Colorado Regulators Approve Draft Rules To Allow Sports Betting Exchanges

Colorado Regulators Approve Draft Rules To Allow Sports Betting Exchanges
Fact Checked by Thomas Leary

Efforts to bring sports betting exchanges to Colorado took another step forward late last week. That’s when the state’s 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 state’s sports betting law allows for them. However, regulators didn’t 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 company’s 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.

Must be 21+ to participate & present in CO. Gambling problem? Call 1-800-GAMBLER. T&Cs Apply.

Rules May Take Effect In June

Thursday’s actions weren’t the final hurdles. The Colorado Attorney General’s office must still review the changes, and the Division of Gaming must file them with the state’s Department of Regulatory Agencies before they can take effect.

“We 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,” Christopher Schroder, the director of the Colorado Division of Gaming told commissioners at Thursday’s meeting.

A division spokesperson told 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 “simply an ala carte menu” 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 “market maker,” which the state defines as an entity or an individual who “participates in revenue sharing and provides odds and/or liquidity to an internet sports betting operator.” Market makers need to hold a license in Colorado.

“I 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,” Kane said. “I think that’s a somewhat harmful potential way to market the platform, and I can understand the potential responsible gaming ramifications of doing that.”

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.

“When the individual makes the bet, how is that different than an entity?” 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 “an unincorporated association of friends” is neither an entity nor a proxy. How would the division know what’s 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.

“It’s not possible to 100% guarantee what someone’s doing in the privacy of their own home with their friends,” Schroder added. “What 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.” Tipton was not convinced.

“How many of you in this room have given money to somebody to buy lottery tickets and then say, ‘Well, if we win, we’ll divide it all up?’” he said.

“Happens every single day, and that is not proxy betting. I’d be happy to defend that case. So, if you’re worried about an entity, why don’t you license them?”

Despite his concerns, Tipton voted for the changes and urged his colleagues to “address this gray area” moving forward.

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Steve is an accomplished, award-winning reporter with more than 20 years of experience covering gaming, sports, politics and business. He has written for the Associated Press, Reuters, The Louisville Courier Journal, The Center Square and numerous other publications. Based in Louisville, Ky., Steve has covered the expansion of sports betting in the U.S. and other gaming matters.

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