Temporary Licenses Cloud Massachusetts Sports-Betting Rollout

September 19, 2022
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As the Massachusetts Gaming Commission continues the process of creating regulations to oversee legal retail and mobile sports betting, regulators will gather twice more this week to consider how to certify independent testing labs and hear from interested operators.

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As the Massachusetts Gaming Commission (MGC) continues the process of creating regulations to oversee legal retail and mobile sports betting, regulators will gather twice more this week to consider how to certify independent testing labs and hear from interested operators.

The MGC on Tuesday (September 20) will consider approval of certified independent testing laboratories for sports betting, followed on Thursday (September 22) by a roundtable meeting with stakeholders to hear comments on several issues, including their interest in temporary licenses.

According to regulators, each gaming company will be given five minutes to comment on a prospective MGC implementation of temporary licensure for untethered mobile sportsbook operators that would necessarily include technical testing, suitability, internal controls, and other industry-standard requirements.

The five-member commission is also seeking comments on consumer protection concerns, and if the companies have an interest in temporary licensure do they have any suggestions on how to address consumer protections if many licensees are required to shut down within a short period of time.

Last Thursday (September 15), commissioners spent a considerable amount of time during their three-and-a-half hour virtual meeting struggling with exactly how many temporary licenses they can issue, especially when it comes to untethered mobile apps.

According to the sports-betting law passed by the state legislature and signed by Republican Governor Charles Baker in August, the MGC can issue up to seven so-called Category 3 licenses, or standalone mobile licenses.

The sports betting law also allows the MGC to issue three Category 1 licenses to the state’s slot parlor and casinos to host retail sportsbooks and two individually branded mobile apps.

Category 2 licenses are for in-person wagering at horse and greyhound racing facilities. These licenses also allow racing facilities to host up to one individually branded app.

But while the law would effectively limit the number of permanent mobile operator licenses to 15, it does not cap the number of temporary mobile licenses the MGC may award.

That distinction has caused concern among commissioners about the possibility of issuing more than two-dozen temporary licenses and then issue notices to most operators requiring them to shut down their operations upon failing to secure a permanent license.

MGC executive director Karen Wells told the commission on Thursday that at least 30 operators were expected to apply for those seven standalone licenses. She expressed concern about what will happen to the dozens of operators that may qualify for temporary licenses but not one of the seven permanent permits.

“So this structure and this disconnect proposes complications for both the regulator and the licensee themselves, and it also presents consumer protection concerns for the public,” Wells said.

Wells said operators are required to pay $1m for a temporary license, and if they are one of the seven to receive permanent licenses, then the $1m is credited to the $5m full license fee.

“However, for the vast majority of applicants there is no mechanism to receive any of the $1m back,” she said.

“Perhaps of greater importance for those companies that do enter the temporary license pool as a mobile operator and do not advance to getting a full license, as many as 76 percent of these are going to be required to shut down their operations once the commission makes the determination of the up to seven licenses.”

Wells warned commissioners that means any temporary licenses may only be valid for a short period of time, “even well under a year.”

She added that the MGC would have to establish a regulatory process to shut down the operators who do not receive a full operator license.

Wells highlighted several other possible issues including how the MGC ensures players get any money left in their accounts returned, whether regulators allow for the outcomes of all pending bets to be settled before an app is closed, and whether operators be required to put up a bond to pay out all wagers if they do not secure a license.

“I’m worried about implementing a licensing construct that saturates the market with temporary licenses who ultimately do not become Category 3 licensees,” said commissioner Jordan Maynard.

Chair Cathy Judd-Stein said she was “struggling with the idea that the temporary license pool was not limited by the legislature.”

“The idea of having to issue notices to (operators) that just didn’t make our final cut of up to seven is just untenable to me and then the fallout to customers … is just a construct I would say was never intended here by our thoughtful legislature. But I haven’t found a workable workaround.”

Judd-Stein hopes to get more information on Thursday when the MGC holds a roundtable discussion with potential applicants.

On Thursday, “when we will hear from every interested operator on these matters, it might shed some light, might shed some consensus and [we] may come up with a solution,” Judd-Stein said.

Commissioner Bradford Hill reminded his colleagues that the regulator still has not addressed the timing of when the Massachusetts sports-betting market will be live.

“We must have some indication of timing for all of this,” Hill said.

Judd-Stein and commissioner Eileen O’Brien both said they believe the commission could have already produced a timeline for the start of legal sports betting if it was not for the question around temporary licensure.

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