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While cease-and-desist letters by U.S. regulators to offshore sportsbook Bovada and other unregulated operators have been successful to date, some regulators believe more tools will be needed to further cut down on unregulated operations.
In May, Michigan became the first state to publicly announce that it had ordered Bovada to cease operations in its jurisdiction, and the operator swiftly complied, adding Michigan to its list of prohibited jurisdictions just weeks later.
At least nine additional states have followed suit, and in each of the known cases, Bovada has complied with the letter and halted its operations in the state, with the exception of Massachusetts, where regulators sent their letter just last week.
Michigan has sent letters to other operators, including sweepstakes and social casino operators, and Kurt Steinkamp, chief of staff of the Michigan Gaming Control Board, said the efforts have so far been successful, noting that each of the nine operators who were sent letters prior to last week have ultimately taken steps to prevent Michigan users from registering.
“That is, I think, evidence that the use of cease-and-desist letters is very effective,” Steinkamp said.
Lindsay Slader, senior vice president of compliance for GeoComply, said the geolocation provider had studied the number of active users in seven states where cease-and-desist letters were issued, and noted an average of 6.5 percent year on-year growth in new or active user growth on regulated sites from September 2023 to September 2024.
“There could be many reasons for that, but I’d like to think that if the action taken directly against just one one single operator site, this has actually shown that people may in fact be coming over to the regulated market,” she said.
Steinkamp also added that part of Michigan’s approach is specifically being vocal about their actions to put additional pressure on the operators to withdraw, potentially deter others, and influence suppliers who could potentially work with those operators.
“I've seen in some cases and done it myself in the past, where we've sent cease-and-desist letters out, tried to work with the company, and it's been very difficult, but when you're public about what you're doing, you know you're on good footing, then the word spreads like wildfire,” he said.
“You get a lot of coverage, at least within the gaming industry, other companies in the legitimate sector become aware, payment processors that do not want any hint of being associated with illegal activity, they’re seeing that Michigan is saying what this company is doing is illegal and they’re a client.”
While several states have followed suit, not all of them have done so transparently, with their actions only becoming clear to the public after Bovada itself updated its terms of service to include the new state prohibition.
“In speaking to several of our regulators over the last several months, we know that there are regulators out there who have sent cease-and-desist letters but chose not to make it public, not to show a press release, and I really do think…in terms of vendors as well as other regulators, understanding what's going on out there and what's possible as an enforcement strategy, making these things public is really a valuable tool in your toolkit,” said Cory Fox, vice president of product and new market compliance for FanDuel.
Dennis Mullen, acting executive director of the Indiana Gaming Commission, said that in the commission's past experience, it was difficult to tell how effective cease-and-desist letters were.
He suggested more creative ways of halting illegal operations.
“I think the more important route, in my opinion, are more creative ways [such as] communicating with advertisers, searching out if there are software components and data centers in the U.S. and have communications with payment processors who are very risk averse,” Mullen said. “I think those are all good ways of attacking the problem, creatively hoping to curb some of that activity.”
Another potential tool is seizing assets, said Joel Trella, unit head of the financial crimes north unit for the New Jersey State Police.
“From a law enforcement perspective, the seizure of assets is a very big tool that we can use to prevent those illegal operators,” Trella said, giving one example of seizing funds from payment processors in order to disrupt operations.
“Cease-and-desists and civil action can only go so far for a company that doesn't play by the same rules as a domestic company, but asset seizure does, and I think that's a very big tool that we can use, but it also requires an aggressive and forward-thinking prosecutorial body to accept some of the risk that goes along with asset seizure.”
Kirk Hendrick, chair of the Nevada Gaming Control Board, said the board has not issued cease-and-desist letters in the last several years against any sports wagering operator.
“If we saw there was activity going on in Nevada and somebody brought it to our attention, we absolutely would,” he said. “But most of these offshore guys, they don't even use them for coasters, they're not worth the paper they’re written on because they're like, come get me, that's why I'm in Costa Rica.”
Andrew Rhodes, chief executive of the UK Gambling Commission, said that in the UK's experience, cease-and-desist letters are often a necessary part of a lengthier process to shut down illegal operations.
“We've issued quite a lot of them, even with offshore, and the reason we do it is, with some of the offshore [operators], not all of them, they will then geoblock Great Britain, and that is not unhelpful.”
“The other [reason] is, it's frankly a part of our process before we can go to court and get the internet service providers to block that traffic coming into the country.
“So we need to demonstrate, as per our regulations, that individual is aware that they're behaving illegally, so the cease-and-desist notice is a massive clue from the regulator saying you’re behaving illegally, if you don't stop, we will come and prosecute you and everything else.”
Each of the speakers addressed the topic of cease-and-desist letters over multiple days of discussion of the topic of unregulated gaming at the Global Gaming Expo (G2E) in Las Vegas, which concluded Thursday.
