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IN-DEPTH 2 August 2018
PASPA: A brief history
Marc Dunbar, Partner at law firm Jones Walker, summarises the rocky road to a decision that changed the face of sports betting forever, and what the future holds for the states who hope to regulate the once outlawed practice
By Gambling Insider

On 14 May, 2018, the US Supreme Court opened the doors to legal sports betting throughout the country. In Murphy v. National Collegiate Athletic Assn.¸ the Court struck down the Professional and Amateur Sports Protection Act, which previously prevented states other than Nevada from engaging in sports wagering. Following this opinion, states are now free to authorise that activity, and some already have.

The 2014 New Jersey law at issue in Murphy was aimed at both getting around the PASPA prohibitions and challenging them outright. Instead of regulating or taxing sports gambling, that law simply decriminalised the activity at certain locations and in certain circumstances. The New Jersey Division of Gaming Enforcement would have had no authority over sports wagering and no license would be required to accept such wagers. However, the exception created to state criminal statutes only allowed this activity at previously-licensed casinos and horse tracks and continued to prohibit wagering by children or on New Jersey sports teams or events.

In defending this law, New Jersey took a multi-pronged approach. First, it argued that the law did not violate PASPA because it did not “authorise” sports wagering. It simply decriminalised the activity. In the alternative, if the law did violate PASPA, New Jersey argued that a portion of PASPA should be struck down because it violates the “anti-commandeering principle.” Put as simply as possible, the US Supreme Court has held that the Federal Government cannot compel a state to regulate conduct that it does not wish to. Instead of making sports wagering illegal on a federal level, PASPA simply prohibited states from allowing that activity. New Jersey argued further that, if that part of PASPA was struck down, then the rest was not severable and must also be rescinded.

The Supreme Court agreed that PASPA violated the anti-commandeering clause and that its sections were not severable. PASPA “unequivocally dictate[d] what a state legislature must do.” The Court held that PASPA created a situation akin to allowing federal officers to be “installed in state legislative chambers” and giving them the ability to “stop legislators from voting on any offending proposals.” The Court added that, “a more direct affront to state sovereignty is not easy to imagine.” It also found that Congress would not have wanted any section of PASPA to “stand alone” because those two sections were intended to “work in tandem” to stop the legalisation of sports wagering.

In light of this opinion, the narrow limitations of the 2014 New Jersey sports wagering law are no longer necessary. New Jersey is currently working to change its state law to allow the regulation and taxation of sports wagers. Although the state believed that decriminalisation of sports betting was an acceptable option, it should come as no surprise that New Jersey would move toward more traditional regulation when given the chance.

The first question that states must answer when implementing sports gambling policies is how to regulate the activity. Delaware, which was the first state post-Murphy to accept legal sports wagers, regulates this activity through its state lottery. Prior to that decision, Delaware was one of the few states that was allowed to offer some limited form of lottery sports betting (specifically, a National Football League parlay). Now, that same agency will regulate single game bets placed in state sportsbooks. Although this system makes sense for Delaware, gaming states such as New Jersey and Mississippi will likely proceed with regulation through their traditional gaming control boards and commissions. Other states without such a gaming history will likely need to significantly build out their regulatory structure in order to potentially accommodate sports gaming.

States must also be mindful of the requests coming from the professional sports leagues and the NCAA following this decision. Several of them are requesting that an “integrity fee,” which would direct a portion of each wager to the leagues so that they can monitor potential corrupt practices, be included in any sports gambling legislation. If such a fee was implemented, it could impact the margins for operators in a way that would make sports betting less enticing. Although some would argue that this would be overcome through tourism-related revenues (hotels, food/drinks, etc.) resulting from betters traveling to sports gaming jurisdictions, states need to ensure that such regulations do not stifle the positive impact on the gaming industry that sports gambling should provide. Although Murphy has created considerable excitement in the gaming industry (and for good reason), most states will need to proceed with caution into the new era of sports betting. For the time being, states such as Delaware and New Jersey will provide a road map for others to follow and a window into potential issues that might arise.
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IN-DEPTH 4 September 2019
Virtual reality: Creating next-gen experiences for players

Singular CEO George Shamugia discusses a new revenue stream for casino operators

The competition in online gaming is intensifying, with players becoming more and more demanding. In some markets, single-customer acquisition costs can reach up to €400 ($440) alongside growing churn rates. Furthermore, the online gaming sector struggles to attract one of the most lucrative groups of players – millennials. The experience provided by casinos no longer appeals to the younger generation.

On  the other hand, the video gaming industry perfectly understands the needs of millennials and by introducing elements of luck in their games offers the best of both worlds. With the launch of loot box systems and Grand Theft Auto’s in-game casino, we have seen their first successful steps in targeting the online gaming sector. GTA V online, with 33 million active players, recently opened an in-game casino, where players gamble real money on games such as poker, roulette, slots, etc. As a result, churn users returned and GTA Online reached the highest number of active players since its launch in 2013.

The online gaming industry has almost fully utilised the potential of the mobile medium. The time has come to look for new, innovative ways of delivering a next-gen experience to customers.

The potential of VR

Could the next big thing for online gaming be a fully fledged virtual reality (VR) casino delivering an immersive experience and limitless new opportunities?

Although not widely adopted yet, VR has a sizable number of customers. Analysts predict it’s poised for explosive growth to become mainstream in about five years. According to market intelligence firms, the VR market will be worth $117bn by 2022, and according to Juniper Research bets made through VR will reach $520 billion by 2021. Upcoming 5G mobile network technology will propel VR’s mass adoption by allowing the development of fully portable untethered and affordable VR headsets.

Different level of social interaction

The captivating nature of gambling comes from its social aspect. Unfortunately, personal interaction is widely missing from online gambling sites. VR technology creates multiple opportunities to bring back and even enhance that social moment. The ability to connect with other players is one of the main reasons behind Fortnite’s popularity. This form of co-experience is the next generation of entertainment. Research conducted by Facebook has found participants spend more time on VR compared to any other medium. This directly translates into increased profits for casinos.

Pokerstars has made efforts in this direction by implementing Voice UI. Instead of using hand controllers to make a call, pass, or raise, players give voice commands.

Another opportunity for bringing in the social element are the players’ avatars. They enable players to build their identity reflected in the avatars’ appearance, but also the avatar's social, competitive and community status. For instance, players are willing to pay real money for virtual drinks at the bar. Operators can offer these social touchpoints for free to VIP customers as an act of appreciation.

VR also brings a new dimension to customer support. Customer support can also be represented with avatars to assist the player in person. The social moment increases the LTV of players and contributes towards lower churn rates.

Rethinking game design

VR is a way more capable medium than a 2D mobile or desktop screen. Instead of copying the existing online experience, games must be redesigned from the ground up for a competitive advantage with VR. For example, a VR slot game can become fully immersive by teleporting the user into the slots’ world of Ancient Egypt. Next, enrich the experience with high-fidelity graphics, realistic spatial sounds and animations. When betting on virtual race cars, the user can be teleported inside the car he/she made a bet on and experience the race firsthand.

New revenue streams

VR casino lobbies create new revenue stream opportunities: ad placement of brands on the venue walls, company logos decorating the bar etc. This kind of branding is not intrusive in the VR space and feels natural from the user's perspective. VR also gives users the ability to change venues from a Las Vegas casino today, to Macau or even Mars casino, the very next day. The dynamic and diverse experience increases retention rates.

The majority of profits for online gaming operators come from their high-roller players. Although they represent a small subset of active players, an operator can launch a separate VR casino brand for them. Providing exclusive VR gaming experiences to high rollers/VIPs, the operator can minimise churn and maximise VR efforts for these player demographics.

The catch with VR is to focus on quality, rather than scale. The target audience might be limited yet, once these players experience it, they will become ambassadors for your offering.

Surely, the opportunities and possibilities offered by the VR medium truly exceed anything offered by mobile and desktop. VR is a new frontier not just for gaming but for every industry, and it’s exciting to see where it takes the industry and what kind of innovation it brings upon us.

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