“There’s no use running if you are on the wrong road.”—Warren Buffet
I have had a longtime relationship with gaming regulation.
In the early 1970s, I was a college student at the University of Nevada, Reno, and I worked nights dealing at Harrah’s Casino. Late one evening there was a curious event taking place in the pit where I was dealing and it had to do with two agents from the Nevada Gaming Control Board taking custody of the dice off of one of the craps tables. I was later told this was just a standard integrity check that they would do from time to time. This was my first experience with real-life gaming regulation, and I found it interesting.
Upon graduating from the University of Nevada, I went to the University of Utah to pursue a Ph.D. in economics. When it came time to write a dissertation, I opted to explore the evolution of the Nevada gaming regulatory model from 1945-1966. I worked on that effort for several years.
I then went back to gaming operations and had a career that took me around the world – spanning roles from dealer to a Las Vegas casino company CEO. I always thought the experience of being regulated helped me understand gaming regulation.
I have submitted more than 120 gaming applications around the globe and have never been declined a license or had an application withdrawn with prejudice. That experience also taught me about gaming regulation and regulators.
I was a consultant to the city of Detroit as that jurisdiction introduced casino gaming and served in a like position with the state of Kansas when that jurisdiction introduced casino gaming.
For reasons I still do not understand, I then opted to become a regulator. I was appointed twice by the governor of California to sit on the California Gambling Control Commission and then was hired to be the executive director of the Bermuda Gaming Commission.
Beyond that, I often speak on the topic, have published numerous articles about regulation, and have taught it at a number of universities around the world.
I mention this one-half-century relationship with gaming regulation because from that perspective I have never seen such a shitshow as that which I have witnessed with the rollout of sports betting in the United States.
The US model of regulation was initially built in Nevada to address the brick-and-mortar gaming industry. In particular, it was designed to solve the challenge of organized crime being involved in Nevada casinos. This means the model was built to address the backgrounds of the people involved in the industry, as well as their tendency to skim revenues and cheat at the games.
Through some curious twist of logic, it seems that when a fundamentally different industry was developed to deliver gaming products by way of the Internet, under fundamentally different risk profiles for abuse, people assumed that it made sense to rely on the old brick-and-mortar model and its dated foundational assumptions for, after all, they both were identified as involving gaming.
The reality is that there are few similarities between brick-and-mortar gaming and the offering of gaming products on the Internet. It is not even apples to oranges, but rather more akin to apples to antelopes. The best symptom of this is that if one speaks with operators in the digital sports betting space and asks the right questions, they will soon indicate that the regulators are generally lost with respect to the new technology.
That seems important.
Oh, and the regulators also do not understand sports betting. Most of the people who are regulating sports betting have never regulated sports betting before, either in a brick-and-mortar environment or through a digital delivery system. Nor have they ever worked in sports betting. And betting is not something that one understands after reading a book or taking a class.
I had the opportunity to be involved in the oversight of several books in Las Vegas as an operator, including the legendary Stardust Race & Sports Book, and after numerous years, I was still learning. Under all the circumstances where I was responsible for sports betting as an operator, I learned something new nearly every day.
Sports betting is a complicated and nuanced discipline. Also complicated are the delivery systems of gaming products by way of the Internet, and all that surrounds them. And if a person is good in either area, there is a lot more fun and money in the gaming industry than working as a regulator.
If you want to do something fun, go to a gaming conference and ask one of the betting experts on a panel who has never worked in or regulated sports betting to discuss the terms laying & taking, closing line value, a dime line, and to convert U.S. odds into those presented across the pond. They are big favorites to hem and haw.
It is also the case that our gaming regulatory agencies are part of each state’s government bureaucracy, and these bureaucracies behave like—well, like bureaucracies. This reality makes them less than nimble for they have material challenges with issues of discipline and discharge, hiring, wage rates, budgets, and the like. In a sea of speed boats, our regulatory agencies are diesel-powered tankers sluggishly moving about. Moreover, as mentioned, if someone is good at either betting or technology, they often leave skid marks out of the bureaucracy to work in the private sector for our industry and politicians do not seem to think we should pay regulators much.
So, we take this situation of trying to pound a square peg into a round hole, using underpaid human resources who have not had the opportunity to adequately learn what they need to know to regulate this new industry, rush them into a launch, and think all is well in the world of betting.
The culprits in all of this, I believe, are an industry that seems to believe in faking ESG guardrails is preferable to enacting them, and politicians who seem to have forgotten whom they represent.
One of the things that bothers me with the roll-out of sports betting has been the rush to go live in a market once a state has passed the enabling legislation. Politicians tend to say things like betting will be available by Super Bowl, March Madness, or some such target. The correct answer for anyone who cares about industry sustainability is that betting will start when the regulators are comfortable that they can apply an appropriate level of regulatory oversight. Unfortunately, not every state seems to understand that is the right answer.
It appears the people of Massachusetts were terribly distressed because some people were betting in unregulated markets, so the legislators of the Commonwealth decided to work all night and into the early hours of the morning on August 1 to pass a sports betting bill.
It seems stuff like homelessness, gender inequality, screwed-up schools, racial tensions, and the like could be handled during the normal daylight sessions, but to push through betting took an all-nighter.
As mentioned, this was on August 1.
It was then the case that Senator Michael Rodrigues, a member of the committee that wrote the bill, suggested that betting could possibly start in time for the pro football season—an event that was slightly more than five weeks away.
What Senator Rodrigues was saying suggests that he had no idea what he was talking about. It is one thing to pass legislation. It is an entirely different thing to implement it. To anyone with even a modicum of regulatory experience, Mr. Rodrigues sounds like he was drifting away in a LaLa Land not connected to how gaming regulation works in the real world.
Senator Eric Lesser, another member of the committee that drafted the bill, suggested that betting could start in October, thus demonstrating that while perhaps only one-half the fool of Senator Rodrigues, he too was still something of a fool.
I have been amazed by the willingness of such politicians across the U.S. to seemingly leap at the opportunity to carry water for the gaming industry. My guess is they are salivating over potential campaign contributions or perhaps trying to establish a financial relationship with a gaming or lobbying firm(s) for their approaching term-limit imposed retirements. And unfortunately, the regulators are either forced (or feel they are forced) to go along with this nonsense.
In light of all this, I found it terribly refreshing that the regulators in Massachusetts chose not to execute this fool’s errand of scrambling to open. The regulators will still be scrambling, but not a ridiculous scramble randomly imposed by these legislative sycophants. It was nice to see a state with some adult supervision in its regulatory assets.
The key to all of this is that whether it is land-based gaming, iCasino, or sports wagering, there is a need to build sustainable systems and the regulatory leadership in Massachusetts seems to get this critically important reality. Well done.
Those who think that this talk of building sustainable regulatory models before a jurisdiction goes live is old-school nonsense can share your opinion with Sam Bankman-Fried at FTX—but you may have to wait in a very long line of people looking for their lost assets.
The point is, it is better to build sound systems to minimize risk upfront, rather than having to clean up a big industry damaging mess later.
