Companies looking to offer mobile sports betting in Massachusetts were split Thursday on the use of temporary licenses, which have been pitched as a way to quickly stand up the sports wagering industry but regulators have cautioned come with many challenges.
A Massachusetts Gaming Commission roundtable at the State House featured a who’s who of the online sports betting industry, from household names like Boston-based DraftKings to new startups like Jake Paul’s Betr. The meeting comes as the commission is working its way through a mound of new regulations and soliciting feedback from stakeholders through public meetings.
During the hourslong hearing, many of companies told regulators that a defined timeline, clarity, and transparency from commissioners will help move the nascent industry along. Representatives also largely agreed that a universal launch date for mobile betting would create a level playing field.
But some of the most prominent players in the country were not in agreement on the use of temporary licenses here in Massachusetts, which the state’s sports betting law allows for but does not place a cap on like it does for the seven untethered digital licenses.
DraftKings Government Affairs Senior Director Chris Cipolla said temporary licenses will “ensure that everybody is given a fair shake.”
“The commonwealth, and you as a commission, do have the benefit of four-plus years post the Supreme Court decision striking down PASPA to look to other jurisdictions where operators are safely operating and responsibly operating their product to help determine who should be entitled to a temporary license,” he said. “We do feel that the temporary licensing process, and making those available, is important to maintain that parity across all categories.”
- Read more: Enjoy playing video games? You may soon be able to bet on competitive matches in Massachusetts under new sports betting law
But not everyone who attended the roundtable agreed, including one of DraftKings’ main competitors.
Cory Fox, vice president for product and new market development at FanDuel, said a successful sports wagering launch requires companies to invest significant time and resources into a “customized product.”
He said offering more temporary licenses than the final count is not an effective use of resources if companies may be asked to shut down later on. But temporary licenses, he said, could be used to expedite the launch of online operators who are later selected for one of the seven untethered licenses.
“The temporary licenses allow the commission to launch sports wagering while the commission is finalizing its suitability review of the operator in preparation for issuing a full license,” he said. “In mobile sports wagering, this has been successfully implemented in numerous jurisdictions throughout the U.S., expediting the launch of many mobile sports wagering markets while allowing regulators to take the time necessary to complete their due diligence on operators prior to issuing a full license.”
Commission Chair Cathy Judd-Stein said the commission is wrestling with the concept of temporary licenses, which under the state’s sports betting law, can be granted by the commission at a $1 million fee for one year or until a final determination on a license application is made.
The sports betting law spells out three categories of licenses, with the third allowing for seven digital or mobile companies that are not connected to a brick-and-mortar operation in Massachusetts. But it does not place a limit on how many temporary licenses can be issued.
Both industry players and the commission have said that could lead to a situation where companies offering mobile sports wagering on a provisional basis would need to shut down if they are not selected for one of the seven final licenses.
- Read more: Sports betting grew without it being legal in Massachusetts; bettors primarily young, educated males
Judd-Stein said that possibility “was an inadvertent development” on the part of the Legislature when they were crafting the final sports betting bill over the summer.
“The law does allow for a temporary licensing pool where it could be imagined that honorable companies could end up not prevailing in our selection process,” she said. “We have real concerns about what that would do to the integrity of the marketplace, the destabilization as I’ve noted, but what does it do the operator’s interest, what would it do to your customers.”
Cipolla pointed to Virginia, where he said a similar situation played out with a finite number of licenses, a competitive selection process, and more interest in licenses than were available.
“They did that within a relatively short period, eight months from the governor signing the law to the first wagers taking place,” he said. “Under ideal circumstances, I believe that you would select the companies that would be participating, and then utilize the temporary licensing to have comfort with who you’re selecting, and then go through a full suitability.”
- Read more: Sports betting regulators are worried about a false start for the new industry
Cynthia Hayes, vice president of compliance at BetFred USA Sports, said offering temporary licenses could promote “bonus abuse,” where customers take advantage of promotional signup offers.
“In most cases, depending on how long the temporary licensees are allowed to remain operating, [companies] not going to be able to recoup that money,” she said. “And just the setup and the effort and the time that goes into getting a system out into the field, as well as the expense, it’s very prohibitive, and we don’t recommend that temporary license process.”
Ashwin Krishnan, head of legal at Betr, said the company supports temporary licensure.
“Combined with all of our responsible play efforts, we believe that our offering will resonate well within the marketplace,” he said. “We are simply looking for equal footing amongst operators in terms of having the opportunity to put forward our product to consumers in Massachusetts.”