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Fencing Out

Why geolocation is becoming an issue in U.S. iGaming launches

Fencing Out

For many years, geolocation was not an issue in the iGaming industry, as regulation by jurisdictions was immature and player pools were global. But, beginning with the “ring-fencing” that European countries began, the idea of identifying where the player was began to grow.

Once Canadian provincial lottery corporations initiated iGaming services, identifying the location of the player was clearly an issue for North America. In Canada, most provinces appear to be using third-party vendors to gather information on IP address, including the user’s country, province or state, city, and postal/ZIP code.

Now that three states in the U.S. have successfully launched, the standards for geolocation services increasingly continues to be part of the mix. Regulators want to know that the device the player is gambling on is within state boundaries at the time of play.

It appears that the biggest challenge has been the calibration of the geolocation services near the state borders. Not wanting to take any chances, operators have often had the vendors set their services one mile in from the borders.

There were some complaints related to this when Nevada launched. Some reports said that as many as 35 percent of those attempting to register were blocked. The issue of “false negatives” remains a critical one for operators, particularly as they try to build liquidity for poker products.

But given the relatively sparse population of the state, especially along the borders, it really wasn’t much of an issue. It’s estimated that less than 1.5 percent of Nevadans live within one mile of the border, which was the standard there. It does, however, include some cities like Laughlin, thus excluding some players.

But now, with a populous state like New Jersey, with tens of thousands of folks along the borders, it’s a bit more problematic. The population across the Delaware River from Delaware and Pennsylvania as well as those across the Hudson River from New York is sizable enough to be of concern if too many are excluded.

The electronic fencing has created a bit of a “dead zone” or no-play zone.

“Unfortunately for some people, there may not be sufficient verification that they are in New Jersey—even if they are—and they’ll be denied,” David Rebuck, director of the state Division of Gaming Enforcement, told the AP. “It’s an unavoidable consequence.”

While New Jersey regulators were pleased that over 50,000 accounts were established in the first week after the launch, there were also a myriad of accounts of players not being able to register because the geolocation said they weren’t in the state. Anecdotally, some players who lived within a few miles of the Atlantic City casinos were upset that they were told they were outside the state.

News reports stated that in the first night of iGaming in New Jersey alone, the geolocation services blocked players attempting to register from at least 23 other states. However, some estimated that 12 percent of those within the state who wanted to register were blocked due to geolocation issues. In many cases, through working with customer support, players were able to finally establish their accounts. For operators, the fines associated with accepting a player outside state borders outweighs the number of players who can’t sign on. They’re erring on the side of caution.

“No one can afford to risk that,” Tobin Prior, CEO of Ultimate Gaming, which is the Trump Taj Mahal Casino resort’s online partner, told the AP. “We would err on the side of caution.”

A quick look at the technology behind geolocation is useful. In Nevada, cell phone triangulation was used. This was particularly problematic in the Nevada launch since Verizon customers were not included in spite of the fact that Verizon allegedly has about a 40 percent penetration rate in Las Vegas.

Another technology is a USB key, which plugs in to the computer, some even with fingerprint technology. This includes personal information on a player as well as latitude and longitude of the device. This may translate to a “Wi-Fi positioning system” in use by some operators.

Given that veteran players were unused to this level of verification in the past, whether this will be a deterrent is an unknown at this point.

One of the more serious concerns is that the geolocation is checked on occasion during the play, and some have indicated that their play has been interrupted mid-game. Those actions cause even more problems for the player as they seek to resume the game.

Geolocation wasn’t the only glitch that emerged during the launch in New Jersey. Probably the more critical one is the credit card declines that players experienced when trying to fund their accounts. If the iGaming lifeblood of deposits is cut off, the entire operation comes to a screeching halt.

Until the banks and the card associations get a comfort level with iGaming in spite of its growing legitimacy, the alternative payment methods will likely be the primary mechanism for moving the money in and out of player accounts.

 

Sue Schneider is one of the pioneers of iGaming. She is the founder of the iGaming North America conference and is also editor of Gaming Law Review and Economics.

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