Licensed sportsbooks are more than a way for the state to make money off sports betting. There are a lot of reasons why betting on legal online sportsbooks makes sense for every bettor.
Sportsbook licensing also keeps bettors safe from predatory practices that plague other parts of the industry. At their worst, illegal sportsbooks can be part of international criminal organizations that fix games and abuse their patrons. The least insidious illegal sportsbooks are merely incompetent–which endangers bettors’ financial information. But they’re all unlicensed and unaccountable to any regulatory authority. That is what makes them so unwise to use.
Why State Licenses Keep Bettors Safe
When bettors hit the craps table in Vegas, they know that if they win, they’ll get paid. They know when they exchange their chips that they’ll get real money in return–and in the full amount. One of the reasons is customer retention. No one would visit Vegas if they didn’t know they’d receive their winnings.
But the only reason the threat of customer losses works is because of each casino’s accountability to the city. The Nevada Gaming Control Board has great influence over the casinos. The Board can suspend or revoke a casino’s gaming license. There’s a place for bettors to file complaints about the casinos. So, the Strip has good reason to operate fairly. The casinos know they have to operate legitimately, or the full force of the law will crash onto them.
- Set rules for sportsbooks to follow
- Decide which players can operate sportsbooks
- Discipline sportsbooks when necessary
But the Colorado Division of Gaming has other regulatory authorities too. It sets the formula for sportsbooks to determine how much cash they have on hand. That way, licensed sportsbooks are less likely to run out of cash. How it compares to private formulas for preparing for underdog wins is unclear. However, Colorado set this safety net to make sure bettors got paid. Under this consumer protection group, bettors can wager safely under Colorado’s licensed sportsbooks.
How Bad Sportsbook Security Can Hurt Bettors
The mild alternatives to licensed Colorado sportsbooks are offshore betting sites. Federal law doesn’t allow for international sportsbooks. That keeps international sportsbooks from setting up shop in the United States. But Americans can still access those sportsbook sites. They can even wager on them.
But security isn’t just about safe emails and passwords. It’s about wagering somewhere that will keep a safe watch over bettors’ bank information and social security numbers. American sportsbooks are required to know the identity of each bettor to comply with the Patriot Act. Consequently, they need security measures to protect these vital bits of bettor information.
Sportsbooks that don’t have to comply with strict know-your-customer protocols may not have the security in place to protect bettor information as securely. The United States has cautiously legalized sports betting state by state. American bettors will likely find the most security at their own state’s sportsbooks.
But offshore sportsbooks that aren’t regulated by any government pose some of the greatest security threats. Some sportsbook sites are run by websites whose infrastructure is spread across multiple countries. The server, oddsmakers, and technical staff could all be in different countries. That makes them harder to shut down and keeps any single government from being able to shut them down. These types of sportsbooks also don’t have to face consequences for mishandling bettor information.
If bettors want to make sure they get paid, keep their information secure, and avoid the unnecessary risk of fraud, they should stick to the sportsbooks close to home.
The Most Insidious Sportsbooks
While many unfamiliar sportsbooks may be incompetent, a few are criminal. These sportsbooks are run by cabals that take bets, then fix matches so they always come out on top. Match-fixing is a $1 trillion industry, and it’s difficult to snuff out.
However, data analysts can watch odds change throughout a game to infer whether the match is fixed. One analyst caught match-fixing in a 2016 FIFA match by noticing the odds for scoring a goal were the same halfway through the match as it was at the beginning.
The sportsbooks that profit off this tend to not only be shady but also profit the people who are in on the match-fixing scheme. Analysts uncovered the FIFA fraud by comparing legitimate sportsbooks with a few hundred other sportsbooks from around the world. Strange betting and odds patterns can lead investigators to fraud quickly.
But bettors won’t know anything about this during the game. They may just trust their sportsbook, place their wagers, and hope they chose wisely. But sportsbooks that support match-fixing are hard to pin down without access to their background data. Bettors may be funneling money to criminal organizations without realizing it just by choosing an unfamiliar sportsbook site.
The Worst Bookies
Although bookies aren’t online websites, they’re the final alternatives to licensed Colorado sportsbooks. Many bookies are just running small businesses for themselves. Often, the worst thing that can happen is a bookie running out of money to pay winnings.
However, the worst-case scenario is betting with a bookie who lets bettors stretch themselves on credit. Criminal bookies can let bettors who can’t wager money upfront bet with credit. If bettors lose, bookies can begin harassing them to get the lost stake back. The worst bookies could resort to violence to beat the money out of their patrons. Some bookies also work for crime syndicates, making them easy to replace if caught. Bettors are better off staying away from bookies now that legal sports betting options are available.
Colorado Sportsbook Safeguards
Coloradans have many safe sports betting options at their disposal. Online and retail sportsbooks are available across Colorado. Big brands and homegrown sportsbooks are represented across the Rocky Mountain State. They’re among the most secure because of the United States’ regulatory environment and conservative pace of legalization. Bettors are less likely to have their money, bank information, or social security numbers stolen at a licensed Colorado sportsbook than an offshore site. Colorado’s sportsbooks are a vast improvement on all types of bookies, from the clumsy to the criminal.
If bettors want a secure sports betting outlet, they won’t do better than Colorado’s licensed sportsbooks. They offer more consumer protections than any available alternative.
Legal And Licensed Sportsbooks FAQS
Sports betting in Colorado is overseen by the Colorado Department of Revenue. While that might seem an odd fit at first, it’s worth noting that the CDOR is already the regulator for the state’s legal casino industry, making it a natural fit for the role of overseeing legal sports betting in Colorado.
The agencies within the CDOR that are directly responsible for sports betting regulation are the Division of Gaming and the Colorado Limited Gaming Control Commission. It’s not at all uncommon for a state to have two agencies overseeing gaming; typically, one body is charged with making the rules, and another body is charged with enforcing them.
It’s important to note that these regulations are likely to change somewhat over time. Sports betting is wholly new to Colorado, as it is to most states, and online gambling of any kind is also new to Colorado regulators.
As regulators gain more experience with both forms of gambling, they are likely to add, edit, and otherwise amend the existing regulations for legal CO sports betting.
It’s a little complicated. There are multiple tiers of licenses. The most important license is what’s called a Master License. These are restricted to the state’s land-based casinos (currently 33). The state’s two tribal casinos would also be eligible to offer sports betting, bringing the total number of potential sportsbook operators to 35.
Anyone offering sports betting in Colorado has to either hold a Master License or be in partnership with a Master License holder. That’s the critical point in this discussion. To put it another way, you can’t offer legal sports betting in Colorado unless you either operate a retail casino in the state or have a partnership with a retail casino in the state.
As the rules are currently written, each Master License holder can operate one online sports betting brand. So the number of potential online sportsbooks is also capped at 33, pending additional casinos opening in Colorado.
Colorado is generally expected to be a mid-tier market when it comes to sports betting. This is largely a function of the relatively limited population of Colorado versus more densely-populated states in the east and geographically larger states such as California and Texas.
On a per-capita basis, the story may be much different. When you look at all U.S. states on a per-capita GDP basis, Colorado does quite well. There the state is in the top 20, suggesting that Colorado is likely to punch above its weight when it comes to legal sports betting.
The market will also be helped by what is shaping up to be intense competition among multiple national operators for supremacy in Colorado. With major operators such as DraftKings, FanDuel, and William Hill fighting for share, there will be no shortage of the kind of marketing spend and promotional offers that tend to drive over-performing markets.
How big the market will ultimately be is obviously an open question. But a survey of various forecasts for Colorado’s legal sports betting market suggests that a round-number estimate of $300 million is a good starting point for understanding Colorado’s annual legal sports betting revenue potential.
The trend with legal sports betting in the U.S. has been clear: Mobile is the dominant product, generally accounting for over 75% of total activity states that offer both retail and online sports betting. In New Jersey, for example, mobile’s share of the overall market is steadily heading north of 80%.
With a few months of data to look at, so far in Colorado mobile sports betting has positively dominated. In August 2020, 98.5% of all sports bets placed in the state were made through apps or websites.
That’s not to say there’s no place for retail sports betting. The retail sportsbook experience is a unique one, and will always appeal to some consumers some of the time. But the sheer convenience of the online sports betting experience ensures that most consumers will place most of their bets through computers and mobile devices.
Estimates from Eilers & Krejcik Gaming call for Colorado’s legal sports betting market to reach roughly $300 million in annual revenue at maturity, with online sports betting accounting for more than 80% of that total.
Colorado taxes sports betting at 10%, meaning that the state should eventually expect to see about $30 million a year in revenue from sports betting taxes.
There are also some additional benefits for the state from legal sports betting. For example, legal sports betting will bring hundreds of new jobs to Colorado. Those jobs will generate additional tax revenue and economic activity for the state. And legal sportsbooks will spend tens of millions of dollars locally in marketing efforts, spend that will expand the economic impact of legal sports betting in Colorado.
That’s the bright side. But those gains do need to be balanced against some additional costs that will arise as a result of the legalization of sports betting in Colorado. For example, it will cost the state hundreds of thousands of dollars annually to regulate sports betting. There is also the chance that some of the money spent by consumers on sports betting is redirected from other forms of entertainment, which could offset some of the employment and economic activity gains.
Finally, it’s important to consider the overall budget picture in Colorado when thinking about sports betting’s benefits. While tens of millions of dollars is a lot of money, it does represent a tiny fraction of the overall budget in Colorado.
While there is no formal estimate of how many jobs Colorado will gain from sports betting, it’s clear that that the legalization of sports betting will bring new jobs to the state.
One useful parallel is New Jersey. A study from industry trade group iDEA Growth concluded that the introduction of online gambling resulted in the creation of some 6600 new jobs in the state.
Some jobs will come to Colorado thanks to the opening of retail sportsbooks. After all, a sportsbook needs employees, whether it’s ticket writers, servers, or the technicians and managers who keep the whole thing running.
Others will come thanks to the need for online sportsbooks to establish a presence in the state. A great example of this trend is PointsBet, who opened up a second U.S. headquarters in Denver in 2019 and continues to hire new staff to support both their Colorado and their broader U.S. sports betting efforts.