This op-ed is via Gabe Hunterton, CEO of the iTEAM Network.
Growth, customer acquisition and fallout.
If you had to describe the daily fantasy sports industry in 2015, those would be the defining factors. (Well, that and $200 million+ spend on football season advertising).
When we look back on 2016, the DFS story narrative will be all about regulation: How fast it happens, how many states, and how the varying laws will impact the industry.
Learning from the land-based gaming process
I’ve worked in regulated gaming my entire career. However, this is my first foray into iGaming. Before joining iTEAM Network as CEO, I spent over 16 years in land-based, regulated gaming. Most recently, I was Deputy Chief Operating Officer of Galaxy Macau, the world’s fifth most profitable casino resort.
When I went to Macau in 2006, the gaming regulation framework for the market had been written, but the laws, and the execution of those laws, were still an evolving work-in-progress. Many policies that played out after I arrived in Macau our company helped shape, including table caps, non-smoking policies, and poker tournament rules.
What was important though— what stood out most to me—was that Macau was set up for both rapid and sustainable growth.
Why? Because Macau made the regulatory process a collaborative effort. Now let me be clear here, the regulators were absolutely in charge. There was never any doubt about that. But we worked with the regulators to create an environment that protected the consumers and served in the interest of the jurisdiction, the operating companies and the industry.
For DFS legislation to be successful for the state, companies, and ultimately for the consumers, a collaborative effort between the regulators and operators is a must.
Why collaboration works
Operators know their customers and business concerns better than anyone. This is especially true in a new or emerging market.
With that said, gaming regulators are experienced in creating a safe environment and level playing field. Operators and regulators working together is simply smart business. Everyone benefits.
One of the biggest parallels I see from my time in Macau to the DFS industry is that we have a huge market that is going to evolve (and is evolving) very quickly. We, as operators, want and need regulation.
Having said this, something important to keep in mind is that for the first few years (like in Macau) the state regulators will not be allocating any additional resources to cover the industry. In short, more work for them, but no more people to help.
Operators need to keep that in mind and assist the regulators as much as possible.
The recommended regulatory route
If we agree that DFS regulation should be a collaborative effort, then what’s the right path from there?
In Macau, the most successful regulatory works were written from a common sense base.
Some of the key issues to immediately address include:
- Player fund protection
- Game integrity
- Age and identity verification guidelines
- Geolocation verification guidelines
These are a great starting point, as all sides (operators, regulators, media, and public) agree on their importance. By starting with these common ground/common sense issues, operators and regulators jump-start the collaborative process and begin working in spirit together.
From there, build in a “conflict resolution policy” to regulations. This again builds common ground between operators and regulators.
Regulators do not have the time or resources to get involved when a customer feels that a contest was scored incorrectly, or a deposit didn’t go through, or any of the other things that happen when you deal with tens of thousands of customers per day.
What the regulators do want to know is that the operators have a process for handling disputes internally. And then, there is a process for handling disputes that cannot be resolved internally (arbitration).
50 states, 50 different answers
After building a common sense/common ground foundation, we have to recognize that moving on each state will have different areas of concern to address.
There is no fix all here. Each state is different. Each state has its own set of competing interests, agendas, and regulatory path.
The problem is far from insurmountable though. There’s a line of thinking I use when tackling this potential issue.
Think of it like this: There are laws that govern speed limits. Speed limit regulation is totally in the hands of each state. State speed limits range from 60 to 80 miles per hour. In the past five years, multiple states have changed their own speed limit (Nevada, my state, included).
Which one is right? They are all right. The elected officials of each state set those laws based on certain factors in their respective state.
It is no different with DFS.
It’s all manageable though. Find common ground. Establish the framework. Collaborate. It worked in Macau, a similar, rapidly growing and evolving market. It can work for DFS too.