Weekly News Desk
Here are some stories you may have missed from another whirlwind week
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Now on to the News!
Back to Kalshi. Gaming regulators in Arizona sent cease-and-desist letters to Kalshi, Robinhood, and Crypto.com, accusing them of running afoul of state laws and tax regulations.
Why does it matter: Arizona is the seventh state to send such a letter to Kalshi and the others. So far Kalshi has sued three states that sent similar letters while they await some sort of ruling from the Federal Government on their platform. But the legal limbo is not keeping them from pushing forward with new sports markets as they await their former board member to take the helm at the CFTC.
Campaign Trail. A Republican candidate for Governor in California bet on himself to win his election. Kyle Langford “invested” $100 in himself, and we know this because he publicized it on Twitter. Kalshi says they are investigating and will take appropriate action, but they have not offered additional details.
Why does it matter: There are a few interesting angles here. As Dustin Gouker points out, several political markets prohibit candidates from trading, but this California political race had seemingly different rules for some reason. Apart from this, Langford’s purchase, along with his plea for supporters to jump into the fray, moved this low liquidity market fairly significantly for a short period of time. It highlights an avenue for distorting markets for a variety of reasons in future instances. It also highlights possibilities for real insider trading in political markets. If a candidate, office holder, or staffer made trades but didn’t publicize it on Twitter, would Kalshi ever know? It would be great to see them be transparent about some of their moderation efforts.
The Op-Ed Page. In SBC UK, ClearStake CEO Martin Burt writes about regulatory changes in the UK that require financial vulnerability checks for bettors and how platforms are adjusting to the changes. He argues that while regulation can create friction for players, in the end, if you put your customer first these rules can build trust.
Why does it matter: Burt clearly has a financial stake in this argument with ClearStake. But I also happen to agree with him. Often times imitation is the most sincere form of flattery when it comes to regulation. If regulators see something work in another state or another country, it’s often used as a starting point for regulation somewhere else— if not copied entirely. So it seems worthwhile to see how the new regulation plays out, and how the market responds.
AML News. Three major casinos have been sanctioned by the Nevada Gaming Control Board recently for violating anti-money laundering rules. One Commissioner went so far as to call it a “failure from the casino floor to the C-suite.”
Why does it matter: While the casinos in questions have laid out remediation plans, the article points out that they leave out some more heavy handed changes even though their transgressions were fairly egregious. In particular the article mentions independent monitors inside casinos. Certainly what remains to be seen is how enforcement is treated going forward, and what reforms take root in the casinos. Plus there is the wild card of whether prediction markets will eventually lead the federal government to take a hands on role in regulating sports gambling.
Very Online. The American Gaming Association recently released state-level gambling data, and it shows that revenue is increasing across the country since the pandemic. The data pretty clearly shows that the growth comes from online gambling though, not brick and mortar casinos.
Why does it matter: People want to do more things online in general, and certainly on mobile devices. So this growth is not surprising. And there is no reason to think this trend will stop, which makes it all the more important for platforms to invest in educating their customers about digital risks and to take steps to keep losing gamblers from taking their frustrations out on athletes, among other safety and security steps.
Betting Limits. The Wyoming Gaming Commission recently released a report about a hot topic in gambling circles— limiting bettors. The report contends that the limiting of bettors is largely focused on cheaters of various stripes, and not on throttling the winnings of successful gamblers. Steve Ruddock juxtaposes this report with some quotes from Isaac Rose-Berman about the advantage that modern day digital casinos have in terms of the troves of data they have about gamblers.
Why does it matter: Rose-Berman suggests something akin to warning labels on cigarettes to let consumers know about the risks associated with gambling. Ruddock also points to the barriers to entry in state-licensed gambling. Given that states only allow so many operators, or have prohibitively high fees, it allows those operators to press their advantage. And as people have these arguments about more traditional gambling, advocates for prediction markets will point to the lack of a “house” to throttle gamblers at all as a more fair way forward. Whichever view prevails it will have policy implications for potential regulation.
Thanks for reading, and have a great weekend.