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Editor's Note. The Road To Maturity: While sports-betting launches continue across the U.S., several states are transitioning from the launch phase to the next chapter of their path to a mature market. VIXIO GamblingCompliance previously spoke to regulators in Colorado and Indiana about their journeys thus far and what the future holds.
In Iowa, sports betting has effectively seen two distinct launch points, the first coming in 2019 and the second at the beginning of 2021.
Although the state launched its first sportsbooks in August 2019, the legalization of sports wagering included a requirement for players to register in person at a land-based casino for online accounts from that point until January 1, 2021.
As a result, many operators effectively held fire in the Hawkeye State, waiting for the lifting of the in-person registration requirement before exerting maximum marketing efforts beginning this year.
“We’re two years into this, but we’re really facing another wave of licensing because of that requirement that sunset on January 1,” said Brian Ohorilko, director of the Iowa Racing and Gaming Commission.
“We knew we would have a few new companies that would be interested, but we really doubled in terms of the number of applications.”
Online sportsbooks in Iowa produced $684m in handle in the first half of 2021 alone, already exceeding the $523m in total handle for the 17 months that preceded it since the state’s initial 2019 launch and the two full NFL regular seasons included in those years.
“We didn’t really know what to expect,” Ohorilko told VIXIO GamblingCompliance. “I think we expected more customers in the state to have access and download additional apps, and that happened.
“I think we expected increased marketing as the operators were trying to compete, and that happened without a doubt,” he added.
“We had the most amount of advertising that I’ve ever experienced in the state with casinos and sports betting, and it was all around that one month before January 1st and the next month or two after.”
The state’s pseudo-staggered launch of legal sports wagering has given regulators a chance to effectively ease into sports-betting regulation.
“It’s very different from a regulatory standpoint regulating sportsbooks than it is casinos” Ohorilko said.
“I think most people would say 'well, yeah, of course', but we’ve had casino gambling in this state for about 30 years and you do get accustomed, if you have a problem, you can pick up the phone if we have trouble with anything or need to take a closer look.
“You just drive to the casino, you have people that are there, and it’s more hand-to-hand regulation and you can observe this in person.
“We’ve learned a few things along the way and for the most part, most of the operators are very responsive, but every now and then we’ll have a situation where it’s maybe a little bit more difficult to run something down, so we’ve had to implement different tools for that.”
Ohorilko said that although compliance has been strong to date, some of the biggest adjustments for the relationship between the regulator and operators include revenue-reporting requirements and change-control processes that differ from state to state.
“The way they report revenue and really making sure that numbers are coming from a system database that’s coming from the sports wagering system and not just downloaded or uploaded into an Excel document, there’s no reason to believe that anything could be changed, but we would want something from the system directly,” he said.
“What we learned was a lot of these sports wagering systems were very antiquated in terms of what we were used to seeing in a casino environment,” Ohorilko added. “I’m pleased to say we’re starting to see lots of upgrades and changes to that and it’s been easier from a regulator standpoint with some of these newer systems to really look at how revenue’s reported and conduct various auditing exercises within that system.”
Another area where there was a bit of learning curve for operators, the Iowa regulator said, was in the area of responsible gaming requirements, including age-verification and self-exclusion requirements.
“There are similar requirements in every state, but how to comply is very different,” he said. “The tricky part for some of these companies, at least what we’re seeing and hearing feedback, and when we’re maybe pursuing or looking at a particular issue and trying to understand why it occurred, is you might have somebody on the compliance team that either gets confused between one state or another or just isn’t able to keep up.
“It’s the differences in regulations from the other states on some of those more critical policy issues,” he added.
“I think things with technology and reporting, most of the states are starting to accept and do the same thing, but a lot of the requirements with underage gambling and self-exclusions, or a set-off where there’s state debt that’s owed, most states have things like this and there are specific requirements in the statute that need to be met.
“Overall, considering the volume that we’ve had compared to the amount of time we’ve had incidents, I think they’ve done a pretty good job of complying,” he added.
As the state continues on its path toward becoming a more mature market, some of the key aspects of what Ohorilko is looking at going forward include the sustainability of an Iowa market in which more than 20 operators have market-access agreements.
“We saw some different strategies right before January 1, we saw a couple of the casino operators just enter into these agreements right away and use all of their skins, and then we saw some companies hold back,” he said.
“There’s not a lot of [agreements] happening right now, and I’m hearing anecdotally that the value of these agreements are a lot less than what they were a year ago, so it makes you wonder if maybe some of the operators are just kind of holding back now to see if this state can sustain all of the different agreements that have taken place because a lot of these companies haven’t gone live yet.”
In addition, Ohorilko said he would be looking to see what the next chapter of sports betting looks like in the years to come as operators shift from acquiring customers to retaining them.
“There’s only so many companies that are out there and then customers get accustomed to certain things, so what would attract customers away from their favorite app?” he wondered. “We may have seen one or two companies that focus on in-play wagering or more of an exchange-style betting, but is that really going to move the needle or is it going to be something else?
“I think content might be it in terms of the next step is if customers can really have access to what they’re betting on,” he continued.
“I think some of the larger sports, it’s going to be trickier because of network agreements, but if [operators] are showing content for some of the other types of sports that aren’t as popular, maybe that’s something that can attract a customer to download an app, so we’re keeping an eye out on some of that stuff and trying to understand what’s next.”
Ultimately, as Iowa shifts out of its second launch phase, the focus for the regulator remains on securing a positive experience for customers and shifting into a consistent maintenance regulatory strategy.
“It might be cliché, but it really is just to see that the industry is something where customers feel like they’re getting a fair shake,” he said.
“Early on, the customer experience in this state has been really good, we get really few complaints, and I think it’s because compliance is so good, but we’ll be growing in this state from seven to maybe 15 to 20 companies.
“The shift will be more on just trying to do more of a routine compliance and making sure that the operators aren’t getting complacent in some of their responsibilities in this state,” he added. “We have no reason to believe that they will be, but as a regulator, once we get through the licensing and the due diligence, we’ll really try to fall into some cadence of a regular compliance exercise.”
