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Global online gambling laws

UK vs the rest of the world

Here in the UK, online gambling is legal and prior to November 2014 in order to advertise in the UK, the gambling site had be licensed somewhere that met UK standards for fairness, prevention of underage gambling and assistance for problem gamblers. Those places were the UK itself, EU (including Malta), Gibraltar, Alderney, Isle of Man, and Antigua and Barbuda but all the regulation was brought onshore in November 2014.

The UK’s approach to online gambling is comparatively liberal, as it happens. A great many countries such as Singapore either do not allow remote gambling sites to be operated on their soil or seek to prevent their citizens from gambling remotely, or both. Interestingly some countries such as Costa Rica allow online gambling sites to be based there but their own citizens are banned from gambling on them!

But which is the right approach? Ban/enforce, or legalise/regulate/tax? There’s no denying that problem gambling gives rise to a whole slew of social evils – including extreme effects such as large-scale theft and fraud to cover up gambling debts, and families being broken up and/or rendered homeless. The question is, does banning gambling actually stop problem gamblers from doing it? Conversely, does making gambling legal cause more people to develop a gambling problem?

 

What if it was banned in the UK?

Imagine, if you can, a parallel world in which someone in the corridors of power made a different decision a few years back, resulting in there being a ban on all online gambling in the UK.  Suppose you decided to play bingo online anyway (in the knowledge that the police have much better things to do than look for players of illegal bingo!)  What sort of site would you be playing at? Would the bingo there be fair or could it be fixed? Do you think they would care about your age (if under 18)? And what do you think your chances of cashing your winnings out would be?

With the current set-up, you have the choice of a large number of sites to play at that meet UK legal standards for fairness, protection of minors and a responsible attitude to problem gambling.  If people would still play bingo regardless of whether it was legal or not, then clearly regulation gives them a great deal of protection they wouldn’t otherwise have.

It is not surprising that the UK has taken the legalise/regulate/tax route, given the history of gambling in this country.  In 1906, for instance, street gambling was banned by law but this law turned out to be completely ineffective – it was supposed to protect the poor by preventing street gambling but in fact gambling carried on as before; there were just more arrests.   A ban only works if it actually causes the thing that is banned to stop, and in history there are very few cases of bans on anything (in non totalitarian states) that actually stopped the banned behaviour, even if it was something physically taking place within the country boundaries rather than virtually on the Internet.  The classic example of this is of course Prohibition.  Contrast that with the UK Smoking Ban – which despite its name is actually a form of restrictive regulation rather than a ban (people can still smoke but only in certain locations).

 

Comparing a legal casino with an illegal one

Let’s leave the online part of it out for a moment and imagine two land based casinos in two different countries. In country A the casino operates legally, but in country B all gambling is banned so the casino is a secret operation (much like the speakeasies of Prohibition-era USA).

  • Which casino is more likely to have fair games?
  • Which casino is more likely to pay out winnings?
  • Which casino is more likely to keep underage players out?
  • Which casino is more likely to have a policy regarding problem gamblers?
  • Which casino is safer to play at?
  • Which casino provides employment and investment opportunities?
  • What happens to the revenues from the casino?

What sort of player will be put off visiting Casino B purely by its illegality (as opposed to the risk of getting caught and jailed, or the risk of getting beaten up or ripped off)? Will problem gamblers be put off? What will they choose if they have a choice between a legal casino and an illegal casino? What will they choose if they have a choice between an illegal casino and not gambling at all?

Now, the police could find out the physical location of Casino B and go round there and shut it down and arrest everyone.  But in a country where online gambling is banned, how is that actually going to be enforced?  How do the police (whoever they are – not the regular police force presumably) locate and shut down the casino, or prevent people from going there? How do they even find out that it exists or where it is?

 

Enforcement options

Here’s some of the possible ways to go about enforcing a ban:

1) Tell people not to do it, by means of public information ads, leaflets etc. Some people may be put off by this – but the ones who are, are likely to be ordinary law-abiding adults who do not have a gambling problem and can take it or leave it . But there are an estimated 6 to 8 million people in the US alone with some kind of a gambling problem, according to the National Council on Problem Gambling. What of them?

2) Attempt to shut down/ prosecute foreign gambling sites that accept players from your country, under international law or your own country’s laws. This only works if the jurisdiction that the site is based in recognises your country’s laws. Malta, for example, does NOT recognise US anti-gambling laws.  In the case of Antigua and Barbuda, the World Trade Organisation took a very dim view of USA actions.

3) Ban the banks in your country from processing (identifiable) payments to and from online gambling sites- as the US has attempted to do.  Lots of ways round that – Bitcoin and Ukash are two.

4) Attempt to block every single gambling site in the world from being accessed from any device that is geographically located in your country. Uh, good luck with that – both making the full list and getting the blocking to work for all and only gambling sites. Not to mention that you’ll be joining the list of countries such as China, Syria and Saudi Arabia that censor the Internet.

5) Don’t bother trying to shut the casino down, just punish your citizens if they are caught gambling.  That’s what currently happens in Vietnam, where betting on football can earn you a hefty prison sentence. This only works if the enforcement is consistent enough to function as a deterrent to other would-be gamblers – and that could end up being very expensive.  The Vietnamese government now has legislation in the pipeline to legalise/regulate/tax.

 

What might people who don’t have a gambling problem do if gambling is made illegal?

1) If they work in the industry or make a living playing poker they might leave the country.

2) If they gambled just for the entertainment value, they find somewhere else to spend their money – that could be a casino in an adjacent country or it could be some other form of entertainment entirely.

 

What might people who DO have a gambling problem do if gambling is made illegal?

1) They go underground and play at illegal sites where there is no regulation or protection – and if caught they may be criminalised

2) They find some other activity that pushes the same buttons and tell themselves that it isn’t gambling. Day trading on the stock market, especially using leveraged products, is essentially gambling; in the UK some of the products are even referred to as bets – and yet out of nearly 30,000 calls to Gamcare during 2010-2012, NONE were concerning financial spread betting or the stock market. That is almost beyond belief! One need only spend a little time perusing day trading forums to see that there are a great many problem gamblers in the area. The answer has to be that even if someone in that position recognises that they have a problem, they aren’t thinking of it as a gambling problem.

3) They go crazy on scratchcards – which are generally freely available as part of government run lotteries. Scratchcards have many of the same characteristics as casino fruit machines:
a) No skill, just luck
b) a small chance of winning a big sum
c) short payout interval (instant)
d) rapid “event frequency” (no need to wait for a draw to play again, just buy another card straight away)
e) the illusion of scoring a near miss (match 2 symbols instead of 3)

 

Where does social gambling fit in?

What about social gambling such as DoubleDown Casino? You can spend real money on those games – and some people undoubtedly spend quite a lot. There are a great many other games on social media that encourage you to spend real money. Buying power-ups and extra lives is one thing – but gambling real currency in-game (on a spin-the-wheel or scratchcard type scenario) for in-game items is another, and the reason it doesn’t come under gambling legislation is that you can put your money in, but never get it out again. Should there be more regulation in this area? Is it compulsive spending rather than compulsive gambling? And are some cases of compulsive gambling really cases of compulsive spending? As it happens, the UK is preparing to regulate this area further, with particular reference to premium content being marketed to children in unsuitable ways, and apps being described up front as free when in fact it is impossible to progress without spending real money.

 

Why is gambling so addictive anyway?

Well, firstly, humans in general have a very poor grasp of risk and reward. Let’s take a lottery as an example. The chances of winning the jackpot in the Euromillions is 1 in 116,531,800. That is less likely than flipping an unbiased coin 26 times in a row and getting all heads – and is an example of an extremely unlikely event with a huge reward. Conversely, the results of a 2006 European study into smoking and lung cancer put the probability of developing lung cancer in men who smoke more than 5 cigarettes a day at 24.9% (almost 1 in 4, or about as likely as getting two heads when you flip a coin twice). It was 0.2% in men who had never smoked and 5.5% in male ex-smokers. That is an example of a relatively likely event with a huge negative consequence. So why do people buy lottery tickets and fantasise about what they will do with the winnings, but continue to smoke without thinking about their hugely increased risk of death? It kind of makes sense to buy just ONE lottery ticket, if you look at it as donating £1 to a good cause in exchange for the opportunity to dream about how you would spend millions – but it makes very little sense to buy more than one ticket. When you buy two tickets, you double the almost certain downside (the cost of the ticket) in order to increase your chance of winning from 1 in 116 million to 1 in 58 million. Both those chances are so near zero that from the other end of the bet, they would be considered a vanishingly small risk (and vanish is what your money does). Basically, people buy lottery tickets because they think it WILL happen to them, and fail to quit smoking because they think it WON’T happen to them. We can’t compare the probabilities directly because the lottery one is for one lottery draw and the cancer one is a lifetime risk – but roughly speaking, a male smoker would need to do the lottery once a week for hundreds of thousands of years to make the chances of a lottery jackpot win at some point come anywhere close to his chance of developing lung cancer in the remainder of a normal lifetime.

Secondly, humans have a tendency to have an emotional investment in gambling wins and losses and most of us haven’t really moved on from the state of the 2 year old who bursts out crying when he loses a game of Snakes and Ladders. The payback from the win more than makes up for the bad feeling for the losses (even if the same cannot be said financially). This leads to the feeling that one is “owed” a win and chasing losses to try and get one. Problem gamblers feel bad about themselves when they lose and keep on gambling to get the high from the win. Successful professional gamblers – and there are some – generally truly understand that it’s just a game of numbers, and retain their emotional composure regardless of whether they win or lose.

 

The argument against a ban

What it all boils down to it that it is not possible to ban and regulate (or tax) at the same time. If a ban on gambling cannot be made 100% effective, little can be done to help problem gamblers who either do it anyway (apart from criminalising them which is arguably NOT helpful) or move to some other activity such as binary options trading which is really thinly disguised gambling. In addition, if all gambling is banned there is nothing to differentiate, say, a fairly run game of bingo from a crooked one.

 

Times are changing

Starting from December 2014, the UK is taxing all gambling at the point of consumption – so if the player is located in the UK, it does not matter if the company’s offices and server are elsewhere in the world, they still have to pay UK tax on the transaction. It will be interesting to see how point-of-consumption works out and whether it is applied in the future to organisations in other industries that use offshore tax havens, e.g. taxing the Starbucks coffee in the place where it is drunk.

This is in addition to that change that took place in November 2014 requiring all UK-facing gambling sites to be licensed in the UK (with transitional provisions for those with white list licences). This ought to be good news for players as in theory it should result in much better consumer protection. The UK has also been cracking down on misleading advertising, specifically in relation to wagering requirements not being made clear.

In the US, some states have passed or are passing legislation to allow online gambling. Nevada now has its first legal online poker site, open only to those physically located in the state of Nevada (and over 21). New Jersey has also passed legislation and there, only the operators of licensed Atlantic City casinos are allowed to offer poker and other casino games in-state.  However, many in the US remain vehemently opposed to online gambling as a result of which the RAWA bill has been put before Congress.  If passed this would enact a federal ban on online gambling and render the currently legal operations in Nevada, New Jersey and Delaware immediately illegal, along with all online sales of lottery tickets.