NJ’s Top Regulator Talks Sports Betting: DraftKings, FanDuel And Racetracks ‘Pushing The Envelope’

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NJ sports betting pushing the envelope

New Jersey Division of Gaming Enforcement Director David Rebuck has seen a lot during his seven-plus years as the state’s top gaming regulator.

Rebuck has played an integral role in advancing gaming policy not just in New Jersey, but across the United States.

During Rebuck’s time at the helm:

With sports betting now a reality, Legal Sports Report spoke with Rebuck to get his thoughts on the state’s new, bright shiny object.

Here’s what he had to say.

On the first movers in the NJ sports betting market

Sports betting has been authorized at all nine Atlantic City casinos, as well as the state’s three racetracks. But not everyone has been acting with the same alacrity.

Rebuck identified two separate groups as having put in the hard work and resources to bring a strong product to market as fast as possible.

Those groups?

The state’s existing racetracks and daily fantasy sports companies DraftKings and FanDuel.

“They [racetracks] have a financial motivation to get it up and operating because the horse racing industry in New Jersey has been struggling a bit,” said Rebuck. “They have the motivation to get it up and get it good.”

“Daily fantasy sports companies have a strong financial motive to get moving in this area because with the legalization of sports betting there’s an expectation that fantasy sports becomes a niche market,” Rebuck remarked. And because of their databases and technology, Rebuck believes DFS companies are poised to be major players in the nascent sports betting market.

“My compliments to both of those groups that I normally don’t regulate,” Rebuck said. “They’re pushing the envelope and making the traditional groups we oversee in bricks and mortar and internet gambling say, “Hey, we have a little competition here, we’ve got to pick up our pace.’ ”

On DraftKings’ (current) online monopoly

One area where a particular DFS company has really separated itself from the crowd is DraftKings Sportsbook and online sports betting.

DraftKings being the first (and three weeks in, the only) to market with a mobile app surprised some people, but not Rebuck.

“I don’t know why people are surprised,” the DGE director said.

In addition to time and resources, DraftKings “clean” platform played a role in helping the company beat everyone to market by several weeks.

Unlike existing online casinos, DraftKings sports betting app didn’t require integration into an existing online casino platform. And as Rebuck explained, integration is a bit of challenge.

“That always happens when you integrate stuff,” Rebuck explained. “You integrate piece A into piece B and you think it’s going to work and then all of a sudden piece C over here, on the other side of the house goes crazy.

“Why’d that happen? Technology is not as clean as people make it out to be.”

Still, Rebuck expects several new mobile operators to be up and running by the end of the month.

“We’ve got a lot of mobile products in the lab now and we’re very anxious and optimistic that before the end of the month we’re going to have a few more out there in New Jersey.”

On the markets early growing pains

Like virtually every new industry, New Jersey sports betting hasn’t been without issue.

One of the most publicized early issues was a situation at the FanDuel Sportsbook at Meadowlands racetrack.

The basics of the story are: The Meadowlands sportsbook closes at 1 a.m. and the vault is programmed to close. That happened before some late-night baseball games finished, but not before some of the sportsbooks employees told customers they could still cash in their winning tickets.

Rumors began to fly, including speculation that the FanDuel Sportsbook didn’t have enough money to cover all of the bets.

“We investigated it, they had plenty of money,” Rebuck said. “In my mind, it was a training issue and educating staff on how to deal with customers when you’re closing shop for the night. There was no real regulatory issue.”

At the end of the day, Rebuck considers this a learning experience.

On non-traditional gaming companies playing a role in sports betting

Another highly publicized sports betting story Rebuck addressed is Buffalo Wild Wings’ possible involvement in the US sports betting industry.

Despite speculation, Rebuck doesn’t see much opportunity beyond a standard marketing deal.

“They haven’t had any conversations with us, we haven’t had any discussion on anything,” Rebuck said. “Certainly they’re not going to get a license to do sports wagering. They’re not eligible.”

“Maybe from a marketing standpoint they could enter into agreements with unique operators to advertise for them,” Rebuck offered. “They could have the games on, and advertising for different legal sportsbooks.”

Rebuck noted that in New Jersey, Buffalo Wild Wings wouldn’t even be able to provide customers with gaming devices like cell phones or tablets, as that would turn the restaurant into an illegal internet café.

One other possibility is a deal that sees Buffalo Wild Wings launch as an online sports betting skin under a licensed operator — not unlike the existing online casino deal between Borgata, Pala and Scores.

A marketing deal is far more likely, but sportsbook licensees in New Jersey are allowed up to three online skins, and one of those operators could decide to take a flyer on a Buffalo Wild Wings-branded online sportsbook.

On DDoS and other threats

The online poker world is dealing with multiple distributed denial of service, or DDoS attacks. PokerStars, PartyPoker and even offshore sites like America’s Cardroom have been victimized in recent weeks.

That type of attack could wreak havoc if it targeted online sportsbooks during a major sporting event like the Super Bowl.

According to Rebuck, New Jersey isn’t immune from these types of cyber threats.

“We’ve fought off DDoS attacks in the internet gaming world,” Rebuck told LSR. ” We had one that was pretty significant back in 2015 on July 4th weekend.”

The DGE director said there have been plenty of threats over the years, and no shortage of ransom notices sent to the properties and operators, but to his recollection, the last significant attack was the July 4 attack:

“It’s a fact of life nowadays, someone is going to come at you sooner or later and you’ve got to be as prepared as you can be.

“We have a whole protocol on the state of New Jersey for DDoS attacks on anybody, not just gambling sites. We have a whole mechanism of different entities from the  Board of Public Utilities, the utility companies themselves, the state police, the operators.

“Having dealt with it a few times we’ve learned some lessons and I think we have a stronger system in place than we did back in July 2015 to react.

“I also think we have a stronger mechanism to prevent, but prevention doesn’t mean you’re not going to be attacked.  You’ve got to be prepared when the attack comes.”

On cracking down on the existing illegal market

Another threat New Jersey is trying to deal with is the presence of illegal, offshore sportsbooks.

“They [illegal markets] are very robust, they’re very good at what they do, and they’re very successful,” Rebuck said. “They’ll be a significant competitive force to the success of the legal market expanding in the United States.”

Rebuck admitted that shutting down these offshore books might be near impossible. Rather, his goal is to put as much pressure on illegal operators as possible. But that will only be achieved if everyone is on the same page.

“I’ve had dialogue with other states already,” Rebuck told LSR. “This is going to be an issue for us to deal with cooperatively. One state can’t do it by itself, one agency can’t do it by itself. Not only as state regulators but we need to be involved with the industry, with law enforcement (local, state, and federal) we need to come up with a new game plan.”

“I will be soliciting suggestions from a lot of people who want to be in the legal market as to what we can do and can’t do,” Rebuck added. “That includes payment processors, banking institutions, a lot of people involved in not wanting to this occur.”

How to stop it?

Rebuck went on to explain two pressure points he hopes to leverage:

  1. Sanctioning or blacklisting companies that double-deal.
  2. Educating people on the legal and illegal markets.

Rebuck issued a strong warning to any company that might be supplying the black market with goods or services:

“If you’re in the industry as a supplier of goods and services to an operator in the United States, we’re going to look very critically at your company and product if you’re directly or indirectly providing those goods and services to the illegal sector.

“I can’t prove it’s happening.

“I hope it’s not happening.

But, we’ve at least notified those entering into the legal world in New Jersey that they better engage in strong compliance efforts on their end to be very clear that their products are not being used by illegal operators.”

When it comes to educating people, it will just take time:

“They’re so mainstream in the United States right now that you watch some local sports commentator reference Bovada’s lines.

“Really? you have to reference Bovada?

“Little things like that, and then we reach out (we’ve done this) to the local sports channel, we reach out to the local publication or the team and say, ‘do you realize Bovada is an illegal gambling site?’ Could you at least use Caesars, MGM, Wynn, I don’t care, get their line, they’re legal.”

It won’t happen overnight

Rebuck also expects the legal market to hold regulators and government accountable as the industry grows and spreads across the country. “The legal market will be very critical of government if we’re not supporting them in combating their major competitors, the illegal markets,” Rebuck said.

But he also cautioned patience. Unraveling and significantly impacting offshore sportsbooks ability to operate is no small task, and isn’t going to happen overnight.

“At this point in time we’re so focused on getting up and operational on the legal side of the house that we haven’t been able to throw a lot of resources [at the illegal market] other than to begin to plan for how we’re going to do it.

“I think we have a lot of support, but the proof in this in the long run is going to be out actions and our efforts as we move into the future.

“I wouldn’t expect anything other than what we’re subtly doing behind the scenes right now.

But it’s a task he looks forward to tackling.

“Coming from a background working in the Attorney General’s office I find it extremely exciting to determine how we can go after the bad boys and put pressure on them.

“We’re never going to eliminate them, but we can put pressure on them to make life a little more frustrating for them as the blatantly operate in the market today.”

Can regulators and law enforcement make inroads against the offshore sportsbooks? According to Rebuck, only time will tell.