Optimism Offered That Legal Sports Betting Is Cutting Into The Offshore Industry

Sports betting role models like New Jersey and Colorado could be best way to cut into the black market
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The spread of legal sports betting across America has often been based on arguments that gamblers are going to make the wagers anyway, many times through unregulated offshore operators.

Now that half the states sanction sports wagering, the question lingers as to how much the legal activity has cut into the billions of dollars being wagered annually through the illicit market.

That was the topic Tuesday of an online panel discussion, “Reducing the Offshore Advantage,” during the Betting on Sports America Digital conference, which brings together various stakeholders to discuss trends in the industry.

And panelists agreed that states such as New Jersey and Colorado, which have promoted healthy competition among many online sportsbooks, have created a framework that can succeed in steering players away from illegal or unregulated options to place bets.

At the same time, the legal American sports betting market could be so attractive that it lures offshore operators to try to go legitimate and become licensed in the U.S., as the recent 5Dimes settlement with the government points out as a test case. Whether such efforts can succeed remains to be seen, the panelists acknowledged.

New Jersey: ‘Best place in the country to bet’

Bill Krackomberger is one of the more public professional gamblers in America, with a persona so well-known that he says it’s difficult to get sportsbooks to accept his action in Las Vegas, where he lives.

That’s why he said during the panel presentation that he spends several weekends a month in New Jersey betting sports, using the many available mobile accounts from FanDuel, DraftKings, PointsBet, and others, all of them offering the wide array of proposition bets on which he looks to find an edge.

“New Jersey is in my opinion the best place in the country to bet on sports,” Krackomberger said.

And having all of those options available in the Garden State, he said, negates any interest he would have in using the offshore operators.

“I have to tell you, I’m much more comfortable posting up my money with the FanDuels and DraftKings of the world,” Krackomberger explained.

“People like to touch and feel their money. … They don’t want to have to wait for payment processors and different things you have to wait for offshore,” which he said can delay withdrawals for weeks.

While offshore operators have certain advantages they can offer by benefit of avoiding U.S. taxes, such as reduced vig, Krackomberger noted that the legal U.S. sportsbooks offer the average bettor so much in the way of free bets, bonuses, and odds boosts that they offer a fair opportunity to bettors.

Colorado finds collaboration a positive

Colorado has quickly ramped up to 17 sportsbook operators after launching May 1, and Matt Heap, chief of sports betting for the state’s Department of Revenue, believes the range of competitive options they offer is a good means of deterring bettors from using unsanctioned options.

The Colorado Limited Gaming Control Commission made it a point to solicit input from operators in developing regulations and is committed to assisting them in ways such as quick turnaround on their requests to provide new betting options, Heap stressed.

The fair communication with the sportsbooks has bred an industry, he said, that ultimately gives bettors choices that satisfy them in playing legally.

“It gives them a lot of options and sign-up promotions and odds boosts that is really driving a lot of people into the market, hopefully from places where they were betting illicitly offshore,” Heap said. “The more competition that comes into the states, it’s only benefiting everybody.”

Can offshore operators find legit path?

One question about future U.S. competition is whether it could include those companies that have operated offshore and show interest in transitioning to become a legal enterprise.

That is the case with 5Dimes owner Laura Varela, whose husband was kidnapped and killed while running the business in Costa Rica. She reached a $46.8 million settlement with federal prosecutors in September while embarking on a path to pursue licensing where possible from U.S. states with legal sports betting.

Her lawyer, Stephen Miller from the Cozen O’Connor law firm, said on the panel there ought to be an opportunity “where an offshore operator comes in from the cold and says ‘I want to go legit.’”

He acknowledged some special steps and precautions may be warranted by regulators in such cases.

“When you have an operator willing to go through these steps, the question to a regulator is, ‘Are you willing to take someone under these conditions?’” Miller mused. And if the answer is no, he said, it will discourage other entrepreneurs in 5Dimes’ field from ever giving up the businesses they have run to the chagrin of U.S. officials.

Heap said such instances could present “an interesting dilemma” for regulators, and he hopes some middle ground can be found to make it possible with the right precautions surrounding key issues, such as any personnel involved with criminal records.

“I do foresee you will see some offshore operators that want to come to this industry just from the sheer magnitude of customers that are here that are not necessarily going to have to go offshore to engage in sports betting,” he said.

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