Industry Players Give AZ Sports Betting Regulations Final Scrutiny

Posted By Derek Helling on July 8, 2021

With the clock ticking to Sept. 9, it seems final Arizona sports betting regulations might be available soon. On Wednesday, the AZ Dept. of Gaming held the last web call for interested parties to provide comments on the current proposed rules.

Many of the expected stakeholders addressed Department members on a variety of topics. The commentary from Dept. representatives on the call provided necessary clarification for one particular item that several interested parties voiced opinions on.

Final call on the Arizona sports betting regulations

From 9 a.m. to just short of 10 a.m. Pacific Time on Wednesday, multiple representatives of the Dept. of Gaming participated in the Google Call. Primary speakers for the Department were Warren Nichols, the Assistant Director – Gaming Compliance, and James Stipe, a Phoenix attorney.

Among those submitting comments and asking questions during the near-hour were:

  • Andrew Diss, representing the Arizona Coyotes
  • Amilyn Pierce, Arizona Diamondbacks Vice President of Government Affairs
  • Kevin Cochran, DraftKings Sportsbook‘s Manager of Government Affairs
  • Sara Dalsheim, on behalf of the San Carlos Apache Tribe
  • Andrew Winchell, FanDuel Sportsbook‘s Director of Government Affairs
  • Jerry Linum, in the same position as Winchell but with BetMGM Sportsbook
  • Leonardo Villalobos, an attorney representing Major League Baseball

The conversation really began with perhaps the most controversial item in the rules: the number of online skins a licensee can contract for. Several of the aforementioned personnel shared their viewpoints and got some direction from Stipe on the issue.

Forget about skins altogether

Pierce reiterated the D-Backs‘ position that they believe the statute only provides for one skin per operator. She also stated that the MLB team believes the language could be interpreted to allow one skin for online and one skin for retail betting.

Pierce also added that the baseball team would be comfortable co-branding its sports betting products, featuring its partner’s name of Caesars Sportsbook with its own on the app and website. She closed her comment by adding that NASCAR and the PGA Tour hold all the same positions.

Dalsheim was next to comment on the issue, offering a different perspective. She stated the Tribe’s stance that the enabling law allows for multiple skins and sought clarification from the Dept. on the difference between the terms “platform” and “system” in the statute.

Stipe’s comments focused on those exact terms. He advised people on the call to abandon the term skin altogether in favor of those terms. Stipe went on to explain that the Dept. would not be using the term skin. In compliance with the statute, they would use platform and system instead.

Stipe then stated the statute is clear. Event wagering operators can have up to two platforms but only one system. He also spoke to what the difference is between those two terms in this context. It helps to think of the product in terms of a sportsbook’s back-end and consumer-facing sides.

Two platforms, one system

Stipe stated that platforms are not meant to mean sub-licenses. He was adamant that each licensee only gets one system. Platforms, as the Dept. of Gaming interprets the term, is more about the consumer-facing side of a sportsbook.

Thus, TPC Scottsdale as a potential licensee would not be able to allow both DraftKings and another of DraftKings’ competitors – like BetMGM – to both operate under their license unless one of those two simply lent its branding to the other.

Pierce’s co-branding suggestion was closer to the idea of two platforms. The Diamondbacks could choose to call their retail sportsbook Diamondbacks Sportsbook and the online sportsbook Caesars Sportsbook as long as both are operating on the same system.  However, there is no requirement to split the platforms along those lines of online and retail.

So, in the traditional definition of the term “skin,” each licensee would still only get one under the proposed regulations. However, if a licensee wants to apply to use a second platform, it has the freedom to do so. These semantics weren’t the only semantics of note during Wednesday’s call.

Official data, license allocation, and tax rates

One of the issues Diss brought up was the tax rate in the latest draft of the rules. Diss questioned why the rate is 2% higher for online hold than it is for retail revenue when the Coyotes believed the tax rate would be in line with the lowest rate that Arizona tribal casinos pay in a revenue share with the state.

Nichols explained that the Department looked at other jurisdictions and took into consideration that online sportsbooks have lower overheads than their brick-and-mortar counterparts. Villalobos presented his clients’ opinion that the regulations should explicitly state that sportsbooks must use official league data to settle all proposition wagers, regardless of when they are placed.

Limun also weighed in on official league data. His request centered around a concrete definition for what “commercially reasonable terms” means in regards to that data. Winchell and Cochran echoed that comment.

In closing the discussion on the Arizona sports betting regulations, Dalsheim asked how soon some information will be available about how the Department will allocate the 10 licenses earmarked for tribal casino operators. Nichols said that he expects to deliver that shortly after the comment period ends at 11:59 PT on Wednesday.

The final version of the rules might also be available soon. If that’s the case, bettors in AZ could be placing legal wagers at retail sportsbooks as soon as two months from now.

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