In recent years, U.S. state and tribal gaming regulators have achieved significant milestones. They have established world-leading legal sports betting and iGaming markets, ensuring consumer protection, generating substantial public revenue, and effectively replacing large segments of the illegal market with transparent and accountable alternatives.
However, new challenges have begun to emerge.
The effectiveness of state regulation is under scrutiny as federal proposals, like the SAFE Bet Act, suggest that existing frameworks may be inadequate for addressing the risks associated with digital gaming. Additionally, new online gaming formats, such as social and sweepstakes gaming alongside prediction markets, are asserting that they evade traditional state regulatory authority. This includes claims that essential compliance tools like geolocation may be unnecessary or impractical.
These developments signify more than mere policy discussions; they challenge the state-based gaming model that has prevailed in the U.S. for decades.
As a former regulator, I contend that the best response is not just to argue but to demonstrate.
States have shown they can launch new markets; now, regulators must prove they can maintain these markets with the same diligence amid evolving risks.
Regulation requires ongoing vigilance. It is not a static process but a dynamic system that must adapt to advancements in technology, shifts in consumer behavior, and actions by unscrupulous individuals.
The threats confronting regulated gaming markets today differ markedly from those of just a few years ago. Rapid advancements in artificial intelligence have enhanced fraud capabilities, while sophisticated actors are exploiting vulnerabilities in technology and compliance frameworks. Additionally, the distinctions between legal and unregulated markets are increasingly obfuscated.
In this context, simply maintaining high standards is insufficient. State and tribal regulators must regularly verify compliance with these standards.
Independent evaluations, continuous audits, and practical assessments of compliance systems should be embraced as essential mechanisms for ensuring that regulatory frameworks operate effectively. This is particularly crucial in areas central to digital gaming oversight, including identity verification, fraud prevention, cybersecurity, responsible gaming measures, anti-money laundering (AML), suspicious activity monitoring, game integrity, and location compliance.
These safeguards go beyond mere formalities. They form the cornerstone of consumer protection and gaming integrity, underscoring the role of states as the primary overseers of gaming. Claims that such protections are optional warrant close examination.
A gradual erosion of standards can pose a significant risk in mature regulatory markets. As markets expand and competition intensifies among operators and compliance technology vendors, there may be subtle pressures to relax interpretations of existing regulations. Over time, standards that were once well-defined can become inconsistently enforced.
This trend reflects a natural dynamic inherent in growing markets rather than a specific critique of any operator, testing laboratory, vendor, or regulator. Nevertheless, maintaining vigilance against such erosion is essential.
Even minor lapses—in areas like geolocation, KYC/AML, transaction monitoring, or fraud prevention—can be exploited in digital environments. For consumers, this can lead to greater exposure to fraud or harm. For regulators, it risks undermining confidence in their oversight capabilities. For the industry, this erosion threatens the credibility painstakingly cultivated over time.
Sustaining high standards entails more than merely establishing them; it involves continuous updating, testing, and enforcement.
This does not imply that heightened regulation is always advantageous. Excessive requirements may push consumers back toward unregulated markets—an outcome regulators strive to avoid.
The objective lies in finding a balance: implement strong, enforceable protections that foster a safe and competitive legal market while maintaining effective risk reduction standards. Achieving this balance requires transparency. State and tribal regulators need to stay informed about which aspects are effective, which aren’t, and where vulnerabilities may arise, requiring active oversight and enforcement.
The future path for legal gaming in the United States relies heavily on trust—that of consumers, policymakers, and the public.
This trust is not automatic; it must be cultivated through consistent action.
For state and tribal regulators, this entails utilizing accountability measures such as regular independent compliance testing, consistent enforcement of existing standards, ongoing risk evaluations—including AI-driven fraud—addressing both known and emerging threats, and facilitating open dialogue with industry stakeholders and public interest groups.
For industry participants, embracing these efforts is vital for the market's long-term viability and sustainability.
The achievements of state regulators over the past several years showcase their potential; the coming years will reveal whether they can sustain it.
