In recent years the US sports betting and iGaming industry has rapidly grown in size following the introduction of more technology suppliers, payment providers and gambling operators into the market. Of course, this is the result of the federal government loosening its restrictions on gambling across the country, which has in-turn caused many states to begin loosening their own restrictions on the hobby.
This has provided a new opportunity for many European companies to enter the sports betting and iGaming market, hoping to replicate the success they have had in that region or forge a new offering. However, entering into the US region under the assumption that it will function near-identical to its European counterpart is a big mistake and one I have seen gambling operators and suppliers fall into time and time again.
As the CEO of a company that has been operating in this space since 2013, starting in New Jersey and rapidly expanding the states we operate in across 2020/21 to a total of 16 different states, my team and I have had ample time to really get to grips with how the US operates and how it differs from Europe, and that is what I want to share today.
Understanding Regulators
The most important difference between both regions relates to the regulators which enforce the laws that companies have to follow. In the US, each state has got its own regulatory body which defines what is required of companies and what isn’t in order to operate. For example, one might request a ‘test environment’ before you go live, while others will say you can only roll out solutions on a weekend. This is obviously frustrating because gambling operators don’t want to lose even a second of business operations.
Whilst I could go into excruciating detail on how each region’s regulators operate, the short answer is that some will introduce new regulations that businesses need to adapt to, while others will look to places like Europe, which has been successful in this industry, and adopt the best market practices for themselves. Although that might sound like the best option for a company entering into the US from Europe, there is a major downside. Many regulators underestimate the amount of work that is required and that creates a backlog, leading to a longer waiting period for gambling operators to go live.
If a gaming provider and supplier hopes to operate across multiple US states it needs to have a system that can respond to these differentiations across states seamlessly.
Rolling over hurdles
When making plans to operate in a state, a payments provider is required to go through a certification process. While the actual process is different between the US and Europe, both regions require this. However, in the US a new certification is required every time a payment option is introduced. This drastically prolongs the whole process of implementation and is a major friction point for new companies entering the US. And this is just one example.
In this environment, businesses have a lot more preparation to perform and that creates additional complexity in how a solution can be rolled out and onboarded with a merchant. This is extrapolated when you introduce a specific rollout plan, schedule and so on, and each one falls under a new jurisdiction based on regulator and state.
This is far different from the more streamlined approach in Europe, where you can introduce a new payment option with relative ease. However, it should be noted that the reason for this is because Europe has had so many years of experience in this field that the process has become simpler. Eventually, the US will be able to catch-up.
Tackling the competition
One difference between the US and Europe is simply how new the former is. It’s a rapidly moving market with many new opportunities, but with this comes more competition for market space and to achieve this, gambling operators are constantly developing new solutions and upgrades to their platform. If you’re a payments provider, this means it’s a requirement to keep up with all the latest technology as otherwise it will generate friction between yourself and the merchant. From my experience, it is certainly more relaxing to operate in Europe from this perspective.
Yet this is something that will get resolved as time passes. As the US cools down from being the hottest location for businesses entering the sports betting and iGaming market and regulators manage to keep up with the changing industry, less friction is likely to develop. Unfortunately, it is hard to say when this will happen and so to keep up with the demand in present day we at PXP Financial had to start future thinking.
We had to make the innovations in the industry as predictable as possible by being proactive, anticipating the latest tech, and planning ahead. This approach has allowed us to find success and stay ahead of the competition in the sector, but it’s not an infallible approach. Regulators can be unpredictable sometimes but if you bear that in mind then it is possible to reduce friction and to be ready for anything your merchant customer wants, when they want.
An inevitable future
As the market inevitably matures and the regulatory frameworks become easier to adapt to, the gap between the US and Europe’s gaming operations will shrink. As really, all the issues can be brought down to how new and unpredictable that market is. But as we’ve seen in Europe, the more innovative the solutions entering the US market, the more stable and predictable it will become, making it easier and more profitable for providers to move into the space.