Market Watch: Sin and redemption in online gaming regulation

One of the greatest free spins for someone born and bred a Catholic (who became a venture capitalist – in gambling… Jesus truly wept) is the concept of sin and redemption.

To all the agnostics and doubters out there, the elevator pitch goes roughly like this. No matter how big (within reason) the sin is, it can usually be washed away with contrition and a few Hail Marys.

This, though, is the great bit. There isn’t really a threshold on how frequent, or how many times, this needs to be repeated before it becomes unforgivable. In other words, sin and repent, and you can technically repeat the cycle forever.

Understandably, this has been a throng of intense debate between philosophers and sociologists since the Age of Enlightenment. Simply put, how much compassion and/or forgiveness can you dispense before you risk creating a moral hazard?

If you want any anecdotal evidence of this, look no further than a well-known island-based offshore gaming jurisdiction. Reputed for being the cradle of online gaming, and more Catholic than the Pope himself.

Recently, said offshore gaming jurisdiction was also awarded the dubious honour of being one of the most obese nations on the planet. The two seemingly unconnected themes are actually rather connected. Clinical studies have suggested that there is an emerging trend among type-II diabetes patients who continue to over-indulge as long as they keep taking their cholesterol medication. In other words, take those pills and you can keep wolfing down those pies. Redemption!

It thus seemingly transpires that the UK’s Gambling Commission constituents is mostly composed of Catholics. At least that seems to be the case if some scrutiny is applied to the Responsible Gaming Act, which bears more than just a concerning resemblance to the sin/forgive/repeat activity.

Put simply, a compulsive gambler (or convicted fraudster), can attempt to game the system with various operators and try to get back what they lost under the narrative of being a vulnerable party oppressed by the cruel industry. And in most cases gets away with it.

If this sounds outrageous, then clearly not enough attention is being paid to the plights of the operators. From the start of the year, there has been an overwhelming increase in reports to the UKGC for fraudulent responsible gambling claims. Principally made by gamblers using different accounts/VPNs/aliases, it’s put heat on operators to settle out of court only to be caught weeks (sometimes even days) later in a repeat offence.

This is not a compulsive gambling problem. It is a self-inflicted issue by a system attempting to insert an undo feature into the fabric of online gaming. Since the launch of the scheme, it has been widely acknowledged that the failsafe mechanism has been inserted at the wrong place; there should be tougher controls on entry, not on play.

Put this another way. Responsible gambling was never supposed to be about slowing the time between spins, capping the maximum bet, reducing the monthly deposit, or even that outrageous (Marxist again) trope: fixed percentage of your published salary. Responsible gambling was always supposed to be based around serving up a central source of truth to prevent issues from happening, not try and reverse them once they happen. This is not entirely dissimilar to the way insurance companies share data to prevent scams. And it’s also why insurance fraud prevention is much more effective than its gambling counterpart.

In a properly designed responsible gambling system, any new registrations, or repeat logins, would be compared and validated against an increasing blacklist of self-excluded players and/or known scammers. In fact, for all the mundane, humdrum uses the blockchain has been recalcitrantly wheeled out over the past decade, this would surely become its killer application – where else could you find a cheap, distributed single source of truth?

Data access

The notion of a centralised database is starting to catch on, albeit slowly and reluctantly at first. Limited so far to individual territories (such as Australia, Estonia and Germany) for now, it requires cross-border endorsement to be ratified at a larger scale. This surely would be a one of the better pan-border initiatives to implement over the coming years. The detection is not foolproof yet, but that’s mainly down to the disparate methods used.

This is where artificial intelligence can help. AI has been intentionally designed to spot trends such as this in emerging, (and as yet), undetected problem gamblers. The behavioural heuristics are strikingly similar to bot detection, virus scanners, and even DDoS attacks. Enabling blacklist-tagging services that flag suspicious gamblers to an additional security/in-game check is not outside the realms of practicality.

This is what member states should be collaborating on. Not arguing over homogenous bet limits or spin times. Instead we need to be agreeing on the standards of a unified player database that can be designed, evolved and interrogated on a needs basis. The concerns previously levied on the rate of increasing draconian legislation are fully justified especially now. If this is not addressed properly then players will be slowly but surely dragged into greyer, more liberal markets with less restrictions.

The implications of not implementing proper responsible gambling controls are not only significant, they are destructive. As things stand, given higher restrictions on in-game play, advertising, sponsoring, and now limited payment/withdrawal options (thank you, Wirecard) – the overwhelming increase in fraudulent responsible gaming claims truly risk bringing the industry to a grounding halt.

Any reactionary claims that the operators should have been better policing these problem gamblers from the start is also facetious. The same argument can apply to other industries that sell any of the other seven deadly sins. Primarily entry – before usage – needs to be controlled. Almost immediately the proportion of compulsive offenders in the pool is lowered. That way you make it harder to incentivise repeat offences, and in so doing, reduce the risk of creating a moral hazard.

But importantly the obligation is on us – as industry shapers – to put pressure on the regulators that be, not to facilitate any opportunities to precipitate the dangerous sin/forgive/repeat cycle. Creating ‘get out of jail’ options (in some cases quite literally) for problem gamblers is much worse than preventing them from playing in the first place. If any further proof is needed of what happens when someone behaves irresponsibly because they believe they won’t suffer the consequences, look no further than said offshore gaming jurisdiction…