Maryland legislators have touted the provisions of the commonwealth’s latest gambling expansion law along the lines of enabling inclusion for minority-owned, small, and women-owned businesses. However, one area in the proposed Maryland sports betting regulations threatens to completely nullify all those efforts.
The culprits are the vagueness of the language around a potential official data mandate and the trends around such requirements. The procedures the regulations detail could act as a significant barrier to entry as well.
What the Maryland sports betting regulations threaten
When Gov. Larry Hogan signed HB 940 into law earlier this year, things couldn’t have looked any rosier. The law includes several provisions aimed at removing hurdles. Those include:
- Creating a special fund to provide financial assistance to minority-owned, small, and women-owned businesses
- Giving higher priority for licensure to applicants who can demonstrate minorities or women have an interest in the business
- Specifying two classes of licenses specifically for smaller businesses with lower fees
In fact, the new code lays out how this was a very deliberate move by the legislature.
“It is the intent of the General Assembly that this subtitle is to be implemented in a manner that, to the extent permitted by state and federal law, maximizes the ability of minorities, women, and minority and women-owned businesses to participate in the sports wagering industry, including through the ownership of entities licensed to conduct sports wagering under this subtitle.”
Prior to the MD Lottery & Gaming Control Commission posting its draft rules, it looked like the code was having the intended effect. An informatory event drew a lot of minority business owners. Marissa Coleman, a Black woman who has taken on several roles in the nascent industry, stood as an example of the doors the law appeared to be opening.
The current language of the rules has serious flaws, though. Some of the biggest center on how sportsbooks can use data feeds to settle wagers.
What the draft rules say about official data
On page 198 of the proposed rules, a section titled “Verifiable Outcome” needs revision. The section starts off alright, stating that licensees can use any data provider to settle their wagers. It then gives sports governing bodies leave to request that regulators require sportsbooks use “official league data” for bets related to their events.
The rules then state that upon approval of such a request, sportsbooks would have 60 days to make one of three choices:
- Challenge whether that data is available on “commercially reasonable” terms
- Punt on offering action on that sport
- Secure access to the official data feed
Sportsbooks do not send an army of staffers out to every event they offer action on to report results as they happen. Instead, they essentially buy that information from vendors. There are companies that make providing such data their primary product.
The tag “official league” means that such a company has gone through whatever rigors are necessary to get that stamp of approval from a sport’s governing body. For the NFL, for example, that’s Genius Sports.
Should the Commission finalize this section as currently composed, here’s what could happen in regards to NFL betting in MD:
- The NFL submits a request to the Commission to require sportsbooks to get their data from Genius (or other official providers in the future)
- If the Commission approves that request, then
- Licensees have 60 days to make their choice
For the same small businesses the law tries to “maximize the ability” to “participate in the sports wagering industry” for, any of the three choices represents a significant barrier to entry.
A real “Sophie’s Choice” for small businesses
Continuing with the example of the NFL, it’s easy to demonstrate why this is onerous. Given the high price of acquiring the official data provider tag for Genius, rumored to be around $100 million a year, Genius is likely to demand a premium for its feed.
It’s debatable whether a “mom and pop” sportsbook could afford such fees. At the same time, foregoing offering action on the NFL would make offering sports betting a pointless endeavor.
Contesting the commercial reasonableness is not much better. The draft regulations are quite abstract on that subject. Additionally, the criteria for the challenge are very subjective. The rules say operators can get an exemption if they can provide the Commission with sufficient information to show that:
- The availability of a governing entity’s official league data for such bets on commercially reasonable terms from an alternative authorized source;
- Costs paid by the sports wagering licensee for data from authorized sources, in Maryland and in other states;
- The reliability of the data, including the quality and complexity of the process used for collecting the data; and
- Any other information the Commission requires
Undertaking such a challenge would require a small business to employ other professionals, likely billing them hundreds of dollars an hour. Additionally, those economists and lawyers would have little precedent to draw from. There is no objective standard in this language for what the Commission considers complex, reliable, data, for instance.
Furthermore, even if they are successful in such a challenge, this would only cover their access to NFL data. They would have to repeat the process all over again for official data access for NBA, NHL, etc. events. Contrary to legislative efforts, only applicants with deep pockets could participate, after all.
How regulators can avoid this contradiction
Possible ways to maintain the spirit of the governing statute include putting the onus on the data providers, not the licensees, to prove their data feeds are available on terms that small businesses in MD can afford. If Genius can pony up $100 million a year for the NFL’s shield, it can manage to produce such a report.
The Commission could also provide concrete parameters to the term “commercially reasonable” as well. Finally, just as it left the market to decide which data provider would get the NFL’s approval, it could simply let operators choose.
The most annoying part of this whole scenario is that “official league data” is a solution searching for a problem. There have been no reports of rogue data providers scamming bettors and sportsbooks with incorrect information.
There’s zero evidence that “official” data is in any way superior to “unofficial” data. The only quantifiable difference is whether providers have or haven’t paid governing bodies for such distinctions.
With one vote later this year, the Commission could erect a brick wall that contradicts the spirit of the law these regulations are meant to put into practice. Hopefully, Maryland sports betting regulations will instead set a new standard for access to the sports betting industry.