Wednesday, March 25, 2015
How b Spot Wants To Combine Casual Games With Legal Gambling
Story by Benjamin F. Kuo
Traditionally, online gambling has been quite a legal minefield, particularly since the giant U.S. crackdown on illegal online gambling and online poker back in 2011. However, a new startup, b Spot (www.bspot.com)--founded by YouBet veterans David Marshall and Russell Fine--thinks it has figured out a way to marry casual games with legal, online gambling, by tying those casual games with horse racing. We sat down with David Marshall to learn more about the company and what it's doing.
Tell me a little bit about the company and what you're doing? David Marshall: b Spot is at the convergence of games and gambling, letting you legally gamble in the United States on mobile devices. We allow for game developers to put gambling results within their games, so that a consumer can play games that have gambling inside of them. We do that legally, under license.
You talk about gambling--what can they include in game?
David Marshall: Every form of gambling has something that determines the outcome. In slots, it's a random number generator. In lotteries, it's balls flowing around. In others, it could be dice. The thing that we use to generate the result or win is horse racing. For the consumer, that is behind the scenes, with the results coming from races from around the world. They find those results, inside a game. The consumer experience is similar to a random number generator, in that they are able to play a game and get results, and that the game might have lots of different triggers on how and when they see their results.
So it sounds like these are not necessarily presented as horse racing results?
David Marshall: We've learned a lot over the years at Youbet, where we offered online horse racing in the United States, and where we also ran as part of the track system, and ran forty percent of the bets in the country. What we found at Youbet, after tens of millions of dollars of promotion and advertising, is that less than 1.15 percent of people will play horse races directly. The reason why, is it takes lots of information to do that--knowing past performance, that sort of thing. We realized that, with mobile devices and games just exploding, that 80 percent of people were playing games on their phone. If we could bring that game community to horse racing, that would be a big boon for the racing industry, and also a big boon to game players, being able to have gambling inside those games. We're merging those two together. A consumer comes into the platform, puts some money on deposit, and they can play games--any games--it could be a match three game, it could be a solitaire game, it could be fast, quick games, puzzle hunts, there are many. Inside the game, our game developers are developing dozens of games, and creating ways of displaying the results for consumers on how they're winning.
Why a new startup?
David Marshall: That's a great question. In 2011, we watched as there was a whole world of online, illegal gambling being shut down. At the time, there was 20 billion in revenues being generated illegally from U.S. consumers. We thought--how can we do this legally? The only, legal form of gambling across state lines is horse racing. We pioneered that in the US, both with technology, and being active in legislation and rules over the last couple of decades. It took quite a while to figure out how to merge those together in the United States.
Can you talk about the unique position that gambling on horse racing has in the US, in terms of legality?
David Marshall: It's a long story, but in the 1960's, the mob was running numbers illegally in the country, and states couldn't stop it. So what they did, is they passed the Wire Act, making taking betting information across state lines illegal. Horse racing is pari-mutuel betting, where everyone contributes to a pool, the track takes a cut, and whoever wins gets the money, is different than betting against the house in Las Vegas. Because of that, horse racing was running different odds in different states. In California, the odds would be different than New York, and that was creating problems. So, in 1978, the Interstate Horse Racing Act provided a Federal allowance for sharing horse race information across state lines. That put horse racing in a unique position. In the 90's, we came out with Youbet, and walked around with handsets and made digital phone calls with horse racing information. In 2001, there was a modification made to the Interstate Horse Racing Act, to clarify that Internet communications of that information was legal, which birthed the new industry of Advanced Deposit Wagering (ADW), online horse racing. Some states required us to be licensed in the state, and some other states require that you be licensed somewhere else to be in that state. With horse racing today, over the last seventeen years, that means you can have customers in 34 states, or about 70 percent of the U.S. population. As those regulations started being put into place, it helped in lots of ways, and helped shaped what requirements are technologically required for Advanced Deposit Wagering. So, historically, horse racing has had a federal exemption, but there is still state-by-state regulations and licensing required. We abide by all of those things.
With all those rules, you must have a huge legal team?
David Marshall: That's a great question. Obviously, we have a lot of experience in this area, and we do have a couple of key attorneys. Melissa Riahei, our General Counsel, used to be an attorney with the Illnois Lottery, and helped take that online in 2011. She worked with the Justice Department for stamps on the Wire Act to let the lottery go online, and also worked on privatizing that lottery. She's considered the top attorney for online gaming. We also have Greg Avioli, who is a lawyer and founder of the National Thoroughbred Racing Association, who was instrumental in modifications to the Interstate Horse Racing Act, and was also CEO of the Breeder's Cup. Between those two, and others we have worked with since the YouBet days, we have lots of historical knowledge of the industry, and we also work very closely with regulators across the country.
What kind of developers are you hoping will adopt your technology?
David Marshall: I want to say any, but we do screen those developers. For example, developers of games for kids are not going to be appropriate, and we are going to look at content to make sure it is not inappropriate or offensive. But those are only the outliers. The majority of developers, I think, will like this, because they need a monetization engine, and gambling is pretty big. They just need to connect to us, and the interactivity with us is very simple, what you can think of as a trigger. Their game communications with us, and so during the game you might think of putting in a dollar token, and we'll come back and say--great, that person won $4. Those triggers could be anything in the game, whether a card flips over, a person smacks something, anything exciting. Game developers get a piece of all the revenue played on their game. The connectivity is very simple, and is one man, two weeks to connect to a game. We've got both small and large developers. We're starting slowly, just in California, and will then be growing through a gated launch. When we ungate, I think we'll see lots of developers coming. We currently have around 43 games on the platform in development.