SugarHouse Sportsbook app situation could be just the start
Legal Sports Report

Apple Is Creating A Huge Obstacle For Some PA Online Sportsbooks, Casinos

Apple

SugarHouse Casino recently became the first to market in Pennsylvania online sports betting, opening its digital doors to bettors via its website PlaySugarHouse.com as well as the SugarHouse Sportsbook PA app for Android mobile devices.

Conspicuously absent, however, is an iOS app for iPhone/iPad.

They’re not the only ones, either. PlayPennsylvania reports that multiple operators have been having similar difficulties. It’s known that this is not a legal issue, but rather one having to do with Apple’s internal approval processes for the App Store.

What’s really going on here?

SugarHouse is remaining tight-lipped about the specific issue, but informed speculation initially is that it was likely SugarHouse and others running afoul of Section 4.2 “Minimum Functionality” in the App Store Review Guidelines.

That section specifies that to receive approval, apps should “include features, content and user interface that elevate it beyond a repackaged website.”

In other words, for a sportsbook app to receive Apple’s approval, there need to be distinct differences to using it over simply opening up Safari or Chrome on your iPhone and visiting the mobile version of the site.

Most existing sportsbooks apps don’t meet that criterion, but developers in other industries note that Apple has been getting stricter about the requirement over time.

Apple changes for online gambling, sports betting

On June 3, however, it became apparent that there’s more going on than just this. Apple released updates to its Guidelines — one of which, for section 4.7, addresses real-money gaming specifically:

“HTML5 games distributed in apps may not provide access to real money gaming, lotteries, or charitable donations, and may not support digital commerce.”

That rule is effective immediately for new apps and those pending approval, but even existing apps have only a three-month window to comply and will be removed from the App Store come Sept. 3 if they have not done so.

That’s going to be hugely impactful both for existing operators in the international market and those looking to get on board the burgeoning US market as new states pass enabling legislation. It’s also bound to affect not only online sports betting, but online poker and online casino offerings as well.

Controlling the ‘Apple experience’

The timing is surely not a coincidence, but Apple’s motivation remains unclear. Apple has always been fixated on the idea of a unified user experience, attempting to push developers to design their apps so as to resemble as closely as possible those developed in-house by Apple.

The nature of desktop computing is such that strict enforcement is impossible, so for Mac developers, Apple has had to satisfy itself with publishing a set of recommendations.

For its mobile devices, on the other hand, Apple has convinced its customers to accept the idea that all apps must come by way of its App Store, save for those with the willingness and technical know-how to jailbreak their devices.

Working in the native system

Apple would love it if everyone developing for iOS would do so natively in Cocoa, its own application programming interface. It includes an extensive set of graphical control elements that make Apple apps look and feel like Apple apps.

Developers, on the other hand, obviously prefer the ability to write their code once and deploy it to as many platforms as possible. In the case of games, Apple has had to compromise.

Most game developers don’t have the budget to develop separately for multiple platforms. Taking a hard line and insisting on native development would mean many games would simply not be available for its devices, which in turn could hurt the popularity of its products.

Sports betting isn’t quite the same thing as Angry Birds, however, so prior to this week’s update to the Guidelines, it looked simply as if Apple was choosing to draw a line between the two.

After all, a sports betting app consists mainly of grids, menus and forms, and those are exactly the sorts of things contained in Cocoa’s UIKit and which Apple would like to force developers to use as much as possible.

Covering the legal bases for online gambling?

However, the content of the update as a whole, combined with the fact that it explicitly references real-money gaming, suggests there might be other motivations. Most of the changes to the Guidelines suggest that they were spurred by Apple’s legal department, tightening policies about data privacy, for instance.

Furthermore, section 4.7 – the one quoted above – goes on to specify that functionality for real-money gaming, etc. is “only appropriate for code that’s embedded in the binary and can be reviewed by Apple.”

Thus, what we may be seeing is a pre-emptive clarification of a gray area by Apple.

Into the details …

If Apple is only taking responsibility for ensuring the legality of code embedded in the binaries it distributes through the App Store, then it may worry that companies will attempt to use HTML5 as a workaround.

If so, it may ultimately find itself embroiled over a legal battle over whether it’s responsible for uncompiled code distributed with apps, as well as that which is embedded in the binary itself.

Any sort of real-money transaction would be particularly hazardous in that regard. That would explain why, although real-money gaming and lotteries are listed up front, charitable donations and digital commerce are also included.

Getting in on the gambling action?

There might also be a profit motive for Apple, though that’s far from clear at this point. Although hardware is still its primary business, services – including digital content delivery via iTunes and the App Store – now account for almost a fifth of its net sales and a third of revenue, once cost of sales is deducted.

Currently, Apple takes a 30% commission on both app sales and in-app purchases, and 15% on subscriptions lasting more than one year. That doesn’t include products “fulfilled outside of the app,” such as physical products purchased by customers using the Amazon app, for instance.

However, real money gaming doesn’t involve a physical product. When the app supplies HTML5 code to connect to an external website that handles deposits and withdrawals, the transactions are “outside the app.”

Yet, if Apple forces developers to handle all transactions with compiled code, then any such transaction that doesn’t involve a physical product could be argued to constitute fulfillment within the app, and therefore subject to Apple taking a cut.

Losing out on a cut?

As it stands, real money betting and gaming apps are generally distributed free of charge, yet Apple incurs costs to review those apps and distribute them through the App Store. It’s likely a bit of a sore spot for Apple that gaming companies are using its services for free in order to make money, while skirting the need to share in the profits by handling all transactions externally.

The way things are going with regulation in the US, the market for real-money gaming and sports betting is going to grow much bigger in the coming years. Apple might be trying to secure some leverage to negotiate for a piece of the pie.

Aggressive timeline for online gambling operators

Whatever the case, this is going to be a huge issue for online gambling operators until a satisfactory resolution is found. International operators have found their mobile products to be gaining importance, especially in terms of customer acquisition, and iPhone has over a 15% market share.

For real-money gaming to simply remain unavailable on iOS would be unacceptable for the operators and likely damaging to Apple in the long run as well, whether or not it has any direct financial interest in it. Given the timing of the new Guidelines and the short compliance deadline for existing operators, it looks as if Apple is trying to force a quick timeline for negotiations.

It shouldn’t be long, then, before we see what the eventual compromise looks like. This will tell us more about Apple’s goals, and what we can expect in other states going forward.

Alex Weldon
- Alex Weldon is a freelance writer, game designer and semipro poker player from Montreal, Quebec, Canada.
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