Don’t hide your head in the sand: regulated real-money gaming is the future

This post originally appeared on blog.betable.com.

Any of you following the news last week may have noticed some very public comments from Sheldon Adelson, CEO of casino giant Las Vegas Sands. In a Forbes op-ed, he slammed state and federal plans to regulate online real-money gaming, claiming that it is bad for society and steals players from land-based casinos.

As these comments were coming from a multi-billionaire maven of the casino industry, they caused quite a stir. There is still a split in the traditional gambling industry’s thinking on the regulation of online games. But Adelson is in the minority these days, as most Vegas casino companies have online businesses internationally.

A number of parties have offered counter arguments and criticised Adelson’s comments. Pointing to the legalization of internet poker in Nevada, John Pappas, director of the Poker Player’s Alliance, said:

“All of the perceived evils have been addressed through appropriate oversight—greater oversight and regulation than what’s available in a brick-and-mortar setting. Age-verification? Protecting problem gamblers? Those can be addressed on the Internet even better than in one of Mr. Adelson’s casinos.”

It does seem odd to argue against regulation on player protection grounds, as without regulation there is no oversight of operators, no standards in player protection, and no recompense for players who want to recover their funds.

The current system in the U.S. relies on blocking internet gambling payments, but even with authorities shutting downthe highest profile poker sites, this method is widely found to be very ineffective.

Norway introduced payment blocking, ISP blocking and an advertising ban in 2010 in an effort to protect its market from unlicensed foreign operators. In 2012 the regulator was forced to admit that this effort had failed. A survey by the regulator, found that two years on, 54% of gamblers on foreign websites continued to gamble as often as they did before and 5% were gambling more frequently than they had before blocking measures were implemented.

And what about the concerns around giving people more ways to place bets increases the likelihood of creating problem gamblers?

This week California gaming lawyer Martin D. Owens told ABC news that Adelson’s claims were not accurate. He pointed to Harvard Medical School research which showed that the “overwhelming majority of online gamers, play in a very moderate manner, spending minimal amounts on gaming.”

The U.K. was one of the first jurisdictions in the world to fully regulate all forms of online gambling in 2007. The 2010 British Gambling Prevalence study, one of the largest of its kind in the world with more than 50,000 people surveyed, reported that the total percentage of gamblers who were problem gamblers was 0.7% according to one statistical model and around 0.9% according to another.

Any problem gambling is a serious issue, so the U.K. Gambling Commission has rightly taken steps to improve its methods of identifying and measuring the issue. But, it is important to note that this rate is basically the average world-wide.

In 2009 Sweden, one of Europes biggest online gambling markets, measured the percentage of problem gamblers at 0.3%, a 2007 German study measured the rate at 0.6%, and a 2008 Singapore study – a jurisdiction where its two casinos generate more revenue than Las Vegas, measured problem gambling at 1.1%. In the U.S., the percentage of problem gamblers is around 2%. As Pappas points out, regulating internet and mobile real-money gaming could actually help the U.S. get this rate down to European levels.

Adelson also claims that European casino revenue has suffered as a result of the regulation of online gambling. The European Casino Association said that land-based casino revenue declined 6% between 2011 and 2012. However, this is primarily due to recession. The E.U.’s Economic Sentiment Indicator – an index which measures business and consumer confidence – is at 89.1 in 2013, compared to rates of over 110 in 2006.

The total size of the European gambling market has actually grown, mainly due to the rollout of slot machines in Italy and Greece and the regulation of online gambling in several jurisdictions. Regulating online gambling has allowed many casinos to add new revenue streams during the crippling recession which has plagued many E.U. countries since 2008.

Betable was at the Las Vegas Social Casino Summit in Las Vegas last week. It was interesting to see the presence of big casinos such as MGM and Bally. Unlike Adelson, they are certainly interested in the opportunity of online real-money gaming and social gaming. For land-based operators want to be able to engage with customers after they leave the resort.

At the conference, Scott J. Voeller, MGM’s Senior Vice President of Brand Strategy and Advertising told delegates that 50% of activations of the company’s loyalty program, M-Life, were completely new players – an increase he suggested could be due to the company’s forays into social gaming.

Online real-money gaming is not going away. It is the fastest growing vertical in the gambling industry. To suggest that U.S. authorities should ignore this is naive. Adelson is concerned about change, but this is change driven by consumer demand. In an increasingly connected, 24/7 world, real-money gaming online or via mobile is the future.

As California lawyer, Owens pointed out, even here in the U.S., online real-money gaming is already happening.

“Mr. Adelson is staging a very belated and unimaginative rear-guard action,” he told ABC news.