As the Super Bowl approaches, there is the usual uncertainty. Which team will win? Which commercials will be talked about most in the following days? Which brands will blow it? Will Tom Brady turn in his jersey after the game for an AARP card and hit the celebrity golf circuit?
For payments and commerce, there’s another uncertainty that hangs in the air: Will legal online sports betting keep going forward, despite a recent decision by the U.S. Department of Justice (DOJ) that appears designed to counter that progress? In the meantime, what should businesses that want to operate in that new world do besides sit around and wait?
Those were the main topics in a new PYMNTS interview, featuring Karen Webster and Zac Cohen, general manager at Trulioo, a global identity verification service. “The Department of Justice, he said, is “throwing people a curve ball, and there’s a lot of uncertainty about which way this will fall down the road.”
That said, it doesn’t mean payments and commerce operators interested in the sports betting space need to sit by helplessly as the political process takes it course, he explained. More about that in just a bit, though.
First, a review and update about the online sports gambling situation in the U.S.
In May 2018, the Supreme Court struck down a 1992 law passed by Congress that made it illegal for most states to legalize sports betting within their borders. The decision came down six to three, representing a victory for several states that would like to tap into sports gambling as a way to generate revenue and bring in tourism. New Jersey was the ringleader of the effort, though it did enlist support from 17 other states and three additional state governors.
Now, at least eight states have some form of legal online sports betting.
The DOJ, though, recently introduced a wrench into that legalized sports betting landscape by coming out with a new interpretation of the Federal Wire Act, enacted in 1961. That new interpretation from the DOJ “now makes the Wire Act applicable to any form of gambling that crosses state lines, including online gambling and online lottery,” according to an account. The new view of the Wire Act reportedly follows a long lobbying effort by Las Vegas casino owner Sheldon Adelson.
Those are the politics and the bureaucracy of the matter, and — as Cohen told Webster — there is probably not much that payments and commerce operators can do about that.
However, payments and commerce operations can take steps that could not only increase the long-term odds of more online sports betting in the U.S., but help with other tasks that involve online retail and transactions. It all comes down to security, authentication and fraud prevention. “The focus needs to be in a different place,” Cohen said about those operations. “They cannot control which wall the DOJ and Congress” might eventually rule on this new betting regime.
The concerns about gambling come in large part from stats such as this one, provided by Cohen: More than 90 percent of the $5 billion wagered last year on the Super Bowl was illegal. That illegality, in turn, leads to worries about money laundering and other ills that stem from black marketing payments and financial transactions. That said, sports — and sports betting — are “so persistent in our culture” that it is difficult to imagine either of those activities disappearing from the culture at large.
In Cohen’s view, the best move now is to turn the argument away from any political considerations to “how do we safeguard this?” There is always talk about getting ahead of the regulators, and that actually happens sometimes. Yet, there seems to be a reasonable chance of doing that when it comes to online sports betting.
Simply put, businesses should make sure their AML, fraud prevention, and secure authentication processes and technologies are “in place,” Cohen said. “The conversation really needs to [be] around AML and strong [know your customer (KYC)], regardless of” what happens at the federal level concerning the Wire Act (the DOJ has given a 90-day grace period on its interpretation). Those consumer protections, after all, “can get a lot better.”
Challenges Are Immense
There are significant challenges to such an effort.
First, putting better protections in place means more costs, and with the state of legal sports betting in the U.S. seemingly at risk, there is much less motivation to make investments directly related to that eCommerce activity. (Then again, such protections can bring benefits in other areas.) In addition, as the Wire Act and other laws that prohibited various forms of betting have stood for a long time, the card networks (the major players) have barely put their toes into the water — at least, when it comes to online gambling throughout the U.S.
Still, the potential upside is appealing, Cohen explained. Such protections could go a long way to pleasing regulators. If that happens, the card networks would gain more confidence. “Once we have a firm footing on the regulatory front, it’s an easy jump for them,” he said.
Cohen added that the DOJ’s recent move in regards to online sports betting was hardly surprising. “You could see this coming from a mile away,” he said.
Even before the Super Bowl this upcoming Sunday (Feb. 3), the returns have begun to come in. For instance, New Jersey’s online sportsbooks accounted for $241.05 million (76 percent) of bets in December, according to one recent analysis.
However, nothing is guaranteed, and nothing is usually gained by someone — or some company, network or other organization — who doesn’t work hard and proactively for what they want. That might be a reminder of some pep talk from a high school coach, but, as trite as it might sound, it’s true.