Regulation Works: NJ Online Sportsbook Self-Reports Problem Gambling Glitch

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New Jersey is home to world-class casino gambling regulation, and one example of that was made public this week by the state’s Division of Gaming Enforcement.

According to the DGE, the DraftKings online sportsbook noticed last November that its platform was allowing some gamblers who had requested “cool-off status” to continue to wager. The DGE said that the tech fail happened thanks to a software upgrade the previous month.

Regulators said the software malfunction was unintentional and that no patrons filed complaints stemming from the issue.

The defect “caused the cool-off duration to be set to zero days, thereby negating the cool-off status and allowing patrons to resume normal account activity immediately after requesting such status,” said a filing from DGE Director David Rebuck.

A total of 54 gamblers were in cool-off status at the time of the software malfunction, according to the Garden State. DraftKings corrected the issue on Nov. 16, informing the DGE of what happened.

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Between Oct. 24 and Nov. 16, 13 of those gamblers deposited money and placed a combined $28.8k in wagers. DraftKings won a combined $3.2k from that handle from 11 of those players.

New Jersey’s rules on cool-off status

For those unfamiliar with this feature, NJ actually requires online gambling operators to offer a way for patrons to take a break. It’s a feature you won’t find in a brick-and-mortar casino.

“Internet and mobile gaming systems shall employ a mechanism that places an internet or mobile gaming account in a suspended mode,” says a provision in NJ’s online gambling regulations. Online sportsbooks must provide a minimum of 72 hours of suspended play when a patron seeks cool-off status.

That 72-hour minimum, while possibly dissuading some gamblers from requesting cool-off status, does boost the odds that a gambler losing control can receive enough time to clear their head.

Any state looking at legalizing and regulating online/mobile sports betting could look at NJ as a strong example on how to encourage responsible gaming behavior.

DraftKings to pay fine, disgorge winnings

While the DGE was happy that DK reported the issue the same day it was discovered, regulators imposed a $5k fine against the Boston-based company, which partnered with the Resorts Casino Hotel in Atlantic City for sports betting. Resorts wasn’t fined.

In addition to the civil penalty, DK was ordered to disgorge the $3.2k it won from the gamblers.

The financial hit to DK is miniscule relative to the revenue it generates. According to the DGE, Resorts won more than $26 mm from sports bettors via online/mobile through the first five months of 2019. The dollar amount of the fine is less significant than the DGE making the regulatory violation public, which helps bolster the public trust of the state’s gambling industry, especially at a time when there’s national attention, and scrutiny, toward online/mobile sports betting.

Some states are grappling with whether to do retail-only sports betting or allow it via the internet as well. The benefit of legalizing and regulating online/mobile is that you can begin to phase out the offshore online sportsbooks, which are under little to no oversight and don’t have any incentive to protect gamblers potentially developing a problem. Offshore is basically one giant money grab, while regulated online sportsbooks in the U.S. are aiming to be in the space for the long haul. Sustainability matters.

NJ regulators have the authority to revoke licenses after regulatory violations, so it behooves operators to self-report software malfunctions and own up to the issues. The state’s sports betting industry just turned a year old, so operators in the state are still relatively new to the casino offering that prior to May 2018 was restricted to the state of Nevada. DK doesn’t operate in NV.

 

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Brian Pempus

Brian served as a senior reporter and online content manager for Card Player Magazine for nearly a decade before joining USBets in October 2018. He is currently focused on legal and regulated sports betting and online gaming. He's an avid jiu-jitsu practitioner in his free time.

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