NCSharp brings you part II of a series evaluating the tasks facing North Carolina sports betting regulators. Read part I here.
North Carolina’s online sports betting bill puts the state lottery in charge of regulating online sportsbooks.
The lottery will write regulations, analyze license applications and monitor the state’s new online sports betting industry. The lottery will also be in charge of overseeing the live horse racing and parimutuel wagering included in the online sports betting bill.
Even after hiring regulatory experts, the lottery is at risk of over-reliance on the industries it should regulate for crucial information about customer and industry safety, NC responsible gambling metrics and match-fixing and fraud attempts.
The lottery can solve this problem by hiring experts in both sports betting and horse racing regulation. As North Carolina works to meet that challenge, NCSharp will examine three concrete issues it can use as litmus tests for regulatory competency.
- Betting-related harassment of college athletes
- Adequate criminal and financial investigations
- Proactive and common-sense regulation
This article will introduce the second issue.
Rush now; pay later when it comes to licensing
Checking for lawsuits, criminal histories and financial security are standard steps in acquiring sports betting licenses.
Screening for lawsuits indicates how likely a potential sportsbook is to comply with a new market’s laws and regulations. Criminal histories ensure no known money launderers launch online sports betting businesses. Finally, financial histories show regulators that a sportsbook can reliably pay winnings and won’t leave bettors hanging due to financial mismanagement.
These seemingly mundane steps can go wrong in states rushing to launch sports betting. During the pandemic, the Colorado Division of Gaming faced layoffs and experienced a hiring freeze. Understaffed and pressured to launch sports betting, the Division expedited some of its applications and investigations. A 2022 audit of the Commission found, among other things, that:
– As of March 2022, 90% of the sports betting licenses were temporary licenses with lower investigative standards.
– A Division report stated an operator had no pending lawsuits even though the operator disclosed an ongoing lawsuit.
– For two operators and two principals (individuals), the Division didn’t check whether the parties were “delinquent on Colorado tax obligations.”
Further, Colorado’s temporary licenses only last for two years. The Division had to reinvestigate licensees to reissue temporary licenses on top of the more detailed investigations required to issue permanent licenses, which last five years.
Those are the kinds of missteps that North Carolina regulators will have to avoid as they vet operators, suppliers and vendors into the state’s new sports betting and horse racing industries.
North Carolina can’t under-hire investigators
The North Carolina Lottery must hire enough investigators to conduct the necessary fact-finding to ensure that North Carolinian sportsbooks will operate functionally, not to mention responsibly. However, that will require the NCLC to spend enough on competitive salaries to attract strong investigators.
License investigations demand more than ticking a few boxes. Investigators must secure documentation demonstrating an applicant’s ability to function financially, operationally and responsibly. An investigator needs enough financial literacy to determine that a company’s cash flows will support consistent sportsbook payouts. Investigators must know how to tell whether a horse track will adequately care for its horses and whether track accommodations are humane.
North Carolina doesn’t have to overspend on consultants and middlemen to recruit investigators with appropriate knowledge and skill. However, it does have to invest to prevent incompetence and insufficient staffing from undermining the gambling industry’s successful companies.
GLI contract will expedite the licensing process
In hiring Gaming Laboratories International (GLI) to assist in the regulatory process, the NCLC has already taken steps in the right direction.
GLI has helped several states launch online sports betting through software systems that ensure operators have the financial capabilities to take payments and process payouts at scale.
GLI will assist regulators by offering:
– Implementation services.
– Regulatory expertise.
– Assistance with technical requirements.
– Professional development for staff
– Responsible gambling program development.
– Advanced deposit wagering licensure of parimutuel horse racing rules.
– Evaluation of control standards proposed by sports betting operator applicants.
– The option for additional development and training for other features.
Time is on North Carolina’s side, for now
With an online sports betting launch window from Jan. 8 to June 14, 2024, North Carolina regulators have plenty of time to draft the necessary rules and regulations and vet operators and service providers before the June 14 deadline.
That seems to be where Sterl Carpenter, deputy executive director of sports betting, has set his sights. We think he’s made a wise decision, and we hope North Carolina continues to learn from previous launches to ensure that Tar Heel bettors have the best, safest and most reliable products on the market.
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