Somewhat ironically, the sports betting industry does not love the idea of being limited.
A total of zero sportsbook operators active in Massachusetts showed up on Tuesday for a public roundtable on limiting bettors. That left some members of the Massachusetts Gaming Commission disappointed and still searching for answers about the widespread industry practice of restricting certain customers.
One looming question is what would happen if the MGC or another regulator were to ban or limit the limiting that operators are doing. While Massachusetts or any other state seems a long way from taking such a step, the MGC’s probe at least creates the possibility they might.
Information the commissioners did receive on that question, in addition to what they could glean from public filings made by sportsbook operators, is the counter-argument from the industry is that it will have no choice but to offer a worse product.
“If limiting is no longer possible for individual players to whatever extent, then there are applicable restrictions,” Bally’s Interactive’s Justin Black said during Tuesday’s roundtable. “There’d be product restrictions that would be necessary and that would impact all players. They would be things like more defensive pricing strategies, meaning worse prices presented to patrons. Lower limits would be applied to all patrons, and obviously, there’d be product restrictions and maybe even some offerings being removed.”
#4 here looks like it will be the main counter-argument by sportsbook operators to any suggestion of banning or limiting limits on bettors.
— Geoff Zochodne (@GeoffZochodne) May 22, 2024
In short, ESPN BET-operator PENN is basically saying it would be forced to offer a much worse sportsbook product. pic.twitter.com/eu6mP4ssap
Yet Bally’s Bally Bet is not yet live in the Massachusetts sports betting market. No representatives from any online sportsbook that is active in the Bay State spoke during Tuesday’s forum on limiting, with several operators telling the commission in correspondence that they were concerned about discussing what they consider confidential or proprietary information about how they manage risk.
However, one of those operators, PENN Entertainment Inc., did respond in writing to the five topics of discussion the MGC proposed for the roundtable. One of those topics was about what would happen to the industry if betting limits for individual patrons were prohibited or restricted by law or regulation.
PENN, which operates ESPN BET in the commonwealth, said it could not speak for the industry as a whole, but then proceeded to offer some thoughts about the possibility of limiting limits.
“However, a law or regulation prohibiting or limiting operators’ ability to allow limits would lead to a large reduction in the amount of wager opportunities offered, reduced limits for all patrons (rather than just individual patrons who are manipulating or abusing the system), less sports and leagues available to wager on, and potentially, a reduction in available operators entirely,” wrote Samantha Haggerty, deputy chief compliance officer for the company. “The typical, recreational bettor would experience a vast reduction in betting options if such a law or regulation were put into place. The result would be a less competitive product offering for the customer and reduced revenues for the Commonwealth.”
Moreover, what PENN told the MGC was similar to what it said in its 2023 annual report to investors, wherein it noted the company follows "the sports betting industry practice of restricting and managing betting limits at the individual customer level based on individual customer profiles and enterprise risk."
While PENN warned it was possible gaming regulators may not allow that practice to continue, it argued the "practice is beneficial overall," because otherwise it would prompt the kind of restrictions it gave to the MGC.
This would be "to insulate overall risk due to the existence of a very small segment of highly sophisticated syndicates and algorithmic bettors, or bettors looking to take advantage of site errors and omissions."
'A real risk'
Boston-based DraftKings Inc., which was likewise absent from Tuesday’s roundtable, offered similar logic in its 2023 annual report.
“We believe virtually all operators balance taking reasonable action from all customers against the risk of individual customers significantly harming business viability,” DraftKings said. “We cannot assure you that all state legislation and regulators will always allow operators to execute limits at the individual customer level, or at their sole discretion.”
So, while most operators did not make these arguments themselves during the MGC’s forum, it looks likely they would use the prospect of a worse sportsbook product in their arguments against any limits on limiting. That point may resonate with regulators.
“I think that’s a real risk,” interim MGC chair Jordan Maynard said on Tuesday.
Even so, the MGC is not done digging into limiting, especially when it may apply to bettors who are not trying to "game" operators and are just good or lucky at wagering.
Moreover, the decision by most operators to skip the regulator’s forum irked some commissioners, who are still seeking more information about the practice, including data on how many bettors are limited.
“I do think we have not scratched the surface,” commissioner Nakisha Skinner said on Tuesday.
