Publication

To Temporary or Not to Temporary

September 26, 2022

Key takeaways:
  • The Commission recently hosted a roundtable to solicit suggestions from industry on rolling-out mobile sports wagering in the Commonwealth.
  • The Commission is struggling to reconcile provisions in an Act Regulating Sports Wagering that appear to allow an unlimited number of temporary mobile sports wagering operator licenses, but also cap the number of final mobile sports wagering operator licenses at 7.
  • Generally speaking, industry is hostile to the concept of unlimited temporary mobile sports wagering operator licenses, but the issue is far from settled.
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On September 22, 2022, the Massachusetts Gaming Commission (“Commission”) convened an in-person roundtable to solicit feedback from industry on the launch of mobile sports wagering platforms in the Commonwealth. It was clear from the statements of Commissioners that the Commission is still wrestling with a perhaps unintentional wrinkle in an Act Regulating Sports Wagering (the “Act”), which, on its face, authorizes the Commission to issue an unlimited number of temporary, untethered category 3 licenses (i.e., mobile wagering operator licenses not tied to a licensed, brick-and-mortar gaming facility), even though the total number of final untethered category 3 licenses is statutorily capped at 7. 

Indeed, Commission Chair Judd-Stein even went to so far as to characterize the pertinent provision of the Act as a legislative error. In the absence of new legislation to clarify the Act, the Commission is potentially faced with a scenario where innumerable (and, perhaps, largely unknown) mobile-only operators flood the Massachusetts market on a temporary basis, only to have a maximum of 7 operators receive final licenses. Central to the Commission’s equivocation are consumer protection risks inherent in discontinuing a mobile wagering operation after bettors have deposited funds in online accounts and/or placed bets that may not pay out until long after a temporary licensee has ceased operations.

Because the Act’s ambiguity has obscured any clear path to rapid commencement of mobile sports wagering, the Commission turned to industry for suggestions on how to implement the temporary license regime and mitigate consumer protection risks. Specifically, the Commission asked for industry comments on the following question:

Assuming any Commission implementation of temporary licensure for untethered Category 3 operators would necessarily include technical testing, suitability, internal controls and other industry-standard requirements, and given the logistical complexities and consumer protection concerns outlined at the Commission meeting on September 15, 2022, would you have an interest in a temporary license and if so, do you have any suggestions on how to address consumer protection concerns in the event that a large number of licensees may be required to dismantle their operations within a short period of time?

Generally speaking, most industry commenters were opposed to the concept of unlimited temporary category 3 licenses, with many less established operators suggesting the construct would provide an unfair advantage to the more established operators who already have the technical infrastructure and financial resources in place to quickly commence operations in Massachusetts. For less established mobile operators, the prospect of investing significant resources into Massachusetts without any reasonable expectation of a final license is not palatable. Many commenters also echoed the Commission’s own consumer protection concerns, although some posited that Commission regulations and mandated cooperation between final licensees and any discontinued temporary licensees could ameliorate many problems. Finally, a number of commenters recommended that the Commission convene a competitive process (which the Act requires for final, untethered category 3 licenses) for the temporary untethered category 3 licenses and, thereafter, issue only 7 temporary licenses. This approach, it was argued, would provide mobile operators with the degree of foreseeability needed to invest in a new market. While the Commission is ultimately responsible for interpreting the Act, this approach would appear consistent with the Act because the Commission is given considerable discretion to award temporary licenses in a manner it sees fit.

All told, this issue is far from settled and the Commission signaled its desire to pose additional queries to industry and, potentially, host a subsequent round table to continue to the dialogue.