Bovada, one of the largest offshore sportsbook operators, is pulling out of New York.
In an email to customers last week, Bovada said it would stop taking bets from NY on June 21. The operator said the decision was prompted by the forthcoming legal NY sports betting market.
“The newly introduced regulation and its increased restrictions on our players residing in NY has ultimately led to this difficult decision,” Bovada said.
The company did not specify how it would settle pending wagers. That issue caused trouble when 5Dimes stopped taking US wagers.
What really caused Bovada decision?
Of course, Bovada was already legally prohibited from taking bets from New York. The new regulations do not really change that.
But the move is not totally without precedent. Fellow offshores Bookmaker and BetOnline withdrew from New Jersey back in 2019, a year after the state legalized sports betting.
Bovada did not respond to an LSR request for further clarification. However, one attorney who requested anonymity suggested the company feared NY prosecutors more than other states.
Why fear NY prosecutors?
The US Attorney for the Southern District of New York (USDNY), Preet Bharara, was the prosecutor behind Black Friday.
In 2011, Black Friday saw federal criminal cases brought against the founders of the three largest US online poker companies, PokerStars, Full Tilt Poker and Cereus.
With New York soon to be taxing sports betting, prosecutors could feasibly look to protect state revenues by going after offshore operators.
Not ideal for NY sports bettors
For New York sports bettors though, it is not ideal for convenience in the short term. The legal NY market is unlikely to open until early 2022 as the state works through an RFP process.
Sports betting operators will bid for licenses in the second half of this year.
That means existing Bovada users might find a new offshore site or have to cross the river to bet in New Jersey come June.
Good news for legal operators
The withdrawal is good news for the legal sports betting industry however. Multiple operators have said there is still a lot of black-market activity in the US.
But that is changing gradually as the legal sector acquires offshore customers.
“You’re going to see our ability to convert black market bettors get better over time, especially as more states legalize and we have more scale,” said Penn National CEO Jay Snowden at Penn’s Q1 results.
Changing offshore ecosystem
One of the reasons offshores can offer bigger betting limits is because they have lots of recreational money offsetting sharper bettors. As that recreational money comes into the legal market, limits might have to drop across the board, as offshore books are left taking only sharp action with neutral or negative EV.
Bovada, of course, is not known for taking sharp action but other books might follow its lead in pulling out of certain states, thus affecting the ecosystem.
In turn, regulated books might feel more able to take bigger bets as their liquidity grows.
Could a book interested in market-making like the offshores such as Circa Sports step forward to take that mantle?