Online gaming, inclusive of sports gambling, has recently surged in popularity across the U.S., reaching a record $21.5 billion in revenue last year. And, with sports betting now legal in 38 states and legislation pending in five more, this means over two-thirds of American adults live in areas where sports betting is legal. Thanks to technology, sports gambling is more accessible than ever, putting it at the fingertips of millions of consumers nationwide. This growth, however, brings significant challenges for online gambling platforms. Expansion efforts must be balanced with navigating a complex regulatory framework and ensuring customer data is secure.
Understanding Evolving Regulatory Challenges
The U.S. government views online gambling platforms no differently than financial institutions, as both handle digital transactions and sensitive data. This means online gambling platforms must prioritize compliance and governance efforts rather than solely focusing on rapid growth.
Sports betting organizations face the dual challenge of understanding state-specific regulations while also complying with federal oversight from authorities like the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and the Commodity Futures Trading Commission (CFTC). Non-compliance can be costly, leading to reputational damage or even loss of licenses. Organizations must proactively comply with relevant regulatory frameworks to mitigate risks and maintain customer trust.
Implementing Anti-Money Laundering (AML) Programs
As online betting platforms grow their user base, so grow the risks across data security, fraud, and money laundering. To combat these types of illicit activities, online betting platforms must strengthen anti-money laundering (AML) measures and understand the federal requirements of KYC (know your customer) and CDD (customer due diligence). Despite the location in which sportsbooks might operate, they must implement KYC and CDD policies while also upholding specific state-wide gambling laws.
Safeguarding Customer Information
Engaging in online gambling means the transfer of sensitive data like bank routing information and social security numbers for verification purposes. This makes platforms prime targets for bad actors to compromise user information. Online gambling platforms must prioritize the protection of customer data through the entire lifecycle with proper management and classification. Just like a standard bank or financial institution, betting platforms manage a large amount of data that comes with a responsibility to ensure handling and protection. Because of this, these services must have a holistic approach to ramp up data resilience through tools like end-to-end monitoring, anomaly detection, and real-time alerts.
Automating Data Visibility
With the help of technologies like artificial intelligence (AI) and machine learning (ML), online betting organizations can better navigate these challenges. This may look like real-time monitoring and data surveillance to help organizations detect potential issues nearly instantly, allowing for quick corrective action. AI can also be leveraged to streamline data classification policies specific to varied regulatory requirements. As online betting platforms continue to gain traction, automating routine processes will be critical in helping organizations maintain comprehensive visibility across vast amounts of user data and a large digital infrastructure.
The Road to Compliance
Discussion around online gambling regulation has been contentious for the past several years, and the debate continues over state sovereignty and federal control. Moves have been made in the past several months to introduce new federal standards for all sports betting operations, including online services. These institutions are looking at a potentially challenging road ahead as they navigate evolving regulatory compliance alongside safeguarding sensitive customer data. By embracing technologies like AI and ML in supporting data surveillance and regulatory compliance, betting operators will be better positioned to meet legal requirements while optimizing new business growth opportunities and preserving trust with their customers.
