Sports Wagering Expansion Raises Unclaimed Property Questions

In 2018, the U.S. Supreme Court struck down a long-standing federal ban on sports betting outside of Nevada. Since then, most state legislatures have considered allowing sports betting and currently, 34 states plus Washington, D.C., allow or are in the process of introducing some form of legal sports wagering, according to LegalSportsReport.com.

As a result of this rapid sports gambling expansion, legislatures and regulators in states with legalized gambling have been addressing questions about how holders should handle unclaimed property resulting from sports betting, which can occur when winning bets go uncashed or online betting accounts become inactive.

Following is a snapshot of recent legislative and regulatory activity surrounding sports-betting and d unclaimed property.

Adopted Regulations

Kentucky

Kentucky launched retail sports betting on Sept. 7, 2023, with mobile sports betting following on Sept. 28, 2023. In anticipation of this launch, in July, Gov. Andy Beshear signed emergency regulations related to sports wagering.

The rules related to sports betting accounts specify, among other things, the type of personally identifiable information operators must collect from their account owners, when an account is considered inactive and how licensees should handle such accounts: “Any Sports Wagering Account with no log-in activity for at least three (3) years may be closed. When a Sports Wagering Account is closed, the Licensee shall issue any funds, less processing fees, within five (5) business days to the account holder’s last-known address.”

Massachusetts

Legal sports betting in Massachusetts began in March 2023. The state’s Gaming Commission developed related regulations, which became effective as of June 7, 2023. Among the noteworthy unclaimed property particulars are:

• Funds in any account without activity for three years after the balance in that account became payable or deliverable to the patron are considered abandoned.
• “Activity” includes sports wagers, customer-generated deposits or customer-generated withdrawals.
• Sports wagering operators must conduct “reasonable due diligence to locate the patron” at least 60 days before reporting an account as unclaimed property to the Treasurer.

Proposed Regulations

 Maine

In 2022, Maine approved sports wagering, with rollout expected late this year. The state has issued proposed rules specifying that accounts are considered dormant after one year of “no patron activity.” Licensed operators are expected to have internal controls for handling such inactive accounts.

 New Jersey

New Jersey was among the first states to offer sports betting following the Supreme Court decision allowing expansion. In June 2023, the Gaming Enforcement Division proposed amending its rules to consider an internet gaming account dormant “one year after last login or settlement of a wager, whichever is later.” Operators are instructed to “provide notice to patrons 30 days prior to the scheduled removal of funds from dormant accounts with balances of $1.00 or more. No later than the fifth of each month, an internet gaming operator shall remove all cashable funds from dormant patron accounts for the prior month.”

New York

Although state and federal laws differentiate between sports wagering and fantasy sports, they have similarities. New York has allowed online fantasy sports since 2016, issued proposed regulations in 2022 and recently revised them based on public comments. The proposed rules define a dormant account as “an account to which a user has not logged in for three consecutive years.” Fantasy sports operators are expected to remit unclaimed funds in New York customers’ dormant accounts in accordance with the state’s unclaimed property law.

Questions Remain

Much like another emerging property type, virtual currency, the rise in sports betting has raised questions about whether unclaimed property holders should report these property types under states’ miscellaneous, catchall provisions if they are not otherwise defined in the gaming or unclaimed property laws.  Similarly, some states do not define what constitutes owner activity with respect to dormant sports betting accounts.

As holders are tracking new gaming law developments, additional questions emerge with no clear answers.  Some states, such as Wyoming, have a 3-year dormancy period under the gaming law, but under the unclaimed property law, the catchall, miscellaneous provision is 5 years.  It is also unclear whether such funds are to be reported and remitted to the state as unclaimed property West Virginia, has a 16-month dormancy period for dormant gaming accounts and specifies that they must be reported and remitted in accordance with the unclaimed property law.

Due diligence provisions in the gaming law may either be silent or impose different obligations on the holder than what is required under the unclaimed property law.  For example, Pennsylvania’s gaming law requires that notice be sent to the owner via mail or electronically after accounts have been dormant (no log-in, game play, withdrawals, or contact with customer service), for a period of 1 year.  The dormancy period is 2 years under the gaming law, and funds must be reported and remitted in accordance with the state’s unclaimed property law.

State gaming laws also differ in terms of where dormant funds/accounts should be reported and remitted.  For example, Nevada’s gaming law requires a certain percentage of certain expired wagering vouchers (vouchers that have not been redeemed on or before their expiration date or within 180 days of issuance, whichever is less) to be reported to the Nevada Gaming Commission.  However, licensees may allow patrons to redeem expired wagering vouchers and whether a portion of the redemption value will be reported and remitted to the Commission depends on when the voucher expired.  In New Jersey, on the other hand, gaming laws require dormant internet gaming accounts to be reported 50% to the casino licensee and 50% to the Casino Control fund.

MarketSphere’s unclaimed property experts can help holders with questions regarding emerging properties, such as sports wagering accounts. Contact us regarding any escheat compliance needs to speak with our subject matter experts, who can take the uncertainty out of unclaimed property compliance, reduce the risk of non-compliance, and keep your organization focused on core business activities.

*Content contained in this article is considered accurate as of the publish date.