatches, preventing fraudulent activity.
Another prevalent type of fraud is chargebacks, where a player disputes a credit card charge related to a deposit. Geolocation data provides clear evidence of where a deposit was made, enabling operators to challenge fraudulent chargebacks successfully.
Geolocation is also valuable for marketing and analytics. The extensive data collected by geolocation platforms can be combined with other information to create personalized marketing strategies. For example, operators can offer targeted promotions based on a user’s location—such as offers at a specific venue like a sports stadium. This helps drive engagement and increases the lifetime value of players.
Finally, geolocation is beginning to play a role in responsible gaming. Operators are increasingly interested in geofencing areas such as high schools, college dormitories, and prisons to prevent access from these locations. While not required by law, this demonstrates operators’ commitment to responsible gaming and ensures that their platforms are not accessed in inappropriate places.
Q: How can iGaming companies outside the U.S. benefit from U.S.-style geolocation regulations?
A: The U.S. has some of the strictest geolocation regulations, far more stringent than those in many other regions. Early geolocation efforts in places like the UK were minimal, focusing only on verifying the bettor’s registered address. As time went on, operators began using IP addresses for location verification. However, IP addresses can be inaccurate, especially on mobile devices, with error rates as high as 20-30%. Despite this, many operators accepted the inaccuracies due to limited regulatory oversight.
However, U.S.-style geolocation practices are starting to appeal to operators outside the U.S., even in regions without strict regulations. Operators see benefits beyond compliance, especially in fraud prevention and marketing analytics. They recognize how robust geolocation systems can prevent fraud, enhance customer experiences, and improve the accuracy of marketing efforts.
Furthermore, some international regulators are starting to focus on geolocation, particularly regarding tax revenue collection. Ensuring that bettors are physically located within a specific jurisdiction allows governments to collect the appropriate taxes. In the future, we may see more regulators outside the U.S. adopting these stricter measures, motivated by revenue concerns and the broader benefits of geolocation.
Q: Why does the U.S. have such complex geolocation requirements?
A: The complexity of U.S. geolocation requirements stems from the Wire Act, which prohibits placing bets across state lines. States like New Jersey were pioneers in regulating online gambling, and ensuring that all bets were placed within state borders was a priority. Any bets outside the state could violate federal law, leading to severe legal consequences.
When New Jersey began regulating online gambling, the Division of Gaming Enforcement (DGE) rigorously tested the system by visiting key border areas, like the Walt Whitman, Ben Franklin, and George Washington bridges. They checked whether geolocation technology could accurately determine if someone was on the correct side of the state line. These tests were crucial in ensuring compliance with state laws.
In addition to state borders, some areas were also excluded from betting, including certain government buildings, CIA black sites and tribal lands. Each area has its own legal or cultural reasons for being off-limits to online betting. For instance, tribal nations have been particularly vocal about protecting their lands from Sports betting and iGaming activity.
Additionally, certain states have unique requirements. Pennsylvania, for example, restricts online casino games from inside physical casinos. This regulation stems from a compromise to gain the support of land-based casinos. As a result, operators must ensure that players in a physical casino can’t place bets on competing online casino platforms.
While the Wire Act is the main driver behind these regulations, other countries are taking notice. Brazil and the UAE are adopting similar geolocation regulations tailored to their needs, such as responsible gaming and tax collection.
Q: How can operators successfully implement multiple geolocation providers, and what challenges are involved?
A: Implementing multiple geolocation providers presents several complexities. Operators can adopt either a failover strategy or a split-traffic approach. The failover strategy involves designating one provider as primary and using the second as a backup in case of failure. However, this approach can lead to data continuity and backup readiness issues. For instance, a backup provider that hasn’t been regularly used may not be equipped to handle a sudden influx of traffic, similar to an unused power generator failing when needed. Keeping the backup “warm” by regularly processing some traffic helps ensure readiness, but it adds complexity and cost.
The split-traffic approach divides traffic between two providers, but this brings its own challenges. Operators must decide whether users should be permanently assigned to one provider or randomly allocated each time they log in. Switching between providers may require web application users to install multiple geolocation apps, creating friction and hurting the user experience.
Another challenge is regulatory reporting. Operators must submit regular reports to regulators, and splitting traffic between providers complicates data consolidation. Managing these challenges requires careful planning, and as more operators adopt multiple providers, standardized practices may emerge to streamline operations.
Q: Why are other jurisdictions like Brazil and the UAE implementing geolocation regulations similar to the U.S.?
A: Brazil and the UAE are adopting U.S.-style geolocation regulations due to several factors, including responsible gaming and tax revenue collection. In the U.S., stringent geolocation rules emerged to comply with the Wire Act, which prohibits interstate betting. However, as geolocation technology evolved, it became clear that it could serve other purposes, such as fraud prevention, marketing analytics, and responsible gaming initiatives.
In Brazil, geolocation helps regulators ensure that bets are placed within the country’s borders, facilitating accurate tax collection from licensed operators. This mirrors one of the original concerns in the U.S., ensuring wagers occur within legal jurisdictions; however, in Brazil’s case, the focus is on tax revenue. Brazil may also eventually require operators to geofence certain areas, such as schools, government buildings, etc., as part of its responsible gaming initiatives.
The UAE’s interest in geolocation stems primarily from a focus on responsible gaming. For example, they may geofence areas such as places of worship to prevent access to betting platforms. Although the regulatory drivers differ from those in the U.S., the principle of ensuring that gaming occurs within approved areas remains the same.
Moreover, operators in these regions are beginning to see the benefits of geolocation beyond compliance. Geolocation data improves fraud prevention, bonus abuse detection, and marketing analytics. As these benefits become clearer, regulators in countries like Brazil and the UAE are adopting geolocation not only to ensure compliance but also to enhance operational efficiency and safeguard players.
