Efforts to bring sports betting exchanges to Colorado took another step forward late last week. Thatâs when the stateâs Limited Gaming Control Commission approved final drafts changing two rules that would open the door for operators like Sporttrade and Novig to offer real-time trading of wagers on their Colorado betting apps.
If approved, Colorado would be the second state in the U.S. to allow exchanges, following New Jersey. The stateâs sports betting law allows for them. However, regulators didnât establish rules for those operators because of concerns regarding taxing them.
Discussions regarding exchange wagering resumed earlier this year after Novig founder Jacob Fortinsky wrote to Colorado regulators in December and revised his companyâs request to operate an exchange.
Both Novig and Sporttrade operate in Colorado. Sporttrade currently runs an exchange in New Jersey, but in Colorado, its customers can only place wagers at the price available on the app. In New Jersey, Sporttrade customers can set limit orders in hopes of finding someone to match that action.
Rules May Take Effect In June
Thursdayâs actions werenât the final hurdles. The Colorado Attorney Generalâs office must still review the changes, and the Division of Gaming must file them with the stateâs Department of Regulatory Agencies before they can take effect.
âWe believe that our operators are anxious to get started with this, so that this can launch, if approved, in time for the upcoming NFL season,â Christopher Schroder, the director of the Colorado Division of Gaming told commissioners at Thursdayâs meeting.
A division spokesperson told BetColorado.com Friday that the state Department of Law still needs to review the changes. That department has 20 days to conduct its review, and the division anticipates filing the rules by May 8. That would make the regulations effective on June 14.
Exchange Operator Raises One Concern
Alex Kane, the CEO and founder of Sporttrade, thanked the commission for moving the rules forward, adding that exchanges are âsimply an ala carte menuâ any online sports betting operator like a bet365 Colorado can offer.
Kane did express concern about a rule that exchanges must clearly note when wagers are placed by a âmarket maker,â which the state defines as an entity or an individual who âparticipates in revenue sharing and provides odds and/or liquidity to an internet sports betting operator.â Market makers need to hold a license in Colorado.
âI can certainly understand the concern that an (operator) may market its activity, and if it does offer exchange wagering in the state of Colorado, it could be marketed as you are betting against your friends,â Kane said. âI think thatâs a somewhat harmful potential way to market the platform, and I can understand the potential responsible gaming ramifications of doing that.â
He believes a better way to regulate the activity is to develop rules on how sports betting operators can promote their platforms in Colorado.
However, neither regulators nor the commission chose to amend the regulations to that effect on Thursday.
Commissioner: Why Not Allow Entities?
While the new rules moved forward on Thursday, there was still some discussion among commissioners and state officials about the changes. In particular, Commissioner John Tipton raised concerns about the prohibition against entities taking part in exchanges. Tipton brought up a scenario in which a group of poker buddies each gave one person at the table $100 to use in an exchange account.
âWhen the individual makes the bet, how is that different than an entity?â he asked.
State officials responded by saying that scenario is more like proxy betting, which is also not allowed in Colorado. However, Tipton, a gaming law attorney and former director of the Colorado Department of Revenue, countered that âan unincorporated association of friendsâ is neither an entity nor a proxy. How would the division know whatâs taking place, he asked?
Schroder chimed in that the system requires operators and the division to collaborate. He added that all accounts are revocable if operators believe accountholders are violating rules.
âItâs not possible to 100% guarantee what someoneâs doing in the privacy of their own home with their friends,â Schroder added. âWhat you hope is that through the partnership with the operators, and through that technology infrastructure, there are techniques in place to identify suspicious wagering activity and have those investigated.â Tipton was not convinced.
âHow many of you in this room have given money to somebody to buy lottery tickets and then say, âWell, if we win, weâll divide it all up?ââ he said.
âHappens every single day, and that is not proxy betting. Iâd be happy to defend that case. So, if youâre worried about an entity, why donât you license them?â
Despite his concerns, Tipton voted for the changes and urged his colleagues to âaddress this gray areaâ moving forward.
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