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Massachusetts Drags Sports Bettor Limiting Into the Light of Day

Massachusetts regulators finally got what they were looking for months ago: An extended and perhaps inspirational conversation about the limiting of sports bettors that could someday have consequences for the industry. 

The Massachusetts Gaming Commission (MGC) hosted another meeting on Wednesday to discuss “wager limitations” with sportsbook operators, player advocates, responsible gaming experts, and promoters of “alternative” wagering models.

It was the type of talk the MGC had sought back in May, when the Bay State’s active sportsbook operators declined to participate in a roundtable, citing the confidential and proprietary nature of their risk-management practices.

But the MGC did not let the limiting issue go, and Wednesday’s meeting was perhaps the deepest dive any regulator has taken in public on the wagering restrictions that bettors can face. 

While the commission seems unlikely to start rejigging its regulations anytime soon, the answers the MGC received and the comments from commissioners suggest the matter is by no means settled.

“I know that patrons and those who follow the commission’s work are eager for quick determinations, but we are a deliberative body and we will not sacrifice getting an issue right just for expediency’s sake,” MGC interim chair Jordan Maynard said on Wednesday.

What’s a guy got to do to get limited around here?

Nevertheless, the MGC’s gradual approach has produced some relatively interesting answers about sports bettor limiting, especially from sportsbook operators that cater to mostly casual players.

That information includes the thought process operators say they use to limit, the amount of bettors they claim are subject to limiting, and the reasons why operators act the way they act. 

Wednesday’s meeting was divided into two sections, one for Massachusetts sports betting operators and another that could be summed up as the “player” group. 

On the operator side, the messaging was fairly consistent: We only limit a small percentage of the betting population, it’s for good reasons related to behavior and not winnings, and limiting lets us offer more wagering opportunities and good odds to the larger cohort of players we’re not worried about. 

“The decision to impose a wager limit is based on multiple factors that align with BetMGM’s overall risk management framework,” said Sarah Brennan, senior director of compliance for the operator. “Specific wagering patterns, irregular behavior, bonus abuse, and more are used to determine what stake factor to designate a patron. There is no one-size-fits-all decision in this process.”

Brennan added that BetMGM limits a “small minority” of bettors they deem “advantage players,” which is approximately 1% of patrons in Massachusetts.

The BetMGM reps also stressed their process isn’t “results-driven,” or intended to pick off winners for winning, but rather focused on behaviors and patterns, such as a player who searches for mistaken odds or is acting as part of a betting group or syndicate. Those behaviors could see users get their “stake factor” slashed from 100% of the limit for any given wagering market down to 50%, 25%, or perhaps lower.

“This group of limited patrons, many of whom self-identify as professional bettors, are loud in insisting that limiting patrons is a pervasive practice by operators,” Brennan said. “However, this is not accurate. It is actually the opposite.”

You’re (maybe) sharper than you think

But the variety of factors that go into determining who is an “advantage” bettor and who isn’t prompted questions from commissioners about whether a recreational player could get painted with that brush. 

“It sounds like that the average or casual bettor could, in fact, be deemed an advantage player depending on their betting activity,” commissioner Nakisha Skinner said. 

However, BetMGM’s deputy general counsel, Jeremy Kolman, suggested those two things may not be mutually exclusive, as someone could identify themselves as a casual bettor but engage in the sort of activity the operator deems as advantaged play.

Still, Alex Smith, vice president of regulatory affairs for Fanatics, said “nearly half” of the “small population” of customers who were limited were actually net losers at the book when they were restricted (he said later more than 90% of winning customers were not limited at all). 

“Which I really think drives home the point that we’re not looking at the results, we’re looking at the way that they’re wagering,” Smith said.

More markets, more problems

The defense being played by operators is also driven in part by their desire to offer as much as possible to players. And since there are far more squares than sharps, the wants of the former may outweigh the desires of the latter. 

Cory Fox, vice president of product for FanDuel, said the operator takes wagers on roughly 2,700 unique events and more than 37,000 different markets within those events on an average day. 

If they had sharper bettors latch on to those markets, the recs may realize they are overextended, Brennan suggests. For an operator like us, we know where we’re profitable and we’re taking a “walk don’t run” approach to adding more markets.

— Geoff Zochodne (@GeoffZochodne) September 11, 2024

Being able to limit customers allows FanDuel to offer that many markets, Fox suggested, and if that were taken away, the operator would have to reduce those options, which could negatively affect participation in the legal market.

He also said that, in 2023, 0.043% of wagers placed with FanDuel in Massachusetts were done so at the maximum amount allowed for that player.

“In limited cases, over all of those markets, some users may have more information than we do,” Fox told the commission. “Some users may have a better model than we do. We’re comfortable taking wagers for them, but we have to do it in a responsible manner that protects our company.”

Another case in point: DraftKings’ senior director of regulatory gaming compliance, Jake List, discussed issues with “courtsiding,” or when bettors are at a sporting event trying to make in-play wagers before an operator can adjust to what’s just happened on the field. 

For example, if DraftKings puts up a market for a live tennis match, there could be 200 or so customers trying to bet it online, but maybe one or two at the court trying to wager as well. DraftKings could pull the market entirely or delay it severely. It could also act on information suggesting there’s courtsiding going on and limit those players trying to beat the odds before they shift.

“It is really a balance of providing something we really do feel benefits the vast, vast majority of customers,” List said. “And then in the situation where we do have to limit someone for risk management purposes, really limiting it to just what their behavior is.” 

Rec operators are seemingly framing the debate as the needs of the many (recreational bettors) outweighing the needs of the few (sharps or “advantage” players). Operators say only a small population is limited, and that no limiting would mean fewer betting markets for everyone.

— Geoff Zochodne (@GeoffZochodne) September 11, 2024

But courtsiding is perhaps a more specific example of limit-worthy behavior, and not the sort of thing sharper bettors suspect is really why they are being restricted, which is that they win. 

“We’re not banning customers for beating us,” said Ken Fuchs, chief operating officer and head of sports betting for Caesars. “We’re banning customers for other reasons that we should be banning them for, and often, I think, that obviously doesn’t come out because it is something that is not public and something you would not disclose based on the specific situation.”

Yet banning someone outright from a sportsbook is one thing, and limiting them down to almost negligible wagering amounts is another. Some of the arguments operators made to the commission will no doubt draw skepticism from bettors, and they were challenged during the “player” segment of the MGC’s meeting.

“The way the industry has shifted is that we are no longer in the risk management business,” said Richard Schuetz, a former gaming industry executive and CEO of the advocacy group American Bettors’ Voice. “It seems to be that we are in the risk avoidance business. And the risk avoidance business means that if you’ve got someone that can jeopardize your bottom line, you’re gonna blow him out of the building.”

Schuetz added that the current environment is a “breeding ground” for offshore sportsbook play, a claim that was backed up by writer David Hill, who recently spent time in Costa Rica reporting on the gaming industry there.

Hill spoke to bookmakers in Costa Rica who told him they lost business following the 2018 U.S. Supreme Court decision that paved the way for the expansion of legal sports betting. However, Hill was also told that business has been coming back because of wagering restrictions. 

“They said it was because players are being limited, and that now they’re seeing the way to capture business is to market themselves as a place that will not limit you and will take your bets, and that they’re feeling optimistic that the business may come back to them,” Hill said. “So to whatever degree this is all about stemming the unregulated gray and black markets in sports betting, this, at least anecdotally, is not helping.”

The MGC got something of a crash course in sharper bookmaking models as well, courtesy of Joe Brennan Jr., the executive chairman of Prime Sports, who said their shop won’t limit players. 

“We track our players who are betting, because some of them are going to be smarter than us, and what we will do is, when those players bet with us, after they bet, we use that data to sharpen the lines of our own markets,” Brennan Jr. told commissioners. “We make our own markets smarter because of the result of those wagers.” 

And, by keeping sharper players out, Brennan Jr. suggested recreational-focused operators are opening themselves up to more risk of manipulation, as they are only moving prices “on air” after seeing Prime and other market-makers adjust their odds.

A sharp player may make a big bet on one side at Prime, say on a line of -3 for an NFL team, and Prime will then adjust its line accordingly. Other operators may then follow suit, which is what the player wanted all along.

“Maybe that’s the price or maybe that’s the spread that the player is really looking for, and he spent $50,000 to lose with us so he could get -4 on the other side of the market, and go bet that for $500,000,” Brennan Jr. said. “And this is a process known as head-faking.”

As for the concerns other operators have about all the markets they have up and needing to protect themselves as a result, Brennan Jr. said doing so is even tougher when you don’t have the insights of sharper bettors.

“If you don’t know what the smartest people with the most money are doing in the marketplace, do you really have a good product?” he asked. 

Moreover, asked about what sort of questions still need to be asked, Brennan Jr. wondered what players are supposed to do when they try to play in a regulated market but can’t. 

“What is their alternative?” he said.

Just scratching the surface

All of the above is just some of what was said during the two-hour-plus discussion on Wednesday, which seems like it will be just another chapter in the MGC’s work on limiting. 

What the commission ultimately decides to do remains to be seen. It may be something, it may be nothing. 

Based on what was said Wednesday, a leading candidate for any action is the notification and transparency provided to bettors about limiting, as the regulator is hearing from irritated and sometimes confused players. 

FanDuel’s Fox said very few customers who are limited ask customer service why that’s the case, suggesting they know exactly why. Yet when a limited player does try to wager, the bet slip will indicate what their limit is for a specific market. However, Fox’s comments also suggested that FanDuel is not about to send an email telling players what their limit is on any of the thousands of markets it may offer on any given day.

“At a minimum, it sounds like you could alert them to the fact that that’s going to be happening,” commissioner Eileen O’Brien said. 

On disclosure about limiting, concern with increased info is it could help customers evade controls. If customers are able to find more sophisticated strategies to beat controls, then we have consider removing more markets, offer worse odds, etc., List says.

— Geoff Zochodne (@GeoffZochodne) September 11, 2024

In the meantime, the MGC seems like it will keep hearing from bettors about the limiting issue. And because of that, the regulator does not plan on dropping the matter with operators.

“We’re trying to solve a problem,” Maynard said. “We’re not here because we woke up one day and said we really, really want to cause an uncomfortable conversation with the operators.” 

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Publish date : 2024-09-11 11:14:00

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