by: Brian Schaller

Online Real Money Gaming (RMG) is a growing industry that relies on many non-RMG businesses to operate, publicize, and market games. There are certain licensing and other compliance requirements that may arise for non-RMG businesses when doing business with online RMG companies. These requirements can come as a surprise to businesses that are not regularly in the online RMG space.

Below we explain the landscape and discuss strategies to determine if certain compliance steps are necessary, key legal risks and steps you can take to help protect your interests. Why should non-RMG businesses care? Regulators in the space have a history of following the money (e.g., television networks and online publishers that display paid gambling advertising). Moreover, many of the applicable laws include penalties for aiding and abetting illegal gambling.

What is Online RMG?

Online RMG includes casino gaming, sports betting, fantasy sports, skill gaming, e-sports competitions, horse racing (also known as advance deposit wagering-ADW), lotteries (usually run by the state), charitable raffles, bingo (charitable and for profit) and sweepstakes. However, online RMG is evolving. Traditional lines are being blurred as games are combined and reimagined. Slots and bingo were combined to create a game called Slingo. Skill games have turned traditional single player games (e.g. solitaire) and names associated with chance (e.g. bingo) into skill-based tournaments that reward speed, optimal use of powerups, and so forth. Social casinos were devised so that people could play casino style games (e.g. slots) while arguably removing the gambling element of prize. Now social casino games are being combined with a promotional element where there is a prize. E-sports (typically seen as a type of game of skill) is becoming a popular category of sports betting, which was traditionally reserved for physical sports such as football, basketball, and baseball. Platforms are emerging that offer peer-to-peer betting (betting exchanges), operating under a different model than traditional sportsbooks.

There is an entire industry behind the online RMG curtain, including platform providers (e.g. providing the technical platform for people to place bets), aggregators (websites that earn their money, in part, by advertising/referring potential patrons to online RMG operators), technology companies that ensure geoblocking and age gating, and payment processors. Businesses that are not directly involved in the online RMG industry can be considered a vendor or service provider of an online RMG company and trigger licensing and other compliance requirements.

Who Needs to Comply with Online RMG, Including Licensure

Each state individually regulates online real money gaming, with unique statutes, rules, history, politics, and regulators. Thus, what a game actually is, whether a gaming activity is lawful, who needs to comply, and who needs to be licensed requires a state-by-state analysis.

For example, some states have a strict licensing regime for daily fantasy sports, in some states daily fantasy sports operators rely on general skill gaming statutes and common law to lawfully operate, while betting on fantasy sports is clearly prohibited in other states. Sports betting, on the other hand, has relatively strict requirements and licensing regimes. Now Pick-em style fantasy sports have complicated matters further. Some regulators essentially argue that such a game is not fantasy sports at all, but rather sports betting (see our recent post).

Even when there is a statutory regime for a gaming type, things can get muddy. In 2021, Florida authorized online sports betting through a Compact with the Seminole Tribe of Florida, which granted the Seminole tribe a monopoly to run, and be the primary regulator of online sports betting. The Seminole tribe via Seminole Hard Rock Hotel & Casino Hollywood launched online sports betting in 2021, but then pulled the online offering due to a lawsuit that made its way to the Supreme Court. The Seminole tribe then decided to relaunch online gaming late last year, even though, at the time, the case was still in the Supreme Court’s hands. The Supreme Court recently denied the petition to weigh in on the case, which is favorable for the Seminole tribe and could have implications beyond Seminole tribe and the state of Florida.

Unlike some other states, in Florida, the main regulatory body for online sports betting is not tied to the state government, but rather the Seminole Tribal Gaming Commission regulates online sports betting (with some oversight by the Florida Gaming Control Commission. (16.712 (1) (d)) Licensing of vendors is run through the Seminole Tribal Gaming Commission Vendor Registration Program (see here, and here), which contains certain regulations that are open to interpretation.

Strategies to Determine Compliance Steps

For non-RMG businesses that are considering a relationship with an RMG business, there are some key strategies to determine the risks involved. These include (i) understanding the online RMG business (e.g. reviewing their activities, and what your services will be used for), (ii) knowing the requirements, if any, for registration/licensing within the applicable states/territories (which can be tricky given the complicated nature of licensing as discussed above), (iii) deciding what type of agreement/contract is appropriate for your deal (including the specific protections your business will need to minimize risk), and (iv) accounting for regulations that you and/or the business partner may need to comply with (e.g. disclosures, age restrictions, self -exclusion lists, tech requirements).

Final Thoughts

There are 50 states with various and varied laws governing online RMG, and the types of online RMG is large and evolving. Landmines await those businesses that do not understand or are not prepared to do business with, or in, the online RMG industry. There are steps that you can take to uncover those landmines before they cause damage to you and your business. We recommend to our clients that they do due diligence and implement certain safeguards to protect themse

Originally published by InfoLawGroup LLP. If you would like to receive regular emails from us, in which we share updates and our take on current legal news, please subscribe to InfoLawGroup’s Insights HERE.