Under a provision snuck into a bill banning sweepstakes-style wagering that was passed by the New Jersey legislature last month, the state’s Department of Gaming Enforcement has been enlisted as the muscle for sportsbooks that don’t want sharp action.
That’s the sentiment, at least, among many sports betting industry insiders.
The bill makes proxy betting illegal. Proxy betting, already prohibited by most online sportsbooks per their terms and conditions, occurs when one bettor places a wager on behalf of another. Despite the T&C language, sharp bettors often use proxies – sometimes referred to as “beards” – to get their action down.
It’s another piece in a lengthening list of bad news for professional sports bettors, who rely on proxies to bet with sportsbooks that would otherwise turn them away.
Until now, it’s been up to operators in New Jersey to enforce their own rules regarding proxy betting. The legislation, expected to be signed into law by Gov. Phil Murphy, says “a person who engages [or conspires to engage] in proxy betting is guilty of a disorderly persons offense.”
”It’s creating a kind of shock-and-awe effect for the recreational sportsbooks [by criminalizing] what’s been, up until now, part of their terms and conditions,” Joe Brennan Jr., co-Founder of Prime Sports, one of the few sports betting operators that allows proxy betting, told Comped.
‘This gives them the power’
Essentially, it gives the sportsbooks’ T&Cs some teeth.
“Currently, sportsbooks can’t have you arrested for violating their terms of service,” betting pro and player advocate Captain Jack Andrews said in an email. “This gives them the power to try to get law enforcement to enforce their terms.”
“Why does New Jersey need to turn terms and conditions into state law?,” Brennan questions. “There’s no compelling interest. New Jersey doesn’t make more money. In fact, they potentially make less money, and they incur the costs – and the only people that benefits are the recreational sportsbooks.
“I don’t say this to be mean or dismissive of the DGE, but it’s turned the DGE into mall cops for recreational sportsbooks.”
How will NJDGE enforce proxy betting law?
Despite explicitly prohibiting proxy betting, it’s difficult, if not impossible, for sportsbooks to enforce the rule.
Attorney Mike Roselli, who served as Chief Compliance and Legal Council for PlayUp when the sportsbook operated in New Jersey and Colorado, recalls this as a “pain point” with the company’s technology, as manual work was required to effectively stop proxy betting.
“The [NJ] DGE made it clear that it was a sportsbook-specific issue, and it was more of a technical problem for us,” Roselli said. “It was clear to me that we were the ones that were going to be enforcing it.”
For the state, enforcement could be an expensive endeavor, Brennan believes.
“The DGE has better things to do, and they don’t have the resources to go running around enforcing complaints made by FanDuel that somebody’s proxy betting,” he impassioned.
Across-the-board enforcement seems exceedingly difficult. There’s no way the state can catch all, or even most, offenders, and there’s some thought that certain bettors will be targeted as a warning to others.
“The sole purpose of this law is to intimidate bettors so that they don’t try to circumvent the rules,” said Andrews, co-Founder of Unabated.com. “I wouldn’t be surprised if they do prosecute a well known influencer just to make an example of them.”
Pushing money to illegal markets
Like many pieces of gambling legislation being passed these days – i.e. tax increases on gaming revenues and reductions in write-offs for gambling losses – the new proxy betting law in New Jersey figures to have an unintended effect: incentivizing bettors to play elsewhere.
Wary of criminality, sharp players are bound to head offshore or to illegal bookmakers, exactly what legal sports betting wants to prevent. And while most sportsbooks try to refuse this action – “People who are doing this for profit are not the players we want,” DraftKings CEO Jason Robins has said – less liquidity is probably not a good thing for the sports betting ecosystem.
New Jersey’s proxy betting bill is another legislative measure that makes the US betting market “more hostile to liquidity,” said Brennan, who believes the law may violate the constitutionality of freedom of association.
Per Brennan, the thinking among recreational books and New Jersey lawmakers seems to be, “We should make it tougher for these guys to put liquidity into the marketplace because we might be afraid they’re gonna win.”
