It’s time to stop scapegoating the black market for everything

Black goat
Image: Shutterstock

As children, there inevitably comes a moment where your parents catch you in some sort of lie or you’ve done something wrong and you are terrified of the consequences. So what do you do?

Blame your imaginary friend. Or a toy. I had an incident in my youth where I blamed my misbehavior on, of all people, Teddy Ruxpin’s mom. 

It is only as we get a little older that we realize this Hail Mary attempt was not as persuasive as it seemed in our heads. 

It’s a lesson I think the gaming industry is still trying to learn every time I see people dig in their heels and refuse to change or compromise because if we do, the black market wins. 

Gaming refuses to change or limit and blames offshore sportsbooks

The latest is that we can’t stop offering obscure same game parlays on little-known players like Jontay Porter because bettors will go offshore to bet them. Ditto college player props.

When operators submitted information about college player props to the Ohio Casino Control Commission (OCCC), betting data indicated college player props accounted for a mere 1.3% of total handle. When asked about the market on an earnings call, Penn CEO Jay Snowden said a ban of the betting category would have no material impact on bottom line.

Most people don’t need or even want to place these wagers. Those that do would arguably be fine with severe limitations on how much money they can get down. Those who wouldn’t be fine with them include the ilk that convinced a young NBA player to throw his performance and try to net them a seven-figure payout.

Much of the offshore betting market is not suitable for conversion

CNBC’s Contessa Brewer asked BetMGM CEO Adam Greenblatt a question that I think is fair and crucial to the debate over what regulated operators should be offering:

“If you’re embezzling money, millions and millions of dollars from your friend/employer, are you really gonna go put that down at DraftKings?”

She was referring to Ippei Mizuhara, the disgraced interpreter, who, according to legal documents, managed to wager the total handle of three states over the course of a couple of years. This is not a customer you convert from the black market. I would hope no regulated operator is out to recruit such a customer.

Yet, ballparks of how much is being wagered in the black market are regularly released as if the bulk of that money is not the result of a handful of bettors like Mizuhara wagering over $320 million, largely on credit, and from money that could very well have been stolen because there are no AML measures in place on the black market. 

I will give operators this: At least none of them are claiming they need to offer bettors lines of credit or do away with compliance measures, but the black market seems to creep into every argument in which the regulated industry is asked to change.

Right now, operators and the Sports Betting Alliance are campaigning hard to stop Illinois from a proposed sports betting tax hike. We’ve seen Ohio double the tax rate early after launch and I agree it is a terrible choice. Moving the goalposts after operators, particularly smaller operators, agree to take the financial risk that comes with entering your market is terrible for consumers, limiting their choices. 

Yet, when you look at SBA’s rhetoric, the black market and the threat of worse odds are front and center even though we have yet to see any other market with steep tax rates, like New York, offer odds that are different than other markets.

Even RG measures falling victim to the black market argument

When the Gambling Addiction Recovery, Investment and Treatment (GRIT) Act suggested taking the federal excise tax and putting those funds that currently have no assigned use and putting those funds towards RG, the industry sounded the black market alarm.

It was a tough line for groups like the AGA to walk, arguing that operators certainly want RG funding but not this way. But, we’ve seen in ten years that lawmakers have not been able to repeal this tax and, instead of taking the PR win the GRIT Act could offer, operators dug their heels in and pointed offshore.

As I’ve noted in previous op-eds, I think the industry does not understand how these arguments are landing. It is, once again, an issue of optics.

“Oh we can’t cut problematic markets from the catalog or the black market wins.”

“We need to pay less taxes or the black market wins.”

Where does it end?

“Oh, this is why we need to offer bets on Little League. This is why we need to be allowed to partner with pawn shops. This is why states should pay us to open up a book.”

Regulators and lawmakers are tired of this defense

There are important people who are starting to tire of this song and dance. In a recent story on integrity concerns from ESPN’s David Payne Purdum, OCCC Executive Director Matt Schuler said sportsbooks couldn’t provide a tangible reason to keep offering college props.

“When I get that feedback, whenever I see, ‘Oh, we can’t do that, they’re going to have to go into the black market,’ it comes across with the sincerity of a shark being concerned about the welfare of the smaller fish being taken out of its tank,” he observed.

But we as an industry keep going back to the black market well and people are starting to notice. It’s time to come up with more reasons why we can’t do something, to concede rather than contest some of the suggestions from outsiders on tightening up the industry. Let’s level up on our arguments and our optics. If we don’t, the black market wins.