The Omnibus Online Gambling Regulation Approach, And Why It Makes So Much Sense

July 7, 2016
The Omnibus Online Gambling Regulation Approach, And Why It Makes So Much Sense

New things to gamble on are popping up with increasing regularity in today’s ever-evolving internet.

In the last few years, we witnessed the explosion of daily fantasy sports. Then came increased attention on esports betting and skin betting (wagering virtual in-game items in esports).

DFS and skin betting, at least, have operated in some (or many) US jurisdictions in a legal gray area for some time now, and with no regulation. And who knows what iteration of wagering on things will crop up next.

Which leads to the question: What is the best way to deal with all of these new types of gambling?

The answer that makes the most has already been floated in a few places in the US. And while it is the approach that makes the most sense moving forward, it isn’t close to being implemented anywhere.

First, here is what is being done:

The head-in-the-sand solution

When it comes to online gambling, this is the most common way for states to deal with the industry.

The “solution”: A form of online gambling isn’t going on unless a state is authorizes it.

However, online gambling, sports betting, poker, skin betting and DFS are generally going to occur whether a state does something about it or not. That can be via offshore sites, or by US companies operating in a quasi-legal environment, depending on the genre.

Not regulating a form of iGaming simply promotes the status quo of no consumer protection, and no money coming into the state in the form of fees or taxes.

Government officials should start to realize that all of these things are going on in their jurisdictions right now, whether they act or not.

The piecemeal solution

This is a step up from the “ignorance is bliss” solution, in which one form of gambling is considered/legalized/regulated while others are left on the sidelines.

In most cases, everything is considered on non-parallel tracks:

  • A number of states have legalized DFS, while ignoring all other forms of gaming.
  • California has separate efforts dealing with online poker and DFS.
  • DFS and online gambling are tied together in a Pennsylvania bill, but are handled separately.
  • The legislature in New York passed a DFS bill, but a similar effort on poker stalled.
  • New Jersey regulates online poker and gambling, and is now considering DFS this year.

The piecemeal approach is certainly an improvement over doing nothing at all. But it also represents a waste of time and effort for lawmakers and bureaucrats to legislate and regulate these things separately.

Which leads to a solution that makes a lot of sense that no one is actually using.

The omnibus solution

When the Massachusetts Gaming Commission published its “white paper” on daily fantasy sports, it was likely the deepest look ever taken at the industry, from a regulatory standpoint.

It also included what amounted to a revolutionary approach to DFS and other forms of gaming that had never really come from a governmental body.

Here are some excerpts from the paper:

A third approach is for the Legislature to recognize that because Internet gaming activity is unique, quickly deployed and highly malleable, regulation ought to be reposed in a single, nimble Internet gaming regulatory body. …

If such an omnibus online gaming regulatory body were created, it would be important to give it jurisdiction also over all Internet-based (or “online” or “remote”) economic activity in which a person stakes or risks something of value on the outcome of a future event, whether that outcome is dependent on chance, the individual’s skill or a combination of both.

So formulated, the regulatory body’s jurisdiction would be broad enough to invest it with the power to look at all Internet gaming activity, determine whether any form of regulation of that activity is necessary and, if it is, create “right-sized” regulations to deal with it, pursuant to the public policy objectives and regulatory principles in the Legislature-promulgated enabling legislation.

With that broad mandate, the agency would inevitably keep itself abreast of developments in the Internet gaming industry and develop a body of expertise allowing it to decide quickly the kinds of dangers the new activity posed or presented and impose the measures tightly tailored to preventing those dangers.

This approach, of course, makes a lot of sense. (The joke, of course, is that a government would never implement a law that makes this much sense.)

Giving one body the power to make decisions and regulate online gambling as it sees fit is far more efficient then a legislature doing so on a piecemeal basis. Of course, the approach is clouded by problems with calling something gambling or not gambling, among other concerns.

But when someone invents the next form of gambling that no one saw coming, think about the Massachusetts idea, and how it would be a smart choice for nearly every jurisdiction.

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