iGaming Daily

Jessica Welman (00:03.692)
I can turn it off if you want.

Jessica Welman (00:09.888)
For years, the American mindset has been that gaming is a 10th Amendment issue and the federal government would be overstepping to intervene. However, the explosion of event contracts on sports offered by the likes of calcium Robin Hood suddenly have states asking for the federal government to take action. Is this the issue that turns the tide on which branch of the government controls gambling? We'll discuss that as well as the death of a sweepstakes ban bill on today's episode of iGaming Daily. iGaming Daily is brought to you by OptiMove.

the number one CRM marketing solution for the iGaming market. I am Jessica Wellman, managing editor of SBC Media, joined by Charlie Horner, media manager at SBC Media. Charlie, I have never typed the words event contracts more in my entire life. Poor Tom Nightingale is all event contracted out. I don't think you and I have talked about event contracts. are you familiar with what these are?

Charlie Horner (01:22.744)
Yeah, yeah, this is something that sort of caught my radar maybe a couple of years ago, more in regards to the political betting type contracts. And I thought this was a little strange because I wasn't, because I'm not American and political betting here is...

Jessica Welman (01:34.55)
Look at you ahead of the curve.

Jessica Welman (01:46.87)
Super normal. Yeah.

Charlie Horner (01:47.171)
sort of common place, we do that and that's fine. And I didn't realise at that time that it was such a big deal. And now, it seems to be the talk of the town, you can't get away from events contracts and so yeah, it's been one of the biggest storylines of this year and yeah, let's dive into it.

Jessica Welman (02:06.06)
Yeah, so I mean this one too, it has, and we'll get to it, some pretty big ramifications beyond just is this sports betting.

As you mentioned, Cal-She kind of got the ball rolling on this in our industry where we were taking note when it started offering election markets. So for those who are unfamiliar, the Commodities and Futures Trade Commission is the group that kind of regulates these companies that do event contracts. And they've been around like 150 years. You can listen to past episodes where I get to tell you about like the weather and why it impacted this in 1875.

or whatever, but they started offering election contracts. The CFTC, the commission that regulates them, intervened. This is...

regulation with a big quotation mark around it because like you just get to like self-certify your markets and toss them on up there. You don't really have to get approvals or anything. so CFTC intervened with elections, which is now in the Court of Appeals pending a decision. And then in the meantime, since the switching of administrations and the appointments at CFTC seem to indicate more openness in taking wider ranges of

events contracts. Cal she Robin Hood crypto.com have all started offering more. So with the Super Bowl, they started offering some contracts and now with March Madness, they were they were offering contracts and finally states started to get a little fed up. So Nevada was the first one to send a cease and desist followed by New Jersey, New Jersey sent them at a point by the way where they were offering event contracts on March Madness games taking place in New Jersey for those who

Jessica Welman (03:55.848)
don't realize New Jersey does not allow in-state college betting so you can neither bet on New Jersey teams nor can you bet on collegiate events taking place in New Jersey so I think that was kind of the bridge too far for them where it was like you're not even allowed to bet on these in the state so why you would be able to do this is weird.

Kalchi fought back and has filed suit against both Nevada and New Jersey. Surprised after we've seen most of these other groups just kind of be like, okay, sorry, bye, to see Kalchi fight back on this one?

Charlie Horner (04:31.332)
Yeah, it's quite surprising that they've... It probably reflects a confidence in what they're doing. They probably have a huge legal team and advisors who have probably scoured all of the relevant laws and regulations and thought, yeah, we're not doing anything wrong. And so the company, Cal Shee, must have plenty of confidence in what they're doing is perfectly fine.

whether the states agree and whether the courts will agree is another thing in entirety.

Jessica Welman (05:04.354)
I mean, also, so this is just like a quick aside. The Nevada case got delayed for a few days because the judge originally assigned to the case is married to like a giant casino mogul. And so she had to recuse herself because it was just a little bit too close to home and they had to find another.

case. In the New Jersey complaint, it was interesting that it documented that they went back and forth with DGE trying to find some sort of middle ground that they could work with because they were just like, listen, if we pull out of New Jersey, we potentially risk like our CFTC certification. So we can't really do that. The part that I didn't quite buy, though, is they kept being like, geo locate out New Jersey. What do you think this is? The Jetsons? We don't know how to do that.

that might not even be technologically possible. And I'm just like, I'm pretty sure it wouldn't be that difficult to put in geolocation on this, but you do you, Kalshi.

Charlie Horner (06:05.528)
Yeah, I know a company or two who might be able to support you on that.

Jessica Welman (06:08.716)
I know. Check out the SBC portfolio of editorials from the range of geolocation companies that might be taking, could help you out in this matter. I think it's again one of those, the principles of the thing. So.

There's a thing called a TRO, a temporary restraining order, where they were seeking immediate intervention initially to let them keep offering games in New Jersey. Both parties kind of agreed that a TRO wasn't necessary, but they are very quickly in New Jersey moving towards whether or not there will be a preliminary injunction, which means we're gonna just say you can or can't be in here while this case is going on.

Nevada not quite moving so quickly. So I mean, it sounds like by early May, we'll know whether or not Kalshi can stay in New Jersey. In the meantime, Ohio has now sent a cease and desist. As of Wednesday morning, Connecticut has started an investigation, but not sent anything. Also as of Wednesday morning,

9 a.m. So it's very early and nothing's getting filed just yet. But to date there's nothing in the Ohio Federal Court system from Cal she but I'm guessing that's probably coming right.

Charlie Horner (07:32.064)
yeah, we've seen this year that the regulators are moving in waves and once one regulator moves against a certain product or vertical then they tend to follow each other so yeah, can guarantee that further action is in the pipeline.

Jessica Welman (07:50.476)
Yeah, I would also say, wouldn't be, I mean, to me it seems like Michigan. I'm like, Michigan's always first on these. Where are at? Henry Williams, did you take vacation? Why are you asleep at the wheel here? Too slow. You know, it reminds me though of another case that is happening in Michigan that is somewhat related to this.

Charlie Horner (08:00.368)
Yeah, slow. Slowest paw.

Jessica Welman (08:14.112)
Advanced deposit wagering, essentially online horse betting. There is a case where Churchill Downs is suing Michigan for sending them a cease and desist and telling them to leave the state. Essentially like the one horse track in Michigan closed for a period of time and it wasn't seeming like it was gonna open again. And.

Accordingly, MGCB sent all of the ADW apps in the state a cease and desist. Hey, our state track that you work with is no longer in operation, therefore you can't offer this in the state. Churchill's like, the Interstate Horse Act of the Jimmy Carter era tells us that we can, and it doesn't matter what you think, because this is a federal issue. And in the meantime, they, I believe, have granted Churchill Downs a temporary, an injunction or a temporary

restraining order, one of the two, allowing them to remain in the state. It's kind of moot because in the meantime they added dates to this calendar and the other ADW apps are back in. But we're getting to this problem of the federal law really coming up against the state laws. Charlie, how many times did I claim the federal government can't intervene? It's gambling.

Charlie Horner (09:28.578)
is yeah this is I'll you'll never live this down Jess before the election and in the intervening period we will never ever mention the federal government it has nothing to do with gambling in the United States and yeah here we are

Jessica Welman (09:32.545)
I know.

The fact I have to bring up Donald Trump all the time? Not my day.

Jessica Welman (09:46.03)
Traditionally, it doesn't. The 10th Amendment dictates that certain issues are up to the state, other issues are up to the federal government, and as we've seen for probably a century plus, if not longer, that's the way that it's been. But we're kind of getting to this problem of is our prediction markets and event contracts gambling, or are they financial investments?

Charlie Horner (10:13.872)
Yeah, this is a massive one. And to me, looking in, it smells like gambling, it looks like gambling. It's probably gambling.

Jessica Welman (10:30.036)
Here's, this one's so hard, right? Because everything's gambling. Like this is just such a semantic debate. I think when it's sports, it becomes a little more clear, the overlap, but people have been saying for years, like.

Speculating in crypto is gambling. Buying NFTs is gambling. Stock market trading is gambling. All of this is fundamentally taking an investment in something you don't have complete control over and hoping that you profit out of it, which is conceptually what gambling is. So.

Charlie Horner (11:14.116)
Hmm. Yeah. think the lines do start to blur though when it verges into sports. What happens next? Do we start taking event contracts on random number generators? And calling it...

Jessica Welman (11:30.053)
Yeah, I'm gonna take an event contract that two bananas and a cherry show up on this screen. Is that okay?

Charlie Horner (11:36.015)
Eek.

Yeah, yeah exactly. But the lines are starting to blur. No, go ahead Jess.

Jessica Welman (11:41.322)
I mean, yeah, it's... I will say, kind of the difference with these though is that it is the Betfair kind of model or sport trade. This is peer-to-peer, essentially, where I am saying, okay, I don't think Duke is gonna win the national championship, but...

And so I'm going to sell my position on it at this agreed upon advertised price to Charlie, who is a monster and roots for Duke. Sorry, the Kentucky fan in me is coming out. You're Charlie's just staring at me like I don't know what any of these words mean. We're going with March Madness. Sorry, it's still in the air. So there's not like a house.

Charlie Horner (12:24.1)
No, go for it, go for it.

Jessica Welman (12:29.568)
I suppose, which does make things a little bit different. Recall the endless DFS debates where it's like, well, it's against the house. So obviously it's gambling. And then it's like, nah, it's against another person. You're golden.

Charlie Horner (12:44.92)
Yeah, it's so complex and ultimately the lawyers are going to be the big winners out of this and we're going to have a big, big come together in the courts and where do think this leads to, Jess? Is there going to be federal guidance that the industry gets on this?

Jessica Welman (13:05.442)
I think that you're probably gonna, like you said, settle this in the courts. What's interesting, like we haven't heard, the group we have not heard a ton from is the CFTC on this particular issue. They've been holding round tables, they've been getting information. We know that the,

Interim chair Caroline Pham is kind of pro-election betting and wider scope of event contracts. The name of the man who is up for the permanent job escapes me at the moment, but similarly is very pro-crypto, very like forward-thinking. We know that the Trump administration is very forward-thinking about all of this, but we have reached the point where the regulators are like, excuse me.

this is what we do. And I think that you're going to have some sort of showdown about it. And the question just really is if the CFTC is willing to push the issue or not. mean, Cal-She's certainly willing to push the issue. But I think it kind of, to me, where the federal group that regulates this lands is going to make an impact on how this pans out.

Charlie Horner (14:24.526)
Mm-hmm. And not to put you on the spot, if this, if the CFTC or the courts, if it turns out that Cal-She, Robin Hood and the likes can provide these event contracts and the regulators effectively lose, what are the, what's the impact of that on the regulated sports betting industry, do you think?

Jessica Welman (14:51.33)
I think you've already seen that DraftKings is setting up to launch DraftKings Predict. think FanDuel sees that as much as losing this creates more competition, there is potential for them to do a lot with it. Like in FanDuel Canada, you can bet on all sorts of goofy stuff.

know, whether or not Trump will annex Canada and that sort of thing that you, if you are allowed to expand the scope of what Fandl can do, you potentially get people in that wouldn't be interested otherwise. Like, you know me, I'm an Oscars better. I fired like two March Madness bets. I maybe fire five NFL bets a year. And I...

If I could bet on like, if I could trade Oscars futures year round, which I think I can, like and I could the whole award season kind of leverage and play out my knowledge, I think I would be more inclined to participate with these apps. So I think that's where they see that there is some room here. It also gives them access to states that continue to prove to be difficult to get into like California and Texas.

All just speculation and speaking of states that we can't get into, quick, quick break and then we're gonna do fairly short little roundup on a bill that died that is worth discussing when we get back.

Jessica Welman (16:16.044)
Welcome back to iGaming Daily. we're gonna take five minutes on this one because we had so much to say about the other thing. But there was a bill in Mississippi to prohibit sweeps, stakes, sites explicitly in the state laws from operating that sailed through the Senate, hardly any opposition, and the House approved by overwhelming majority, but guess what? It died.

And the reason it died is one of Charlie's favorite things about the US system, which is that the House, knowing that the sports betting bill to expand from retail to include online sports betting in Mississippi died, decided to tack on sports betting language to all of the gambling related bills that had advanced through the Senate and crossed over in time in the session, including this sweepstakes ban.

Once it got back to the Senate, the Senate's like, dude, we don't want this. Let's negotiate. They went to conference, which is what happens when you have a revised version of the bill that's been approved by both chambers. They couldn't reach any sort of compromise or conclusion, and it's dead. Charlie, I'm sure you were thrilled to experience your favorite part of our state legislative system.

Charlie Horner (17:37.145)
Yeah, I mean this is absolutely ludicrous, isn't it really? Yeah, I mean, it just reminds me again of the whole soapbox thing in Georgia a couple of years ago. If both the Senate and the House agree that banning this sweeps, the whole sweeps thing is a good idea,

Jessica Welman (17:40.439)
This is the Brit and you. I'm just like, eh, this is normal.

Charlie Horner (18:00.922)
just sail it through, just sail it through and we'll come to sports betting again next time. To essentially vandalise the legislation to...

Jessica Welman (18:13.646)
Casey yours just with a big grant of spray paints. Just add sports betting.

Charlie Horner (18:18.928)
Exactly, but it is vandalizing the legislation to add on something which has already been thrown out and let's be honest, it's fairly unlikely to ever be passed through anyway. It's just...

I can see why a lot of people have a lot less trust in the whole political system as they used to do when you see things like this happen on a regular basis. Because I'm sure it's not just sports betting either, it's other things.

Jessica Welman (18:50.702)
I it is funny though that it is just like a tried and true tradition of gambling related bills that it gets tacked on to pieces of legislation with great support.

The Unlawful Internet Gambling Enforcement Act of 2006, that was tacked onto a piece of what is called must move legislation, which was like a 9-11 related safe port act protecting our borders from.

terrorist kind of thing and under the cover of night just kind of got tossed in. I'm just so used to this is how the sausage gets made and I'm jaded and disillusioned that I hear you and I appreciate your disdain for this system. I'm just so used to it.

The question for me too becomes like, do we ever get any sort of gambling expansion period or gambling related bills period in Mississippi so long as this issue remains? It kind of reminds me of like Denny Hoskins and VLTs in Missouri, right? Where it's just like, well, I'm gonna tack this onto every dang thing until you listen to me.

Charlie Horner (20:02.582)
Yeah, and we all saw how long that took to be resolved.

Jessica Welman (20:06.706)
We had to get him out of office and take it to the polls, and even then he still found a way to make it more complicated than it needed to be.

Charlie Horner (20:14.096)
Exactly, yeah, and I think this is probably where this ends as well. Ultimately, if you have a deadlock, then you need to break the deadlock, and that usually happens when voters go to the polls or legislators end up, you know, resigning or retiring or just leaving office. So, yeah, I'd imagine this one's going to be a slow burn unless there is a dramatic political change or a few people have an epiphany.

Jessica Welman (20:43.758)
All right, last question. Do we think, you know, this was the one that just seemed like it was gonna sail right through into law and get a sweepstakes ban. Do you think any other state has momentum enough to pass this, this session?

Charlie Horner (20:57.134)
I'm not sure whether there's any off the top of my head where this is gonna happen, but you can see where the wind is sailing.

Jessica Welman (21:02.818)
Maryland, Maryland making some headway. I'm hearing whispers. The New York one advanced out of committee, but like it's Adabo's committee and it's his bill that like I'm not surprised. You know, it's the gaming committee, of course. But I think the biggest issue standing in their way is that there are just lots of things happening here across the political spectrum that.

especially in states with shorter sessions, do we have time to worry about this? And I don't know for some of these how high priority this is.

Charlie Horner (21:39.553)
think you're absolutely right that we're in strange old times.

Jessica Welman (21:44.158)
Indeed. All right. We are entirely out of time, but you can check out all of the updates that I'm sure there will be more of coming from the event contracts, lawsuits, and cease and desist space. We've got Justin Byers on the ground at IGA in San Diego getting the tribal point of view of things. And Charlie and his team, you've got stuff going up all over the place, including a great feature on internet Vikings that is like, here's why.

Sweeps is gonna be a make or break issue for suppliers on SBC America. So check that out and check back in for another episode of iGaming Daily.