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Former state regulators say including top executives in compliance actions, including potential individual sanctions, may be a more effective deterrent for bad behavior in the U.S. market than headline-grabbing fines.

Regulators both in the United States and abroad continue to work toward steering operators toward compliance, and some have elected to pursue significant fines in order to try to bring operators in line.

Still, David Rebuck, former director of the New Jersey Division of Gaming Enforcement, believes that approach may not have the desired effect.

“A big fine basically sends a message, but is it really going to change what is being done by that agency? Because those decision makers who made those errors… who purposely or intentionally or were grossly negligent remain licensed or still in charge of those organizations,” Rebuck said during a webinar hosted by SBC.

Rebuck suggested that one possible method to spur compliance may be pursuing actions against licensed individuals rather than simply actions against the entire company.

“Unless there’s a concomitant action to go after the highest-ranking individual who has the ability to make change, to fund the compliance operations to the highest levels to reduce risk, to make that commitment as a licensee, then the regulators are just, you know, we’ll collect our money, but will things change?”

“To just rely solely on a half-million-dollar fine or some of the bigger fines we’ve seen internationally, does that truly change actions, does it truly change behavior?”

“If that’s not followed up on by the regulator overseeing what transpired and how corrective action should be taken long-term, it’s just a failure, you’re just collecting money,” Rebuck added.  “You’re thinking you’re the tough S.O.B. who can beat up the industry, but you’re just going to see it again and again and again”

Katie Lever, chief legal officer for Ontario-based operator Great Canadian Entertainment, said that she thinks some of the recent fines issued by regulators are being done to make a point.

“Before I think they were very regimented and structured, but not very significant,” she said. “I think we're starting to see fines that are an attempt to be much more symbolic in their offerings, to say, this is a big number, which means this is a big deal.”

One of the largest fines in the U.S. sports-betting market so far this year was issued on July 25 by the Massachusetts Gaming Commission, which penalized DraftKings $450,000 for permitting customers to deposit and use credit-card funds in violation of state law.  

Lever agreed with Rebuck that larger fines may not be having the desired effect compared to the simple act of publicly disclosing the infraction, which can have effects down the road when companies appear before regulators in other jurisdictions.

“I don't think to a lot of organizations, even those symbolic fines are necessarily a big deal,” she said. “My sense is that the public shaming, because it impacts how you are perceived in the marketplace, is likely far more painful.”

“The board suffers the pain, which is part of it, and senior management suffers the pain,” Lever added. "I think it's far more painful than these really large symbolic numbers that are starting to come out.”

Sara Tait, a partner at Duane Morris law firm who formerly served as director of the Indiana Gaming Commission, agreed that the public reporting of infractions may be more significant than the size of the check a company has to write.

“I think some regulators do fine more often and maybe at smaller amounts, with the purpose in mind that those are reported, they're reported in up through the corporate ladder,” Tait said. 

“That's a way to ensure that the top decision makers at the company are seeing these maybe smaller issues get addressed with the regulators and say, oh gosh, we need to, you know, make some changes at the property level.”

Tait added that she felt only a handful of states have pursued higher fine amounts compared to an across-the-board increase in enforcement across all U.S. markets, and there may be factors unknown to the public as to why regulators have elected to do so.

“Certainly there were times when I was a regulator where I'm like, you guys don't know everything that went down in this investigation, or how the company might have responded to us or didn't respond to us over the time,” Tait said, adding that she does believe that regulators are issuing the larger fines to spur compliance rather than to simply be punitive.