Bad Actor Becomes Issue with Federal Sports Betting Legislation Consideration

Summary: As sports betting continues to be a hot topic of debate in the US, the federal government is now weighing in and bad actor clauses are in the mix.

Since May, every state in the US has the ability to pass legislation to offer sports betting. So far, over eight states have passed legislation with others considering their options. The United States Supreme Court paved the way for sports betting across the US after striking down the Professional & Amateur Sports Protection Act earlier in the year. Now, it seems the federal government is considering getting involved once again and it might not be a good outcome for operators.

Hatch Amendment

PokerStarsFor the past few days, a draft has been moving through the federal government regarding sports betting. Created by Senator Orrin Hatch, the draft, being known as the Hatch Amendment, is set to make changes to the current sports betting landscape and some of the these changes are not good.

As part of the language of the bill, there is a portion that discusses who is suitable for sports betting operations. In this section, the term bad actor is used. This harkens back to the days when online poker was being more heavily discussed and is a term that proponents of online poker are familiar with.

Bad Actor Clauses

When it comes to suitability in the legal sense, the term bad actor clause is used to describe a section in a bill where operators are considered unsuitable for certain reasons. Over the past few years, the term has popped up in online poker discussions, particularly in California. If you have followed online poker legislation at all, you will remember that California has been unable to pass an online poker bill due to issues with bad actor clauses.

Such clauses will keep such companies as PokerStars from operating in the state. PokerStars was a company that functioned in the United States despite their being laws against their operations. They were considered a ‘bad actor’ in the poker world and would not be able to offer such services if a bad actor clause is included in legislation. Lawmakers in California could not agree on the topic, so efforts have thus far failed.

Back to sports betting, the new draft for the federal sports betting legislation discusses suitability and lists several reasons as to why an operator would be considered unsuitable. Such issues include criminal convictions, delinquency involving taxes and providing false or incomplete information regarding licensing.

When it comes to bad actors, the bill lists several reasons for denying licensing as well. This includes if the company has participated in knowingly or they should have know that they were taking part in illegal online gambling activity, including taking an illegal online wager, paying winnings on an illegal wager that was placed online, promoting an illegal online gambling site or service provider or collecting payment for an entity that operators online gambling illegally.

On top of the bad actor section, the legislation also includes tainted asset provisions. A company that has acquired tainted assets will most likely not be considered. This would include such companies as The Stars Group as they acquired PokerStars, a company that was in operation when online gambling was considered illegal.

If such legislation were able to pass, it would cause issues with the current gambling landscape. Such companies like PokerStars would not be able to take part in sports betting via their brand BetStars. I do not imagine that this bill will be well-received and only time will tell if the measure has a chance to pass into law.