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Gaming regulations are evolving fast, as advancing technology transforms the industry, changing both the games to be regulated and the tools available to regulators, suppliers, and operators.
New legislation like the sports betting bills in Ohio, Maine, Nebraska and Ontario – as well as in Kansas as of September this year – means an extra burden on the regulatory agencies to develop state regulations and get those approved before the launch date. In addition, operators and suppliers must go through strict licensing requirements in order to be approved and these agencies must take the time to thoroughly investigate each applicant.
Due to scope, regulators are focusing on a modernized approach to gaming regulation.Some new markets, like Ontario, are replacing the old prescriptive regulatory model with a new risk-based approach that allows registrants to decide how they can be compliant with the guidelines set by the regulator, instead of telling them what they should do.
As the number of new entrants into the industry grows, effective regulatory compliance can become a competitive advantage – especially when the business is poised to expand into new markets within the US or internationally. To help operators better prepare for what is to come, our panel of experts conducted a live webinar on the topics of:
The webinar panel comprised Mukund Goenka (Co-Founder and CEO, Regology), Chris Fleenor (Chief Technology & Gaming Officer, Ohio Casino Control Commission), Steve Kastner (VP Compliance, PlayDigital), together with moderator Jessica Welman (Editor, SBC Americas).Here are the highlights.
The panel discussion started off with painting the picture of what gaming regulators are facing today with regard to the new verticals of regulation in online gaming. Still gaining familiarity with the wide number of products to address, regulators are dealing with copious amounts of work, broad market scope, and tight deadlines. In the meantime, there is a barrage of questions from the licensees that need to be answered, too.
Jessica: Can you describe the new scope of regulation for the gaming industry and its business impact going forward?
Chris: The scope is expanding. As states are becoming more comfortable with the different forms of gambling and gaming that are out there, and as those new forms come about, the scope of what needs to be regulated and how it's regulated is ever-changing. And it's definitely a challenge for regulators to not only build the expertise around all these up-and-coming technology and gaming formats but also to just fully understand the regulatory scope of what needs to be regulated in those markets.
“...we have tried to adopt a strategy of focusing on best practices and points of commonality and then work with the regulator to try to understand what might be a local nuance or something that's different.”
Steve: We definitely recognize that the timelines for regulators are severely abbreviated. I got a lot of empathy for Chris and his colleagues in that they aren't really given a whole lot of time to do a lot of work between legislation and expectations of market opening. And then here come all of the prospective licensees – and we've got a million questions. And so we [IGT] have tried to adopt a strategy of focusing on best practices and points of commonality and then work with the regulator to try to understand what might be a local nuance or something that's different. Hopefully, there are very few of those, and I can say most of the jurisdictions that have opened up recently have done a good job of reaching out to fellow jurisdictions and understanding best practices there and adopting what fits their jurisdiction.
Discussing the topic of entering new markets, the panelists covered some salient challenges associated with growth and risk management. As an operator becomes more successful, the platform they have designed needs to match the scalability of the business by offering new products and services while monitoring legislation for new markets. Their risk management program needs to be planned and carried out consistently with ongoing evaluation of risks and controls that may be impacted.
Mukund: I'd like to point to the growth-operations paradox – or transform that into a growth-compliance paradox – which is as a company grows and looks to enter new markets, its operations and compliance responsibility increase. But businesses often delay their investments and thereby push out their responsibility, causing a downstream logjam. The real hard work really starts after the regulations come into play… So, if it feels like you're running against the headwind with a parachute pulling you back, you're sitting in that growth-compliance paradox and that leads to compliance debt that really needs to be paid back at some point, either in the form of enforcement actions, operational bottlenecks or other discussions with regulators.
“...if it feels like you're running against the headwind with a parachute pulling you back, you're sitting in that growth-compliance paradox and that leads to compliance debt.”
Chris: [S]ome of those potential licensees could be first-time entrants into a gaming market or a highly regulated market. So it's a totally different atmosphere than what they're used to operating. That can be challenging not just for them, but for the regulator, just from a communication perspective and expectation on what needs to be done and when. So that's definitely a challenge that we try to get ahead of by reaching out to stakeholders, especially the ones that we know are new entrants into this type of market and trying to start those conversations and put forth those expectations with different regulations and laws, what their interpretations are, and how they can be met by the operators.
Jessica: Chris, for you as a regulator, what for you is the ideal regulator licensee relationship once you get through the process and things are up and running?
Chris: From a regulatory perspective, as we perform audits or look at how an operator is complying with regulations, we just like to have that open channel of communication…we should be able to reach out and have a conversation with the operator about concerns we have and vice versa. If the operator has concerns with something from the regulatory side or if they spot something that they think is non-compliant or could possibly be non-compliant – open that dialogue with the regulator. I think a lot of operators, again, especially ones that maybe aren't familiar with operating in a highly regulated area, may not realize that having that forward communication could actually stave off some of those regulatory enforcement actions. Trying to sweep it under the rug or pretend like it never happened is never a good strategy when it comes to staying in compliance.
There are a lot of manual processes and paperwork in a compliance process – from 200-page documents to thousands of requirements – and efficiencies are crucial. The use of technology to minimize the overwhelming amount of work will benefit operators and regulators alike.
Mukund: What we see in the industry is that there is an increased awareness in tracking the updates as they flow through and becomes final law as well as regulations so that they're ready to compare that against their existing compliance program to make modifications proactively…The other area going hand in hand with the compliance program is to look at the internal controls, look at the state-by-state internal controls that are published vis-a-vis what are the internal controls for a given organization such that I can build out the minimum controls that are required.
Mukund: [T]here are many solutions out there for automation…using AI…and that's where looking at a solution such as the regulatory change and regulatory compliance solutions that are out there, including ours from Regology, which tracks thousands of regulations at once, thousands of bills that are coming out, as well as any other enforcement actions and activities that are happening downstream in terms of guidance...So there are tools that look at the hundreds of thousands of regulations out there and compare them in order to reduce 95% of the noise coming out of these regulatory updates and changes….Reducing that key-person dependency and identifying a single source of truth [that’s] where you're moving away from emails and individual documents…so that you're not scrambling the day before or the week before an audit. [This] is key to leveraging and identifying what the best solutions out there might be for you.
“...there are tools that look at the hundreds of thousands of regulations out there and compare them in order to reduce 95% of the noise coming out of these regulatory updates and changes”
Steve: We frequently try to go out and look for a tool that works in another industry and try to adapt it to our own needs. An example is a product that probably most of the companies on this call use called JIRA from Atlassian, and it's a case-tracking tool. We've figured out how to adapt it to control such things as product submissions and faults in the field and doing release timing and authorization and those types of things….There are also some good industry-specific tools, such as ArdentSky for licensing application management…So finding a very good, intuitive tool that can be customized to meet your needs, that opens up a lot of doors for an organization, and you have to be good.
Mukund: And the interoperability and connectivity between those tools is something that's additionally providing now for a significant amount of efficiency in the space.
Chris: There's definitely room for automation on the regulatory side as well. In fact, we've been trying to move in that direction from an operations perspective to allow for a lot of efficiency between the operators and the suppliers and even certified testing labs that have to interact with us as regulators. Just developing systems and protocols that allow communication to happen between our system and their system without any manual interaction. So there's a constant flow of data going between all of these different endpoints through these standardized protocols that we're developing. And then having those connections there allows us to automate things like submissions of equipment from the lab for us approving those submissions, shipment submissions on the casino gaming side from a Responsible Gaming perspective, and the voluntarily excluded patron list that we maintain. The ability to share that with operators in real-time as the list changes I think is a huge benefit to having that automation in place and having that connection from the operator to the regulator.
To view the full webinar for more details on the gaming regulatory development process, regulatory compliance management, AI-powered automation, and the Q&A portion, click here.
