Opinion: Europe's approach to regulation paves the way for US success

Online gambling in the US has been legally restricted since the Federal Wire Act of 1961. Over the years, there have been many challenges, with the most successful coming in December last year resulting in the US Department of Justice (DoJ) confirming it only refers to sports betting.

While the announcement was answering a query from two state lotteries, it does move the chances of egaming across other sectors a significant step closer. The nature of the opinion suggests that some forms of gaming will be regulated in the near future. Indeed, given the overwhelmingly positive response the opinion has received, many believe that further relaxations are only a matter of time.

The opportunity this offers is tremendously exciting for both US and international business and consumers. However, opening the industry in this manner will mean many of those involved are entering unchartered and unfamiliar waters, so they need to proceed with caution.

Implementing proven identity verification systems that assess the user’s behaviour, device and identity details will allow organisations to proceed with confidence, but state governments have an enormous role to play in ensuring the right level of security checks are in place. The key to this lies in the approach to regulation. An over cautious approach may mean that the security measures are too strict to allow players to enter the market, while lenient laws could put both businesses and consumers at risk.

At the moment, moves to legalise state lotteries and other forms of online gaming are likely to be implemented at a state, rather than national level, meaning that individual state governments will have control over regulation within their region. While this makes pragmatic sense, it adds additional layers of complexity for the regulation and identity verification process and means we’re likely to see a striking trend towards cross-border gambling.

In many ways this fragmented approach is reflective of the way in which the European gaming market is orchestrated. The individual regulatory bodies and differing approaches to regulation within each country is similar to the situation we’re likely to see in the US. So what can the United States learn from Europe? Where can we show best practice, and where can we warn against the wrong approach to regulation?

There are examples in Europe where regulation has been a success, the latest one being Denmark where there was pressure in the race for operators to be ready for go live, but in the feedback we have had with operators, it’s proving to be a highly successful experience.

We have also seen other examples of the dangers of over-prescriptive regulation, particularly in relation to ID verification where the rules are overly stringent and manual copies of identity documents have to be sent in the post. For those who are eligible to play, the verification process is often so painful that players drop out of the process meaning operators lose vital business.

So what approach should the US take? Essentially, state governments need to focus on providing clear guidelines benchmarked against other well regulated jurisdictions rather than over prescriptive rules. They need to take advice from successfully regulated jurisdictions and industry experts, fully understanding the possible technical solutions to the issues they face. One of the main areas is identity verification. Without being able to get players through the relevant Know Your Customer checks, the revenue model doesn’t work ““ for anyone. The players, operators, regulators and the jurisdictions governments all lose out.

The ideal is a joined up regulatory approach. This reduces the cost to operators when dealing with a fragmented approach to identity verification. It’s likely to be a while before the industry really takes off so there is plenty of time for the market to get itself in order and for regulatory bodies to consort with their European counterparts on the best solution. New Jersey is widely expected to be the first state to allow gaming, so all eyes rest on the approach its governor will take. Like it or not, the state is likely to become the epicentre of US egaming meaning it will play an enormous role in the success, or otherwise, of the industry across this vast continent