In an interesting reflection of the changing dynamics in the gambling industry, a newly published report by the UK Gambling Commission revealed that the Scots are Great Britain’s most avid online gamblers. Scotland follows a general European trend of surging demand for online gambling. Naturally, the industry has been seeking to capitalize on this fast-growing segment. However, this development is also placing immense pressure on national gambling regulators to adapt the judicial framework to the new conditions.
Across continental Europe, Italy and Spain account for the greatest rise in demand for gambling.
Surprisingly, the spike in gambling growth in these two countries continued despite the fact that their economies are finally emerging from a deep, decade-long recession. Usually, people become more risk averse as their disposable income increases and the economy recovers. But during a recession, people seek to improve their financial fortunes, which is why Italy became Europe’s biggest gambling market in 2012. Spain and Italy have continued their rising gambling trajectory ever since, turning mainland Europe into a major market for gambling.
But it is not all down to new markets alone. Due to recent innovations, the gaming industry is also experiencing a structural shift in its revenue sources. Indeed, gambling going online has opened numerous doors to expand betting companies’ line of products. Plans to turn gambling into a Virtual Reality (VR) experience in the near future are rapidly taking shape. Bitcoin is slated to reduce manipulation of online casinos, and steps are being taken to influence a gamer’s total sensory input through Augmented Reality. The take-away is that these technological advancements are set to increase the number of opportunities for gambling even more.
Although VR and AR casinos are still a few years away, the online segment is nevertheless the industry’s most profitable. Take Ladbrokes Coral, for example. In the first half of the year, it revealed that over-the-counter betting fell by 6 percent, but overall profit rose by 7 percent thanks to a 17 percent jump in its online revenue. Industry-wide, online gambling has grown at an annual rate of 12 percent for the past decade and is expected to maintain high single-digit growth for the next few years.
However, now that smartphones have effectively put an uninterrupted Internet connection into the palms of people’s hands, online gambling has turned into anytime gambling. Gone are the days of having to wait until the bookies open before you can make your wager. A UK Gambling Commission survey revealed that 40 percent of respondents used mobile devices to gamble, allowing for round-the-clock betting independent of location. The results from a report by the UK’s Gambling Aware illustrate the change in gambling behaviour: gamblers spend up to £98 a day and were more likely to place bets between midnight and 4am.
With physical barriers to gambling thus removed, attention has increasingly turned to the role of online advertisers for betting companies. Gambling’s online dimension has created an entire offshoot industry of “third-party affiliates“, unlicensed companies referring people to gambling sites and receiving a cut of their losses. For example, a consumer may visit an online retailer and is subsequently “followed around” by ads for a certain betting company when they go onto other websites. These marketing strategies have been criticized for creating unrealistic expectations in consumers. Other methods such as setting up Facebook accounts purporting to provide gambling tips and then selling costumers’ email addresses to bookmakers, have also become pervasive.
These new arenas mean that regulatory bodies in Europe and elsewhere have been scrambling to find the best approach to respond to the gaming sector’s growth. And although they still have some major catching up to do, things are slowly moving in the right direction. Since 888 was fined £7.8 million for allowing self-banned customers to continue accessing its website, regulatory pressure has been mounting to upend the spread of third-party affiliates. The UK’s Advertising Standards Authority (ASA) this week upheld complaints against marketing content created by an affiliate of several major betting operators, forcing them to pull the adverts from the web. Following bad press regarding the 888 fine, online betting companies Skybet and Ladbrokes decided to review their business models and terminate the affiliate program.
However, relying on bad press will only go so far. A solid adaptation of the legal framework surrounding gambling is needed. However, until now Malta is the only European country that has taken concrete steps to do so. Gaming is big business in the country and makes up 12 percent of its GDP. This means it has a vested interest in striking the right balance between the wishes of the industry and the needs of consumers. Consequently, Malta has become a frontrunner on gambling regulation.
In July, the Malta Gaming Authority (MGA) published a White paper proposing to reform the country’s gaming legal framework. Primarily, the paper recognises that what players need is protection most of all. To this end it specifically states that “in case of a conflict between public interest and economic considerations, public interest considerations shall prevail”. Practically speaking, this recommends the strengthening of the MGA’s enforcement capabilities and oversight, along with its Player Support Unit in mediating disputes between customers and gambling houses. It also seeks to introduce new obligations on betting companies to monitor players’ gambling activities, both for anti-corruption and consumer protection purposes.
With the gambling sector growing, tighter legal frameworks need to be adapted to prepare for unforeseen developments in the sector. With the UK due to update its own gambling regulations before the end of the year, the authorities there would do well to look to their Maltese counterparts for guidance. Responsible gaming can only be guaranteed with the necessary framework that allows for better protection of gamers’ inherent interests.
*Alicia Conway is currently undertaking a Master’s in Economics and Management in London