Sports betting has long been a popular activity among fans for generations. For some time, Nevada was the only state that allowed sports wagering. As of now, sports betting is legal in 37 states, and amongst those 37 states, 15 states require sports betting companies to hold a surety bond known as a sports wagering bond to operate legally. The bond exist as a way to financially as a guarantee that operators have the necessary financial reserves to cover all potential sports bet winnings and as a safety in case a betting operator fails to meet licensing regulations. For instance, if a sports betting company fails to make timely payouts to winning bettors, a valid claim could lead to a payout from the bond to ensure that bettors receive their earnings promptly.
The bond is required in the following states:
The cost of a sports wagering bond is not fixed and can vary based on two key factors: your credit score and your business's financial situation.
Here's how it works: The highest bond amount set by regulators is $5 million, which represents the maximum amount you might be required to obtain. To calculate the cost, we consider the premium rate, which at best, is 1% of the bond amount.
So, in the best-case scenario where you're asked to get the maximum $5 million bond, your cost would be just $50,000. This is because 1% of $5 million is $50,000.
However, if your credit score is lower, you may be required to pay more. In the worst-case scenario, with a higher-risk credit score, your cost could be $250,000.
The cost of a sports wagering bond depends on your specific financial situation, with the highest potential cost being $250,000 for a $5 million bond if your credit score is on the lower side.
Businesses within the above mentioned states that offer a platform, whether online or in person, to bet on sporting events need a sports wagering bond. Along with the bond, you also need licensing, which varies on state by state basis.
Examples of Sports Betting Businesses:
Online Sportsbooks: These are websites or mobile apps where users can place bets on sports events. They need licenses and bonds to operate legally in many states.
Brick-and-Mortar Sportsbooks: Physical locations like casinos or betting shops that allow patrons to place bets on sporting events in person. They also require licenses and bonds.
There are different types of licensing requirements depending on the state department that managed sports betting. The following regulatory models have been adopted:
State-Controlled Market: In this model, the state manages sports wagering through an administrative agency or lottery commission. The state may either contract with vendors to offer sports betting through the existing lottery infrastructure or permit vendors to offer it directly.
License-Based Regulatory Market: States issue licenses to qualified market participants, collect fees to cover monitoring and enforcement costs, and impose minimum requirements through licensing agencies. They also tax the gross receipts of licensees.
In a license-based regulatory system, like the one found in New Jersey, licenses are categorized into different types, including primary, service provider (for mobile platforms), supplier (for technology), and key employee licenses. The number of primary licenses is usually limited. For instance, New Jersey restricts the number of primary licenses and gives preference to established entities like casinos and racetracks. This controlled approach helps regulate the growth of the sports betting industry while ensuring responsible expansion and oversight. To determine the specific license requirements for your business in your state, simply click on one of the hyperlinks provided in the chart above, which will direct you to your state's sports wagering bond page.
Sports wagering has started to be legalized for two main reasons:
To establish industry standards, some states have implemented sports wagering bonds for 2 purposes. Firstly, it acts as a financial guarantee, ensuring that sports wagering operators have the essential financial reserves in place to cover all potential winnings resulting from sports bets. Secondly, it functions as a safety net in the event that a betting operator fails to adhere to licensing regulations.
When you file a surety bond with the state, you are also submitting it with your licensing application.
To file a surety bond with the state, include it with your application to the appropriate department. Some states will require you to send out a PDF print copy, which the surety broker can send you via email. Other states will require a wet seal and original copy of the bond, which a surety broker can also send you.
Applicants can review their state licensing application instructions to understand the process and timeframe for their bond submission.
In most instances, states will necessitate that the sports wagering bond be submitted along with their license application. This is because the sports wagering bond is necessary to qualify for and maintain licensing.
A sports wagering bond is only required for the businesses that offer sports betting services. Anyone in the public that meets age requirements can bet on sports without a license being required.
Every state has regulations specifying actions that could result in a bond claim, and individuals applying for a bond should consult the relevant licensing authority to understand which actions might lead to claims. Generally as a guideline, sports wagering operators can follow these rules to minimize the chances of claims against the bond: