Eighteen months after the Supreme Court struck down a federal ban on commercial sports betting, 12 states have already set up legal, regulated industries — and several others are moving in that direction.
In fact, 2020 could be the year that legalized sports wagering goes national, with legislation pending in more than 20 states, many of which are reaching for new revenue streams in the face of budget shortfalls stemming from ballooning entitlement programs.
But as lawmakers and regulators throughout the country scramble to cash in on the gold rush, some experts are advising caution, especially when it comes to online betting: Some of the gaming operators who provide the technology for mobile sports betting, they warn, have long operated in foreign markets where the rules are loose and the power players are known to break them. Experts say that international companies competing in those black and grey markets abroad could bring baggage to the U.S.
The consequences of failing to properly vet foreign companies vying for state contracts should have state governments on alert. Online gaming platforms are susceptible to being used by bad actors as vehicles for money laundering and private consumer information could be exposed.
But keeping those threats at bay is probably easier said than done.
Lawmakers and regulators facing budget shortfalls might be tempted to look the other way when vetting gaming operators, seeking state contracts, come with promises of a cash windfall. And worse, many lack a full understanding of the industry to begin with, since sports betting is just now coming online in the United States. In other words, some may not even know what red flags to look for in this sophisticated, high-tech industry
Of course, many of the sports gaming companies arriving from abroad are perfectly responsible operators with notable records of success. But others are entering U.S. markets with potentially questionable practices that could compromise the soundness and security of markets here in the U.S.
The potential perils of the rush to establish online gaming here in the United States is already playing out in some jurisdictions where lawmakers and regulators have given several foreign companies the green light to operate.
In Rhode Island, for instance, International Game Technology (IGT), a multinational gaming company headquartered in London, was awarded a $1 billion no-bid contract to provide state lottery services for the next 20 years. Only after the contract was awarded did Rhode Island taxpayers find out that a former chairman of the company was a political supporter and associate of the governor. Then, in the throes of a public backlash, IGT threatened to relocate jobs.
But the ominous signs don’t stop there. In Oregon, Malta-based SBTech signed a contract with the state weeks before due diligence was complete, despite allegations that it operates in countries like Turkey and Iran where gambling is outlawed. A background check of the company has yet to see the light of day, adding more speculation about the company’s past.
SBTech told Oregon’s Statesman Journal that it categorically denies that any of its customers or resellers are taking wagers from Iran or Turkey.” And now, SBTech is looking to expand its operations into Pennsylvania, where it recently launched a sportsbook at Presque Isle Downs & Casino. Lawmakers and regulators in the state have been relatively quiet about the company’s arrival.
Another case worth considering involves Sportradar, one of many businesses that were alleged to have been caught up in the ‘Galassia’ inquiry, a yearlong investigation by Italy’s anti-mafia agency into links between organized crime and Malta’s online betting industry. Sportradar strongly denied the allegations.
In a statement to Business Insider Italia, which reported on the story, Sportradar said, “Sportradar acts and has always acted, in full compliance with local and international regulations, legal requirements and regulatory bodies, and has never been involved in any alleged illegal activities.”*
It makes sense that states are interested in tapping into the revenues generated by the bonanza of online gaming, particularly since millions of Americans enjoy this pastime.
But for the sake of consumers and the integrity of American markets, the best approach for lawmakers and regulators should be cautious.
Editor’s Note: A representative of Sportradar contacted InsideSources and requested that we publish the company’s full response to this matter:
Sportradar strongly refutes the allegations made within the article published by Business Insider Italia on 30.10.19 and regards many of these allegations and statements made to be incorrect, untrue and defamatory.
Sportradar acts, and has always acted, in full compliance with local and international regulations, legal requirements and regulatory bodies, and has never been involved in any alleged illegal activities. Sportradar provides services to hundreds of sporting authorities both in Italy and globally, and actively supports and works alongside local and international police and law enforcement authorities in their fight against corruption and crime. Our work has uncovered some of the most high-profile illicit practices aimed at manipulating sporting competitions in Italy, Europe and worldwide.
The article in question is wholly inaccurate and misrepresents our work both in Italy and globally. Sportradar completely rejects its content and the allegations made and is considering taking appropriate legal action to protect its business and reputation.
While we will not be making further comment on this at this time, we take these allegations very seriously and they will be appropriately addressed.
