Opinion

State regulations are major barriers for smaller operators

Smarkets is a challenger brand which launched its SBK Sportsbook in Colorado in early June.

But as CEO Jason Trost commented in a recent interview with the website BettingUSA.com the group has found the US tough going.

The context was “very different in each state” he said. All have “different regulations and different requirements, and that has definitely been a challenge”.

“The American consumer is very excited about sports-betting (and) states are legalizing and turning sports-betting into a legitimate industry that follows regulations and pays taxes,” he said. “I think that’s a very good thing.”

For all those positives however, Trost was critical of a state like Pennsylvania, which currently ranks second on the Wedge Index behind New Jersey.

It is considered a welcome location for operators as it allows for online and mobile betting, casino and poker.

UnAmerican activities

“A state like Pennsylvania is particularly bad with its $10m license fee and only so many available licenses.

“So, part of the reason you get the bland, cookie-cutter experience is the way Pennsylvania is structured. I don’t think consumers will be very happy with it, and I think it’s quite un-American that we’re limiting competition.”

Pennsylvania has regulated a broad range of land-based and online products.

It legalized mobile sports betting in 2017 as a part of a gaming expansion package that also authorized online casinos, poker and lottery games.

Cost of admittance

Players can also visit land-based casinos, retail sportsbooks, racetracks, video gaming terminals at truck stops and the state lottery.

But with individual license costs for either online slots, table games or poker priced at $4m, or $10m for all three, companies without the cash reserves are simply unable to apply for licences.

Pennsylvania also has high tax rates compared to other states: 52% (+ 2% local taxes) for online slots, 14% + 2% for table games and poker and 34% + 2% for sports-betting.

Trost’s comments show that regulatory details play a key role in shaping how competitive (or not), from the perspective of a smaller operator like Smarkets, an individual state’s online gaming industry can be.

Smarkets itself remains an also-ran according to the Wedge Index of sportsbook brand weightings in the low tier.

No doubt operators of a similar size are coming to the same conclusions as Trost. Building up enough market share in the states where they are active will be a key factor in determining whether they are successful.

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Jake Pollard

Jake Pollard is an experienced journalist and editor who has covered the online gaming and betting industry for many years. He has written for the leading media outlets as well as operators and suppliers in the igaming space. His current areas of focus are wide-ranging and include regulatory developments in the US, emerging markets in South America and how European countries are adapting to a decade of igaming regulation.

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