The online gaming industry is set to grow to a 300 Billion dollar global industry by 2025.
To get their piece of the pie, platform operators must successfully navigate a sea of federal and state regulations.
Keeping up with evolving legislation and shifts in technology is the key to identifying and avoiding compliance risk.
Operators need to be aware of the industry changes that are happening every day.
What is gambling compliance?
Gaming compliance is the process of operators assuring that users access and use services while following industry rules and local regulations. It includes all steps necessary to legally operate multi-jurisdictional online gambling and gaming operations from verifying location to safeguarding players’ financial transactions.
Who needs to stay informed on online gambling compliance changes?
Responsibility for internet gambling compliance falls squarely on the operator and their designees, including compliance, security and privacy officers.
How does online gaming compliance tie in with location-as-a-service?
Regulations have borders — people don’t. It’s up to the operator to apply online gaming rules by jurisdiction. Location-as-a-service establishes where gamers are when they play — geolocation determination is a must for compliance.
How has technology changed the way the global gaming industry handles compliance?
Technology redefines what’s possible with internet gaming. From the player’s perspective, today’s mobile devices allow sophisticated live experiences — AR/VR technology offers immersive play regardless of gaming location. High-speed connections reduce latency for faster, more responsive live games, and fans can place wagers on their favorite team in real-time via sports betting apps.
For platform operators, technology provides the same compliance capability as security staff offers a casino. Cloud computing via the network further improves data processing and storage capability without a warehouse full of servers and hard drives. For an aspiring operator, cloud technology is a win-win.
Why is gaming compliance changing?
Online gambling hasn’t always been legal. Convinced that early operations were ripe for illicit activity, such as money laundering, the federal government quickly said existing rules made them unlawful. But without the benefit of regulations that specifically addressed internet gaming, questions about its legitimacy remained.
Recognizing that online gambling was happening regardless of the rules, federal legislation for gambling regulation to curb it was first drafted in the late 1990s, but it wasn’t enacted. A 2002 decision by the Fifth Circuit of Appeals then opened the door to mobile gaming, holding that the Federal Wires Act of 1961 prohibits electronic transmission of information for sports betting across telecommunications lines — but doesn’t clearly prohibit internet games of chance.
The rules have been relaxed dozens of times since as gamers clamor for changes that allow greater access and states needing tax revenue challenge federal regulation. In November of 2010, New Jersey became the first US state to pass a bill expressly legalizing some forms of luck-based online gambling. It now serves as the model for the 48 of 50 US states that currently allow some form of live online gambling. Hawaii and Utah are the lone hold-outs.
Since the US Supreme Court lifted the federal ban on sports betting in 2018, eighteen states and the District of Columbia now permit some form of mobile or online sportsbook. These are the states that currently allow mobile gambling:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
While the new rules improve accessibility to online gaming, there are inherent risks for platform operators because each state issues licenses based on its unique regulatory developments. Others have legislation pending.
Owners face a personal background check and must provide financial reports, credit scores, and bank statements as requested — life becomes an open book.
Core requirements for businesses include assets sufficient to pay winnings and the technological capability to safeguard player privacy, protect financial data and comply with anti-money laundering, anti-terrorism, and gambling addiction statutes. The risks of non-compliance are profound.
What are the risks associated with online gaming and how location-as-a-service will help?
Location-as-a-service not only allows apps to apply custom rules for gamers based on their location, but it also provides a reference point for monitoring the origination of high volumes of financial transactions.
Creating a Gaming Compliance-Ready Platform
Every successful online gambling platform needs a clear, risk-based compliance strategy, including:
-
Risk Assessment Training for Staff - Platforms with the highest revenue will be a target for criminal activity. Training staff to identify entry points and prioritize risk factors maximizes security. Thorough and regular training can help companies be responsive to global gambling industry changes.
-
Compliance Audits - No plan is foolproof. Regular and vigorous audits find weak points before they can be exploited.
-
Hire a Chief Compliance Officer - Mobile gaming operations are extensive and multidimensional. A single voice in charge unifies individual efforts.
-
Hire Security and Privacy Officers - Security and privacy are the two most significant compliance concerns in online gaming. An officer for each provides sufficient oversight and a system of checks and balances.
-
User/Patron Location - Gambling compliance requires following strict jurisdictional rules. There’s no practical substitute for robust geolocation services.
Why all this focus on location?
Transaction volume equals profits, but platforms must operate within a state’s borders to comply with each jurisdiction’s rules. Compliance requires verification of the gaming location.
How does LocationSmart help with mobile gambling compliance?
LocationSmart offers a comprehensive, real-time cloud-based multi-source geolocation service for online gambling, sports betting, and internet casino platforms. Our secure API is used by operators as part of a gaming compliance initiative.
LocationSmart offers the following for Gaming Operators:
-
Location Verification: Determine if users are in or out of a valid gaming area for immediate transaction approval
-
Interaction: Extend on-site wagering to mobile to take advantage of total allowable wagering area
-
Compliance: Comply with state laws for in-state or on-site transaction verification
-
Security: Use trusted and secure location determination for “green light” transaction approval
-
Gamer Invitation: Notify users when in an allowed area to use your application
-
Personalization: Tailor communications to users depending on whether they are in our out of a confirmed betting area
How does LocationSmart validate a gamer’s location?
IP Address - While a ubiquitous solution for online device location, the increasing use of satellite connections, mobile gateways, and anonymous proxies make it undependable on its own. In some jurisdictions, IP address alone is no longer sufficient to confirm user location.
Browser Location - Browser location technology can glean location data from mobile and desktop devices using Wi-Fi, Cell site, GPS, and other signals to determine the best available location.
Mobile App Location - Through a sophisticated SDK for use in iOS and Android apps, operators may access the most precise location information available along with device insights to assess its trust level.
Device Profiling - The Device Profiling technology analyzes device and connection data along with user behavioral heuristics — identifying changes in configuration, anomalous conditions, and inconsistent use patterns that could signal fraudulent activities. It’s future-proof technology available through the power of the cloud.
Geofencing - LocationSmart's Smart Zone technology allows operators to determine whether a device is within an authorized area with confidence based on the device location, its accuracy, boundary conditions, and local regulatory needs.
About LocationSmart
LocationSmart is the leader in geolocation compliance. We have helped our gaming operator clients in New Jersey, Delaware and Nevada verify users and get the "green light" to place wagers and enjoy their mobile gaming experience.
Learn how LocationSmart helps with Internet Gaming Compliance and grab our Mobile Gaming Product Brief.
We keep our customers compliant with regulations and jurisdictions. Read our Gaming Best Practices White Paper.
