Online Gaming and the Challenge of Problem Gambling

General

Extensive research conducted in recent years proves that online gaming does not increase the social risks
and damage of problem gambling.

Moreover, comprehensive research that has investigated this issue has come to the conclusion that online
gaming operators have more effective and sophisticated tools to prevent and combat problem gambling
compared to the measures that are available in the offline gambling world. Such measures have been
adopted in jurisdictions around the world that specifically regulate online gaming and have proved
themselves to be highly efficient.

In this regard, the following key findings clearly demonstrate that there is no linkage between online
gaming and an increase in gambling addiction and that online gaming operators have better tools and
means at their disposal to deal with problems associated with gambling:

The European Union concluded in a formal report that "it is difficult to draw a direct link between
remote gambling and the likelihood of becoming an addicted gambler".

A study conducted by the Harvard Medical School showed that 99% of the customers of online
sports betting and 95% of online casino players did not display any unusual gaming behavior.

A British Gambling Prevalence Survey found that addiction rates for online gambling in the UK
were lower than for some types of offline games.

Most regulated online gaming markets have required their licensees to ensure that measures have been in
place to prevent and combat the problems associated with gambling. These measures have proved to be
more effective than the measures available in the offline gambling market. Such measures include, inter
alia, the following;

Providing defined and clear deposit limits which are either set by the regulators or by the players
themselves (for a certain period of time, for a certain number of games etc.).

Allowing easy and straightforward self exclusion by players, whether on a temporary or
permanent basis.

Ensuring that comprehensive information regarding the players' play history is made available at
all times to the players, in order to allow the players to fully control their play and the money
spent by them.

Prohibition on extending or granting credit to players.

Links to problem gambling help lines and websites.

2
While gambling addiction is indeed an issue, which should undoubtedly be addressed in any regulatory
regime of online gaming as it does in AB 2578, it cannot and should not prevent the introduction of new
online gaming licensing regimes.

The European Commission Study

Due to the rapid development of online gambling products directed at EU citizens, the European
Commission launched a Green Paper consultation in early 2011 to obtain a facts-based picture of the
existing situation in the EU on-line gambling market and of the different national regulatory models.
Following the comprehensive consultation and research conducted as part of the Green Paper, as far as
problem gambling is concerned, the European Commission concluded the following:

1


Where such information is available, rates of probable gambling addiction appear to vary from
0.3% to 3.1% of the entire population.
2
Pathological (addictive) gambling has been considered by
some specialists as an impulse control disorder
3
and therefore not referred to as addiction.
However, recent studies have discovered similarities between gambling and substance addiction.
4

As mentioned in section 3.1, gambling problem screening tools used in surveys allow for the
identification of individuals that have severe problems with their gambling behavior. There are
contrary views as regards the addictive potential of on-line gambling. Although remote gambling
fulfils the criteria of availability and accessibility, making frequent playing easier than in case of
land-based gambling venues, it is difficult to draw direct links between remote gambling and the
likelihood of becoming an addicted gambler.

On-line gambling provides operators with more sophisticated possibilities to track the
transactions of each player compared to off-line gambling formats. In contrast to prevalence
studies, on-line gambling data allow for studies of the players real behavior. A study of on a
teaching affiliate of Harvard Medical School,
5
based on a long term analysis of individual gaming
activity of a random sample of nearly 50,000 on-line casino players from 80 countries and an
almost equal sample of on-line sports betting participants showed that 99% of the customers of
on-line sports betting did not display any unusual gaming behavior compared to 95% in the case
of on-line casino players.
6


The report prepared for the Swedish Presidency in 2009
7
mentions that although some research
suggests the existence of a positive link between accessibility and gambling addiction, the available
empirical data do not always confirm this. Where it has been possible to compare the results of
prevalence studies carried out 7-10 years ago (when on-line gambling was less popular) with the
results of studies carried out more recently, the gambling addiction prevalence rate remained
steady.
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1
European Commission Green paper on on-line gambling in the internal market 22, 2011 (EC Green Paper). Emphasis added.
2
Data from 7 Member States, M. Griffiths, Problem gambling in Europe: An overview, Appex Communications, April 2009.
3
Diagnostic and Statistical Manual of Mental Disorders, 4th Ed., American Psychiatric Association, 1994.
4
Draft of the Diagnostic and Statistical Manual of Mental Disorders, 5th Ed., American Psychiatric Association, publication planned
for 2013.
5
The study was carried out in a research partnership with bwin who made its customer database available.
6
LaBrie, LaPlante, Nelson, Schaffer, Assessing the Playing Field: A prospective Longitudinal Study of Internet Sports Gambling
behaviour (with Schumann,) Journal of Gambling Studies, 2008; Inside the virtual casino: A prospective longitudinal study of
Internet casino gambling (with Kaplan), European Journal of Public Health, 2008 and Population trends in Internet sports gambling"
(with Schumann),Computers in Human Behaviour, 2008.
7
Svenska Spel, The cost of gambling. An analysis of the socio-economic costs resulting from problem gambling in Sweden. Council
of the EU. DS 406/09. Brussels, 2009.
8
For example: Finland and UK.
3
Also the British Gambling Prevalence Survey carried out for the Gambling Commission in 2007
found that addiction rates for on-line gambling in the UK were lower than for some types of off-
line games and that the addiction seemed to be more linked to the introduction of new and thus
more "attractive" types of games, whether on-line or off-line.
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Indeed, most regulated online gaming markets have measures in place to prevent and combat problem
gambling, which have been proven as more effective than the measures available in the offline gambling
market. Amongst other things, such measures include: (i) the instituting of deposit limits; (ii) time limits;
(iii) self exclusion (iv) involuntary exclusion; and (v) links to problem gambling help lines and websites.

Examples:

- Deposit limits: In most jurisdictions, deposit or betting limits must be offered to players but are
optional (e.g. Nevada and Schleswig-Holstein). Other jurisdictions have default deposit limits set by
regulation (e.g. Spain) and others do not allow players to commence any gaming activities without first
having set certain limits on their gaming activity. For example, in Italy and France, operators must deny
access to gaming services to players who have not set individual gaming limits for fixed time periods.
Furthermore, under the Italian online gaming regime, an operator's platform must allow the player to
set: (i) a maximum wager limit per match; and (ii) a maximum game participation limit over a set time
(e.g. daily or weekly). Under French regulation, the limits set by a player apply to the aggregate
amount of deposits made and bets placed by a player for a seven day period. In addition, most
jurisdictions' provisions concerning deposit limits specify time frames that restrict a players ability to
raise a previously set limit (e.g. Italy seven days, Denmark 24 hours, Schleswig-Holstein 48 hours
and any new increase of a previously reduced deposit limit cannot be set before the expiration of one
month).

- Self exclusion: Players should be able to self exclude temporarily or indefinitely (e.g. Italy, France and
Schleswig-Holstein). A temporary self exclusion should result in operators immediately ceasing to
accept bets from excluded players and refraining from contacting the player with marketing offers and
promotional information. Where players exclude indefinitely, operators in most jurisdictions are
required to enter such players into a central list which should be checked by online gaming operators
before registering new players (e.g. Denmark and Schleswig-Holstein). According to most regulations
providing for indefinite self exclusions, a player's request for permanent self exclusion will result in the
mandatory closure of the player's gaming account and an inability to reopen an account before the
expiration of at least one year (e.g. in Denmark and France, the account may not be reopened before
the expiration of three years).

- In Spain, default deposit limits apply and players who wish to increase their deposit limits must first
take a "problem-gambling prevention test".

- In Denmark, operators have to display, at all times, a clock allowing a player to be informed of the
time spent playing. In addition, Danish regulations prohibit the employment of bonuses requiring
players to wager a given amount within a time frame of less than 60 days.

- In Schleswig-Holstein, operators must provide each player immediate access to details on the balance
of the player's account, the game history (including stakes, wins and losses), deposits and cash outs,
and other transactions. These details have to be displayed immediately after a player has logged on to

9
Addiction rates among past year gamblers. British Gambling Prevalence Survey 2007, National Centre for Social Research, Sept
2007.
4
the system and must cover the past 30 days. The player may not participate in any game until he
expressly declares acknowledgement of the displayed details.

- Most regulated jurisdictions prohibit the extension of credit by operators to players.

- Most regulated jurisdictions require operators to prominently display responsible gaming information
as well as links to organizations providing assistance to problem gamblers and their families.

One important factor to bear in mind when considering the above examples is that many of them are only
relevant and effective in an online environment. This is because gambling limits (time or money) that might
be imposed either by the regulator or the players themselves can be implemented by the operator and
then accurately monitored and policed by the operators automated systems. That provides a very
compelling argument to say that online operators are better placed than offline operators to monitor and
control potential problem gambling of their customers.

According to the Sparrow Report
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self-limitations result in players reducing their frequency of play (with
respect to both the number of days on which bets were placed and the number of bets per day) and the
total amounts wagered. Given the automated/computerized mechanism, the measures mentioned above
are able to effectively provide responsible gaming safeguards in an online gaming setting.
11


The challenges noted above are at the forefront of thinking of various regulators in the United States who
are in the process of discussing the possibility of regulating online gaming. Amongst the evidence submitted
to these regulators has been conclusive research showing that the available regulatory measures to prevent
and combat problem gambling have been proven as more effective than the measures available in the
offline gambling market.

In a written testimony submitted to the U. S. House Committee on Energy and Commerce, the American
Gaming Association stated the following:

[Y]ou asked whether licensing and regulation of online poker is a safe bet. Our industry believes it
is. The risky bet would be to leave unchanged current law that leaves consumers, minors and
those with gambling problems vulnerable to unregulated offshore companies.

As you may know, the AGA has not always taken this position. For much of the time since online
gaming was first introduced, AGA members were not convinced that online poker could be
regulated to protect Americans against fraud, money laundering and other illegal activities, or to
prevent minors from gambling online and protect problem gamblers.

New technology and new processes have changed that. We live in a digital world where people
can purchase everything from groceries to automobiles online. These e-commerce companies have
developed new technology and processes to help them facilitate sales, protect customers and, in
some cases, prevent minors from purchasing their products. The same types of technological and
process advancements are being used in countries such as Great Britain, France, and Italy and in
provinces of Canada to effectively regulate and oversee Internet gambling.
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10
A 2009 report titled "Can Internet Gambling be Effectively Regulated? Managing the Risks", authored by Prof. Malcolm K.
Sparrow of the John F. Kennedy School of Government at Harvard University (the "Sparrow Report").
11
See Sparrow Report at 71 with further references.
12
Written Testimony of Frank J. Fahrenkopf Jr., President and CEO American Gaming Association, Submitted to the U. S. House
Committee on Energy and Commerce Subcommittee on Commerce, Manufacturing, and Trade Hearing entitled: Internet Gaming:
Regulating in an Online World (2011) (the AGA Testimony).
5
A very comprehensive report prepared by Spectrum Gaming Group (at the request of the Commonwealth
of Massachusetts Treasurers Online Products Task Force) dealt with the issue of problem gambling and the
internet and included the following conclusions:
13


Any discussion on the introduction of Internet gambling to a new jurisdiction raises the specter of
increased problem gambling issues and poses new questions regarding gambling and social
responsibility. Because the appeal of the Internet is based fundamentally on the greater
convenience of being able to do things from the comfort and privacy of ones own home, it is often
assumed that greater convenience and 24/7 access will concomitantly bring with it greater additive
gambling behavior.

Perhaps the most useful study of actual Internet gambling behavior is The bwin.party DOA research
collaborative. The bwin.party DOA collaborate involves a major international Internet gambling
operator bwin.party digital entertainment PLC of Gibraltar and the Division on Addiction
(DOA) at Cambridge Health Alliance, a Harvard Medical School teaching affiliate. The
collaborative began in 2005 and has generated a series of studies that have established
benchmarks not only for problem gambling but also for normative, or healthy, gambling behavior.
Through the course of the study, bwin.party has provided anonymous data on over 100,000
customers, and the initial case study was conducted on 49,000 online players covering a more than
three years of activity, making it the largest longitudinal study of its kind ever conducted. The DOA
publishes its research in scientific journals after a peer-review process. In addition, the data upon
which the results were based are made available online as part of the Transparency Project,
allowing other independent experts to verify the findings and to complete their own scientific
research.

On March 22, 2012, the Task Force met with Kathleen Scanlan and Jim Wuelfing of the
Massachusetts Council, where findings of from the bwin.party DOA collaborative were
presented.

Among the findings from the bwin.party DOA collaborative:
Problem gambling rates on the Internet are not significantly different from problem gambling
rates observed with other forms of land-based gambling.
Problem gambling indicators are less associated with magnitude of betting or volume of
transaction but more with indiscriminate betting across multiple and diverse products.
Self-imposed limits are a stronger identifier of problem gambling than site-imposed limits.
Tracking software and data analytics can be used to identify potential problem gamblers
early on for remedial action.

More specifically, in a 2008 report using bwin.party data, authors Richard A. LaBrie, et al, provided
revealing, data-driven findings

The sample included 4,222 gamblers who played casino games. Results: The median
betting behavior was to play casino games once every 2 weeks during a period of 9 months.
Subscribers placed a median of 49 bets of 4 each playing day. Subscribers lost a median of
5.5% of total monies wagered. We determined a group of heavily involved bettors whose
activity exceeded that of 95% of the sample; these players bet every fifth day during 17.5
months. On each playing day, these most involved bettors placed a median of 188 bets of

13
Spectrum Gaming Group Facing the Lotterys Future Implications and Strategies Regarding Internet Sales, a Report prepared for
the Massachusetts Treasurers Online Products Task Force (2012, amended 2013) (the Spectrum Report). Emphasis added.
6
25. Their median percent of wagers lost, 2.5%, was smaller than that lost by the total
sample.

Conclusion: Our findings suggest that Internet casino betting behavior results in modest
costs for most players, while some, roughly 5%, have larger losses. The findings also show
the need to consider time spent as a marker of disordered gambling. These findings provide
the evidence to steer public health debates away from speculation and toward the creation
of empirically-based strategies to protect the public health.

In light of the above we believe that empirical evidence and research demonstrates that the introduction of
online gaming regulations does not increase the social risk and damages of problem gambling. Further, the
technology available today allows the implementation of sophisticated measures to prevent and combat
problem gambling. Such measures are more effective than comparable measures used in the offline
gambling market and, in some instances, are techniques that are not even available to offline operators.


View full versions of several studies and reports referenced above here.