A Blog About Online Gaming and Entertainment Regulations
NJ Gaming Chief: “It’s a Wonderful World to Be an iGaming Operator”
With a new bill authorizing online gaming in New Jersey for the first time in 2013, Department of Gaming Enforcement Director David Rebuck and his staff went looking for ways to assuage industry concerns that online firms would “cannibalize” business from the already-struggling retail operations in Atlantic City.
“It was going to cannibalize it, intuitively: ‘We’re going to lose people; they’re not going to come to the property,’” Rebuck said during a virtual panel at SBC Digital North America’s Virtual Trade Show on Thursday, June 10.
As they began to navigate the newly burgeoning online gaming market, a host of new questions arose: How many operators should be active in the market? If participation were limited to casinos (and eventually racetracks), would the market flourish? And if additional participation were necessary, how would such participants be licensed? And thus, Rebuck said, a new concept was born: “skins,” or brands operating under the same gaming license, offering a way to ensure multiple participants and more diverse products while adhering to the statute requiring that online gaming operators be tied to licensed land-based casinos.
“I remember when it first came to us, we looked at people go, ‘What the heck are you talking about? What’s a skin?’ We didn’t even know,” Rebuck said. “Having heard from all the parties, my staff led the discussion and went to the casino association and said, ‘We believe, to start, you’re going to have five … and it’s up to you whether you want it or not.’” They agreed and, in Rebuck’s view, are the better for it: “It has created competition, it has created a better consumer opportunity, and we’re not maxed out yet.”
As for how many online gaming brands should be able to ideally operate under each license? In Rebuck’s home state of New Jersey, where online sports wagers totaled more than $680 million in April, each iGaming license comes with five skins and each sports betting license comes with three skins. In New Jersey and elsewhere, the skins system has allowed gaming licensees to sell skins rights to online operators. Some states allow just one skin per license, while others do not specify a limit. For example, New Jersey’s neighbor, Pennsylvania, offers unlimited skins for iGaming licenses but only one for sports betting licenses.
With 22 jurisdictions now permitting online sports betting and seven allowing iGaming, the states have adopted a vast range of regulatory models, leaving unsettled the question of embracing skins or adopting a more restrictive approach. On this panel, though, there was little disagreement that a proliferation of gaming operators could only benefit the industry and consumers.
“The more operators that are out there, the more they [consumers] have to choose from,” said PlayUp US chief Dr. Laila Mintas. “At the end of the day, the number of operators gets automatically determined by the market. If the market demands it, there’ll be many. If there’s no demand, we will see that it’s not effective for operators to join the party.”
While Rebuck embraces the multi-skin approach that his state first adopted eight years ago, he noted that he does not expect many states to adopt a fully open mobile market—untethered to any casino or racetrack—as exists in the United Kingdom. First, Rebuck opined that established operations like casinos and lotteries are unlikely to cede influence over the market. That control—bolstered by governmental interest of supporting brick-and-mortar industry in places like Atlantic City—has given rise to a system in which land-based firms have taken the lion’s share of the gaming licenses across the country. Land-based casinos are not going to easily lose control of that market share, though the new ventures into online gaming have facilitated substantial collaboration between American companies and online firms that began operations overseas.
“There were lessons to be learned by the foreign companies,” Rebuck said of New Jersey’s early foray into online gaming. “You’ve got things you’re going to have to learn about doing business in the United States, and we have things we have to learn from you of how you do your best practices and how you operate in your foreign countries. And together, if we have an open dialogue and share information, we’ll have a new model of how to do things in the United States.”
For regulators like the Division of Gaming Enforcement, the aim in those early years was to acclimate online operators to the same regulatory requirements as apply to retail firms, including gambling age limits; Know Your Customer and anti-money laundering rules; and standards for cybersecurity and consumer protection. On Thursday, Rebuck said that he foresees operators encountering both opportunities and political challenges stemming from the continued expansion of online gaming in the United States and around the world.
“I think that what online companies are going to have to deal with in the future in the foreign countries is, there’s going to be more and more situations like you see in England, where you have a political backlash, essentially, as to what online gambling is doing in those countries,” Rebuck said, arguing for stronger adherence to the standards in place in the United States.
But as more U.S. firms make their way into the online gaming industry—including through the acquisition of existing operators—Rebuck said that opportunity abounds.
“I think the operators have value already from their foreign operations, but they’re going to have more value to their company because of the value that is [added] by expanding opportunities in the United States, and maybe these opportunities expand into other countries. Canada—soon, in sports wagering,” he said. “It’s a wonderful world for an iGaming operator. If you can be good at what you do, the value of your company has no place to go but up because of what’s happening in North America.”