Future-Proofing The Sports Betting Industry With Blockchain

The Progression of Sports Betting In The United States

In order to fully grasp the utility of Blockchain in Sports Betting, one must first understand the early history of the industry and the regulations that it's Wild West type of origins forced into creation. The United States has a sorted history of gambling and sports betting, and the latter has often flouted gambling regulations and anti-gambling laws simply due to its inherent nature of being ‘mostly’ decentralized from inception. This country (and many others, I’d assume) have witnessed a long battle between gaming laws and people who wish to enjoy betting on sports. Regulation in sports betting really became tight after the 1919 Black Sox scandal where eight members of the heavy favorite Chicago White Sox were accused of intentionally throwing the World Series against the Cincinnati Reds in exchange for a bribe of about $10,000 each. This caused states to begin banning various forms of gambling by targeting the gaming operator and bookies.

However, before that incident, sports betting was extremely popular in the United States — and even prior to the formation of this country, as the American Revolutionary War was funded, in part, through taxes placed on lotteries in the original US Colonies. All 13 original colonies established lotteries and once the War of Independence began, the Continental Congress voted a $10 Million lottery to finance the war. Had the appetite for betting not been as strong as it was, we may well be drinking tea and driving on the wrong side of the road.

Lotteries were not the only form of gambling during this era. Wagering on horse racing was a popular form of gambling. Not surprisingly, it was not quite as organized nor as elaborate as modern horse racing. Rather, the gambling was limited to a few friendly bets between owners of horses and their partisans. The first racetrack in North America was built on Long Island in 1665.

Before the 1800s, the gambling industry started to grow rapidly and appeared as a replacement for lotteries. During that time, New Orleans became the leading gambling center for the United States which was eventually replaced by California in 1850. However, by the early 20th century, gambling was firmly under mafia control which began to lay the catalyst for government regulation of the industry as a whole and to create oversight (and control of) by the Government.

The Great Depression resulted in major financial and economic losses for the United States. Because the Government already had its hooks in the gaming industry, this resulted in gambling being legalized, but with strict controls that were of benefit to the government(s) of the United States — designed to provide economic relief and ensure the flow of money in specific markets. The double blow of the stock market crash of 1929 and the Hoover Dam project created a hard economic depression in Nevada, which led to the legalization of gambling as a way to bring economic relief. In 1931, Nevada legalized most forms of gambling when Assembly Bill 98 was signed into law, providing a source of revenue for the state. Interest in development in the state was slow at first as the state itself had a limited population. After World War II, enforcement of gambling laws became more strict in most places and the desert town of Las Vegas became an attractive target for investment by crime figures such as New York’s Bugsy Siegel.

The town rapidly developed during the 1950s dooming some illegal gambling empires such as Galveston. Nevada and Las Vegas, in particular, became the center of gambling in the U.S. In the 1960s Howard Hughes and other legitimate investors purchased many of the most important hotels and casinos in the city gradually reducing the city’s connections to organized crime.

Southern Maryland became popular for its slot machines which operated legally there between 1949 (1943 in some places) and 1968. In 1977, New Jersey legalized gambling in Atlantic City. The city rapidly grew into a significant tourist destination, briefly revitalizing what was previously largely a run-down slum community. In 1979, the Seminole tribe opened the first reservation-based commercial gambling beginning a trend that would be followed by other reservations. Gradually, lotteries and some types of parimutuel betting were legalized in other areas of the country.

In the 1990s, riverboat casinos were legalized in Louisiana and Illinois in addition to other states. In 1996, Michigan legalized gambling in the city of Detroit creating an economic center for potential casino growth. In an attempt to curb the ill effects of the rapid rise in gambling on sporting events, Congress passed the Professional and Amateur Sports Protection Act of 1992.

In the early 21st century, Internet gambling grew rapidly in popularity worldwide, but interstate and international transactions remained illegal under the Federal Wire Act of 1961, with additional penalties added by the Unlawful Internet Gambling Enforcement Act of 2006. The Supreme Court overturned the 1992 prohibition against sports gambling in 2018 paving the way for the legalization of one of the most popular forms of gambling.

Sports Betting Now — A Worldwide Market With a Future Problem

The sports betting market is the biggest segment of the overall worldwide gambling market. Gaming companies have been extremely excited about the Supreme Court’s decision earlier in 2018 to allow sports gambling across the U.S. MGM Resorts (NYSE:MGM), Boyd Gaming(NYSE:BYD), and Caesars Entertainment (NASDAQ:CZR) have already announced sports book expansions, both in casinos and online, and that’s just the early movers.

While sports betting might be the largest worldwide gambling market segment, it isn’t yet a very big business for casinos in general. In Nevada, sports betting wins for casinos were just $329.1 million, which pales in comparison to games like baccarat and blackjack, which pulled in $1.24 billion and $1.17 billion, respectively. But there’s a reason casinos are excited about sports betting growth long-term

The sports betting market comprises a number of types of wagers; from money line, point spreads, handicap betting, prop bets, futures, parlays, progressives and many others in different prize range. Rewards are given in the form of physical goods, as well as monetary benefits. The online gambling market in the US enables the bettors to use virtual money, which has reduced the risks related to cash. Payment through online real cash transactions and virtual money enables the distribution of prize money as virtual currency, which can later be used to play other games or redeem as cash. It also helps the vendors track the spending history of the customers. Another advantage of online gambling is the scalability it offers as it can be implemented to reach a large gambling population. This will give vendors an opportunity to create customized marketing plans to attract more bettors.

Online gambling, especially sports betting, attracts the younger population. It also reaches the gambling population that does not follow sports on TV and is available in countries where betting is either legal or illegal. The average age of a land-based sports bettor is 45 years, whereas the average age group of an online sports bettor is 38 years.

"For penetration, growth and market dominance, it is essential for sports betting to attract the millennial generation — and those who come behind it. The adoption of and immediate implementation of blockchain technologies throughout the global online gambling market is essential in maintaining the interest of this segment of the population, as well as combating the internal policies of credit card processors and financial institutions.” — Tao of Random

Technological innovations, such as the adoption of Blockchain, along with player reward and retention programs play a significant role in driving market growth. To maintain this growth, the Sports Betting industry must constantly develop new ideas and technology, stay up-to-date with emerging games and maintain compliance with licensing policies and procedures; or adopt technologies which provide solutions across the board and address portions of all road-bumps.

Casinos, Sports Books and Mobile Gaming operators can benefit from the adoption of future-proof technology. No one knows which cryptocurrencies or blockchain networks will be the most popular in 5, 10 or 20 years from now; and this causes hesitation in market adoption of the technology, especially in the regulated industries. While IGT (NYSE:IGT) is powering MGM’s sports betting already, and Scientific Games (NASDAQ:SGMS) announced an agreement with Caesars to use its sports betting platform in New Jersey and Mississippi, there are fundamental gaps in their traditional payment infrastructure for which Blockchain can provide solutions; such as interoperability of assets between games, more robust Know Your Player (KYP) data, instant remittance, and value transfer while dis-intermediating expensive 3rd party processing, and facilitating the legal transfer of value cross-border. Without the integration of network agnostic solutions, these solutions, while they may well work and create increased revenue in the short term, will be prone to the compounding of complexities for the necessary adoption of future protocols and networks as they become cheaper, faster, and more utilized. These companies are in the early phases of building out sport betting infrastructure, and will likely be providers for most early casino sportsbooks — however the gaming industry operators must become educated and look to the near-future while leveraging their pull and ensure their selected providers are adopting and integrating the blockchain solutions that companies such as Omnigate Systems Inc. provide.

The Sports Betting Experience of Tomorrow

Imagine a sports betting casino patron is walking the floor during mid-day after a Premier League game. Throughout the casino, not just in the sportsbook are various flat-screens showing the early NFL games. ATM/TITO redemption Kiosks play these feeds as well when not being used. Each screen has a code displayed which the patrons can scan with their mobile phones giving them the audio feed to their favorite game. They can listen as they walk the floor, playing slots and/or table games.

Suspiciously absent from the casino is the entire Sports Book — having been replaced by the highest revenue-generating table games it now serves as a gambling VIP lounge with concierge service for the property’s most valuable guests. Instead of placing bets at a kiosk, or obtaining cash from winning bets, everything is stored and recorded in a digital blockchain-enabled wallet on the patron’s mobile device. Because the Player Rewards information is linked with the wallet as well as the players' bank account, that single wallet can be used to purchase concessions, casino chips, or transfer funds directly to a table game or slot machine. All of the compliance, Title 31 restrictions, KYC/AML functions, player limits and casino credit are managed by the middleware which the patron’s digital wallet is enabled from.

The wallet, on their mobile device, is powered by the front-end UI developed by the casino but allows for the patron to add funds anytime, anywhere to spend in real time on the casino floor. Funds can be added from any asset class, any fiat currency, any linked bank account with instant and real-time value transfer. Placing a Sports Bet is simple for the guest; as they move from the Baccarat table, with instant credit from their winnings appearing in their wallet, they place a wager on the upcoming Redskins v. Cowboys game. The amount is deducted from their mobile wallet and the casino’s account is real-time credited. The patron continues to walk the floor and participating in the house edge games while enjoying their participation in Sports Betting.

Any technological advance surrounding game-pace and the potential to increase this while retaining customer loyalty and acceptance has huge implications for the casino operator. The underlying metric of whether a casino makes more or not, and how it makes this money is rather simple:

TURNOVER (the sum of all bets made) X HOUSE ADVANTAGE = THEORETICAL WIN

In this case, by promoting the capability of sports bets in a manner where the patron can also instantly utilize their winnings on the casino floor increases the Theoretical Win for the house.

Geographical compliance on betting location is enforced through the inherent ability of location-based protocols native to mobile devices. The casino can restrict the ability to place a sports bet depending on where in the casino the patron is.

Rewards for casino play are given in real-time and can be used directly from the wallet on the mobile device. After the game the patron is betting is over and the patron realizes a hefty win of $50,000 credited directly to his digital wallet, a co-branded offer is displayed on the app, offering the patron the chance to be flown to a player meet-and-greet where he’ll be the VIP guest and met the game MVP. The patron accepts the offer, the money he just won is debited from his digital account with the appropriate percentage transferred to the winning team and the house getting its take as well.

This isn’t fiction.

That scenario isn’t what could be possible in the future. It is what IS possible, right now. But only when the proper technology is applied. The industry has competing interests, and with good reason. Proprietary technologies are beneficial to the companies who create them and provide a service to the buyers. But buyers must understand that they control the development of those technologies with their buying power — working with their trusted tech and experience suppliers today to ensure the suppliers are integrating the correct systems to future proof their tomorrow is the key to rapid development and reduced long-term code complexity.