Shoulder responsibility: Is the US a problem gambling ticking timebomb?

Anyone who has studied online gambling around the world over the years would acknowledge that the US is akin to the igaming industry in Europe – only on fast forward. The clamor to cash-in on this state-by-state digital gold rush in what is the biggest opportunity the sector has ever seen has some questioning whether responsible gambling isn’t receiving the attention it should.

Moreover, could the US be a problem gambling ticking timebomb and could there be a backlash over online gambling’s perceived pervasiveness as operators’ practices are thrust under the microscope like in the United Kingdom, where gambling’s fiercest critics argue it is the new tobacco?

The National Council on Problem Gambling (NCPG), a Washington DCbased NGO formed in 1972 that is neither for nor against legalized gambling and receives no government funding, estimates there to be two million American adults with severe gambling problems.

It says another four to six million have what it describes as mild disorders, while the annual national social cost from the ripples caused by problem gambling – including gambling-related criminal justice, healthcare, and job losses – amounts to $7bn, the NCPG suggests. Yet what impact the proliferation of online gambling, particularly sports betting since PASPA’s repeal in 2018, has had on problem gambling rates is unclear.

This is partly because it isn’t properly monitored. Keith Whyte, executive director of the NCPG, says: “We expect that it has increased both the rates and severity of gambling problems, but it is not something that we know because unlike most jurisdictions, the United States has no national research program, nor do most states.

Outside organizations like ours, nobody’s routinely tracking prevalence or problem gambling rates. And we can only do that by proxy through looking at helpline calls or anecdotal information.

So, we believe rates and severity of problems are likely to have increased, but we don’t know if that’s the case.”

Today, according to the NCPG, 10 states have no public problem gambling programs and resources, while in 40 states the average spend per capita on problem gambling is just 25 cents a year.

There is also no federal funding. This means there is a disjointed patchwork of safety nets across the US reliant upon voluntary donations.

“My area where we have Maryland, Virginia, and the District of Columbia is a very contiguous and metropolitan area, but there are three different helpline numbers,” says Whyte. “I can have breakfast in Virginia, lunch in DC, and dinner in Maryland on an average day, and yet their problem gambling systems are not just non-integrated but fundamentally and massively different in the amount of support they have.”

He adds: “In some ways, the United States is almost like a Third World country in terms of the safety net.”

And as states face budget shortfalls accentuated by the shockwaves caused by the coronavirus pandemic and recession, the fear is that what problem gambling funding is available could suffer deep cuts. In fact, Nevada has proposed slashing its funding by 75% from $2m to just $500,000. This is a state where its 219 commercial casinos raked in $12bn in GGR last year, generating $859.1m in gaming taxes.

Therefore, $500,000 would equate to just 0.058% of the gaming taxes collected in 2019, or just 0.004% of total GGR in the largest gambling hub in the Western Hemisphere. So, it’s little wonder that there has been criticism of the plans.

Data points

As things stand, some form of legalized gambling is available in 48 states plus DC (the two exceptions being Hawaii and Utah), while there are commercial casinos in half of all states.

Therefore, casino operators are, in theory, able to transfer best practise and learnings around responsible gambling and identify customers whose behaviors indicate gambling-related harm into the online sphere.

And unlike brick-and-mortar properties where cash is king, online play is fully tracked, giving operators a 360-degree view of a player, including deposits, withdrawals, staking, session length, and games and sports he or she bets on.

So, despite the immediacy and accessibility of online, it should be more conducive to preventing gambling-related harm.

“People who don’t know the industry will fear online but, ironically, it is the best environment for responsible gambling – we know the players, we track their play, and collect data,” says Paul Pellizzari, VP of global social responsibility at Hard Rock International (HRI).

Pellizzari, who was hired two years ago to strengthen the Seminole Tribe of Florida-owned casino chain’s responsible gambling efforts, adds: “In the old days, responsible gambling was off to the side and you had to do it for compliance reasons, but I’m a believer in branded responsible gambling programs that speak to players in their language, like PlayersEdge [HRI’s program to encourage customers to manage their gambling].

“You normalize tools and make them part of the gambling experience so that it is seamless and understood as just part of what the industry does,” he says. HRI also encourages players to study their bet history and set deposit limits.

“I’m a very impassioned believer in allowing players to choose their limits,” Pellizzari explains. “I don’t believe in a one-size-fits-all approach where no-one can spend over $200, for instance. In my own experience, and the data shows this, when you encourage people to set a deposit level, they will often keep it at that level.”

HRI is also working with researchers on establishing a player self-assessment survey to discover what type of gambler they are in the online arena. Pellizzari says: “We will be looking at risk analytics to understand what the risk level of the player is and then actively promote budget-setting tools and taking a break. We want to motivate players to use those tools and also incentivize them to engage with them.”

One European operator overtly proactive around responsible gambling in the US is GVC, one half of the joint venture (Roar Digital) with MGM Resorts.

The London-listed operator launched its Global Foundation 12 months ago and quickly followed it up with a foundation dedicated to the US as a way of promoting CSR initiatives, corporate compliance, sports integrity, and, more importantly, an advocacy for responsible gambling and problem gambling treatment.

“It’s about the long-term sustainability of all the [US] markets that we have either already entered or we envisage entering at some point in the near or more distant future,” says Martin Lycka, director of regulatory affairs at GVC and a trustee of the foundation.

“That would be a regulatory regime that provides customers with adequate and sufficient levels of consumer protection in the critical area of responsible gambling or prevention of problem gambling, while giving operators an opportunity to provide those customers with a sufficiently attractive offering.”

Speaking more generally, Lycka says: “Responsible gambling is critically important to any market, and the US markets as a whole has a good shot at becoming the biggest sports betting – and potentially igaming – market in the world.

I would advise everybody to acquire customers in a safe and sustainable way because [otherwise] it could backfire.”

Lessons from afar

One advantage US regulators and legislators have is the ability to look across the Atlantic to the UK’s £5.5bn remote gambling market (the world’s largest) to learn from some of the egregious mistakes and shortcomings around protecting players, resulting in seven-figure fines being meted out by the regulator.

For years, UK-licensed operators were accused of paying lip service to responsible gambling. In recent times, though, all the leading igaming businesses – particularly publicly listed ones – have overhauled their responsible gambling protocols and beefed up player interventions and efforts around identifying at-risk customers and indicators of potentially harmful behavior, including using automation and even artificial intelligence and machine learning to do much of the heavy lifting.

Kindred Group has vowed to generate zero revenue from at-risk problem gambling by 2023, while 97% of its employees had received training on responsible gambling by March 2020.

Similarly, William Hill pledged that “nobody is harmed by gambling” with its high-profile initiative launched in 2018, while GVC committed in April to a 10-fold increase in its funding of research, education and treatment of problem gambling to 1% of its UK GGR by 2022 (equivalent to £20m).

This is just a snapshot of a raft of responsible gambling commitments of late. Lycka says: “To future-proof the US market and pre-empt some of the risks that the industry has experienced and learned the hard way in Europe, it is advisable to put the emphasis on responsible gambling.”

He adds: “Observing responsible gambling standards is of cardinal importance to the long-term sustainability of the US market.” That long-term sustainability could suffer if operators attack the market all guns blazing to the point where there is a backlash from politicians, mainstream media, and the public – as has been the case in the UK.

Indeed, calls are growing louder there for a ban on gambling sponsorship in sport as critics argue betting logos emblazoned across jerseys and around stadia, as well as betting ads on TV during live sport, normalizes gambling in the eyes of minors.

In the US, leagues and teams continue to sign deals with gambling companies left, right and center, to the point where it’s probably only a matter of time before sports betting logos appear on players’ jerseys.

For example, the Denver Broncos have now inked partnerships with three sportsbooks: Roar Digital’s BetMGM, Betfred, and FanDuel. Pro sport’s willingness to now embrace betting with open arms and have gambling brands integrated into marketing and displayed around arenas could end up being a case of ‘marry in haste, repent at leisure.’

“Almost all the major triggers we see that led to the backlash in the UK are in fact being pursued even more aggressively here in the United States,” Whyte remarks. He includes gambling sponsorships as one of these triggers and highlights the lack of a national advertising regulator in the US to keep operators in check.

In fact, you only have to look at the apex of the DFS boom when arch-rivals DraftKings and FanDuel were going head-to-head with their TV ad blitz – to the point where a DraftKings commercial appeared every 90 seconds – to note how fed up the public became with that onslaught of marketing invading their living rooms.

There’s been a similar pushback in Europe. Italy now has a blanket ban on all forms of gambling marketing, Spain is mulling its own restrictions, and restricting all gambling commercials to after 9pm in the UK is a distinct possibility.

“If you just look at the main drivers of some of the backlash, they are all present in the United States,” says Whyte. He continues: “Some of the same operators that complained most loudly about the backlash and about the restrictions placed on them [in Europe] are the ones that are going full speed ahead in the US.”

Ante up

When it comes to taking risks, Americans are considered some of the world’s biggest gamblers. Indeed, data from H2 Gambling Capital in 2016 revealed that the average spend per capita annually on gambling is more than $400, putting the US only behind Australia, Singapore, Ireland, and Finland in that regards.

And you could argue that the very nature of American odds encourages sports bettors to stake more than what you’d typically see in Europe. Betting lines revolve around your returns. If you put down $100 you could win X, or if you stake Y you could collect $100. It means $100 is the de facto stake when explaining how sports betting works to a newbie.

For Lycka, encouraging bettors to wager more than they can afford to lose and taking advantage of problem gamblers is not only plainly wrong and short-sighted, it’s counterproductive. “The public health costs would go through the roof. We are doing everything in our power to ensure that customers bet within their means.”

This is why encouraging players to set deposit limits and caps on how long they are logged into a betting site, as well as allowing cooling-off periods and the ability to self-exclude are critical. The issue with self-exclusion in the US, though,

is the lack of a national register where players can easily ban themselves from all licensed sites across the country like in Sweden with Spelpaus.se (more than 54,000 people, or 0.52% of the population, are currently self-excluded).

“Problem gambling is a national public health issue, so it’s going to take a nationally coordinated response,” Whyte insists. “With our laissez-faire system, the burden is placed on those who are making the profit; government is not going to be that provider of last resort in most states – and they never have been.

But it takes everyone in the industry to step up and do, in some cases, a lot more than what they are accustomed to be doing in a jurisdiction like the UK.” Pellizzari concurs: “Government certainly has a role to play in terms of setting up a structure for responsible gambling to happen in any jurisdiction.

So, governments should have a role around funding and supporting the provision of counseling services and research.” At the time of writing, there are 18 states plus Washington DC with sports betting live (30% of the US population) 27 months after PASPA’s repeal.

Another four states have passed sports betting laws, while a further eight have active legislation on the books. In addition, online casino is live in four states, while Michigan is poised to roll out igaming later this year or early 2021.

With sports betting alone projected to be eventually an $8bn-a-year industry, it is clear why operators are desperate to cash-in and why the US has been described as Europe on fast forward.

The priority for legislators, regulators and operators is to not repeat the same mistakes that have brought the European online industry intense scrutiny and widespread criticism. Achieving that will be far from straightforward.