Tag: #responsible gaming

LOTTERIES SHOULD BE MORE RESPONSIBLE OPERATORS

I have wrote this column for www.lotterydaily.com and they have published it few days. This text is partly edited by Chris Murphy – thanks to him about that!

There seems to be a general perception among lottery companies that the lottery business is fundamentally a responsible activity and, in every way, better than any other gambling business. 

If you only thought of gambling products, then slow-rhythm lottery games are certainly less problematic for players than, for example, casino games or fast sports betting (live). However, it is always dangerous to think that one is, in principle, better than the other, because then the risk is to be blind to one’s own operations. Furthermore, most lotteries today offer more than just traditional draw-based and instant games.

In practice all EU countries still have a monopoly system for lottery games. According to the European Court of Justice, Member States are free to decide on their gambling systems, as long as they respect the principles of legitimacy and are consistent in their actions. 

An important justification principle is the prevention of gambling problems which can be summarized into two groups – gambling problems caused to the player and gambling-related crime. For this reason, it is important that the prevention of gambling problems and thus responsible gaming also be given great weight in lottery activities. If anyone thinks this does not apply to lottery games, it would be interesting to hear why there is monopoly in that area…

How should the prevention of gambling crime be taken into account in lottery activities? In general, gambling involves the risk of two types of crime – the manipulation of the results and money laundering. Manipulating the results is not easy in traditional draw-based and instant games, but it has managed to happen sometimes. 

Manipulation of results is a particularly big problem in sports betting, which is also practiced by lotteries. The risk of money laundering is also higher in casino and sports games with high payback rates than in lottery games with lower payout percentages. But at least in theory money laundering can take place in all gambling activities and its prevention should be managed as well as possible. Lottery companies that run sports games have invested heavily in crime prevention through their involvement in the GLMS (Global Lottery Monitoring System).

Crime prevention is particularly important for the gambling business in terms of the reliability and reputation of its operations. If customers cannot trust the correctness of operations, there is not a very bright future in the industry. In this respect lotteries are very much in the same boat as private gambling operators. It is quite insane to think that the problem would not also apply to lottery companies if the general acceptability of gambling starts to fall even more than it currently does.

While the prevention of gambling-related crime is especially important, the prevention of gambling problems itself is even more important. Just one person with a gambling problem is one too many and companies need to do everything they can to keep the number of problems under control and even reduce it. It is unrealistic to think that gambling should be banned altogether, but states still have opportunities and, in fact, an obligation to regulate this fundamentally risky activity.

Gambling today is often compared to tobacco and alcohol, which also cause problems. Personally, I don’t like those comparisons, but I somehow understand the comparison to alcohol-related restrictions. I think tobacco causes more or less problems for all users, which gambling does not. 

Alcohol is closer in that sense because only a small percentage of alcohol users experience significant problems. Gambling is a relatively safe activity for 90-95% of customers. On the other hand, gambling causes awfully bad problems for about 1% of players and some problems for a much larger number of customers. I think it’s the responsibility of gambling companies, including lotteries, to do their best to keep those customers who are experiencing problems from getting into bad trouble.

Studies have shown that traditional lottery games don’t cause gambling problems almost at all and this may still have the wrong effect on the attitudes of the lottery world. Companies are accustomed to a situation where they may have blamed other gambling companies, usually casino operators, for the problems. 

However, in the 21st century, Lottery operations have changed with the digitization of new products and operations, so that gambling problems will certainly arise for lottery customers as well. Therefore, all companies must have tools in place to identify and prevent problems.

What should companies do? It must be possible to monitor and address customers’ gambling, either with restrictions or, in extreme cases, with bans. Gambling monitoring requires digitizing operations and making gambling possible only for identified customers.

There is no way to interfere with gambling anonymously, and there is not even enough information about it. Lottery companies must therefore build technical systems to transfer all gambling to identified gambling. This may sound like a completely impossible plan to most, but it is not. Just ask for advice from Norsk Tipping, which already did this years ago!

Mere recognized gambling alone is not enough. Recognized gambling is a prerequisite for restricting gambling activities. There must be limits to gambling that must be practically controllable. The Norsk Tipping scenario involves maximum loss limits for gambling. Personally, I am not in favor of uniform limits for all, because people’s income and wealth levels vary a lot. 

In addition, some people are, in principle, at greater risk of suffering from gambling problems than others. Due to these factors, I consider the best solution to be the possibility to change the general limits set by the company on the basis of substantiated information. 

If a player is able to prove his wealth and wants to raise the limits of the gambling, he/she should be given the opportunity to do so. Likewise, even low overall limits may be too high for some players. I have noticed that at least in Sweden and the UK, there has already been discussion of a player-specific affordability check model.

I am quite sure that gambling regulators in different countries will tighten their control of operations and to set the gambling companies increasingly more accountability requirements. This will certainly apply to lotteries as well. In many ways, it would be best for companies to act on their own initiative and not just under duress. 

Companies should prepare models in collaboration with or at least by listening to gambling problem researchers and possibly also in consultation / cooperation with the authorities. Implementing the changes will require a lot of resources, but hopefully it will save the gambling industry’s reputation!

WHAT CAN WE LEARN FROM NORWAY’S GAMBLING MONOPOLY?

I have written this blog for LotteryDaily.com and they published it last week. This text is partly modified by Chris Murphy.

The Nordic countries of Denmark, Finland, Norway, and Sweden have quite similar systems and legislation in many areas. That has been the case also in gambling business until the beginning of 2010’s when Denmark decided to move from a monopoly to a license-based system in 2011. 

Sweden decided to follow that from the beginning of 2019. Finland and Norway still have gambling monopolies in all gambling areas, and they are by the way the only European countries that still have that kind of legislative situation. 

It begs the question; why are those well-developed, innovative countries still trying to keep a monopoly-based system? Furthermore, is there anything we could learn from them? 

For the purposes of this particular column I’ll concentrate solely on Norway and return to covering developments in my home country after some months. As you know, in practice all European countries have a monopoly-based system in lottery games but not in sports betting. And most countries have never even had a monopoly in the casino business. But Norway has a monopoly in all gambling areas and physical casinos are totally forbidden. 

The question is, has that kind of model worked well? The size of gambling business in Norway is big. There are about 5.4 million inhabitants in the country and the total GGR of gambling business in 2019 was M€1.244. Almost half of GGR came from digital channels. 

Gambling acceptable among Norwegians

Although there is a monopoly, the share of offshore operators is big – according to H2GC it is 27%. Gambling is common and acceptable among Norwegians. According to surveys almost 2/3 of adults used to play some gambling products at least once a year.

The previous government was keen on liberalization and it seriously investigated a number of other possible legislative models for the Norwegian gambling business. In 2015 it opened up the lottery business by a fraction by issuing supplementary lottery licenses for five small operators. Those licenses are still valid, but the operational possibilities are extremely limited. 

It seemed that Norway would move to a license-based system at the same time as Sweden, but in summer 2017 the government decided to continue the monopoly system. The system is not as the monopoly we have in Finland because there are two operators, Norsk Tipping and Rikstoto, and small lotteries plus bingo halls, but in principle it is still a monopoly.

Norway has run and controlled monopoly-based gambling seriously. The prevention of gambling problems has been the main purpose, relegating profit to just a secondary element. The country has enough money anyhow and there has been no need to maximize gambling revenues at all. 

There are lots of restrictions for gambling in Norway. Mandatory identification in order to gamble has been in existence for many years and there are tight gambling/loss limits in the gambling business run by the state-owned Norsk Tipping. Norway had also tried to restrict gambling offshore with blocks in place for 10 years. 

Gambling offshore is still legal in Norway, but operators don’t have licenses to offer their services in the country and are prevented from marketing their products. To compound matters, it has become difficult to move money to those companies and get winnings back from them. 

However, preventing Norwegian players from gambling offshore has been difficult to achieve because they have become accustomed to playing with those operators. According to customer surveys many Norwegians are unaware that companies like Unibet and Betsson don’t have licenses to operate in Norway. That might explain why 27 % of gambling is still going abroad despite the official monopoly system.

I think, though, that Norway is the best example of how a country should organize its gambling business should it be monopoly-based. Its system is not an ideal one, because there is no reason to have those minor lotteries and probably they should consider merging Norsk Tipping and horse betting operator Rikstoto. 

But there are lots of good things. The state has allowed Norsk Tipping to develop its own business, enabling the state-owned lottery company to offer good products and service to its customers. It is important, however, to have the right channels in place, otherwise the legitimacy of the monopoly system will disappear. 

Norway has now introduced even lower loss limits for gambling. That has and will continue to affect the profitability of Norsk Tipping for sure. The same kind of limits are expected to be applied to horse betting too from the beginning of 2022 and that will greatly impact the GGR of Rikstoto. 

More laws proposed

Consequently, if Norway can’t better control offshore gambling there will be an inevitable migration of players in that direction. The current government knows that and has proposed more laws, for example a restriction of gambling ads on satellite channels which will limit the business of offshore companies. At the moment it seems that tighter payment blocks have managed to reduce offshore gambling a little, but according to estimates it is just a temporary remedy.

To reiterate, the main purpose of the monopoly system is to prevent gambling problems. Norway has tried to do that for a long time. Among other measures, they prohibited the huge slot machines business that was operating 15 to 20 years ago, because most gambling problems were caused by those machines. 

It is strange that although Norway has put lots of effort into the reduction of problem gambling, the results are not so good. The University of Bergen has undertaken significant new research on Norway’s gambling problems. It found that the incidence of problem gambling has increased compared to the situation in 2015. There are 3.1 % of people suffering from gambling problems (2.3 % in 2015) and 1.4% are experiencing serious problems (0.9 % in 2015). 

The number of gambling problems is now at the same level as it was before the ban on the slot machine business. The structure of gambling problems has also changed. Now almost half of the problems are coming from digital casino games. Nowadays younger customers are suffering from gambling problems than before. There are different measurement methods of gambling problems in different countries, but despite that it is obvious that the number of gambling problems is at a higher level than it is in Denmark and Sweden where they no longer have a monopoly.

Norway has strongly and consistently tried to control the social and economic disadvantages of gambling with a monopoly. It is even prepared to decrease profit levels if that would help to reduce the number of problem gamblers. I would like to award them “10 points” for that. 

Unfortunately, results show that it has still not succeeded very well. There will be more restrictions for offshore operations, but it is unclear if they will work or not. I believe that state control and regulation will always be behind business development and that’s why there is no way to totally prevent offshore gambling anymore. 

Might it be possible that the monopoly system is no longer the best tool to prevent gambling problems in the current digitalized world?

Given that a monopoly has not succeeded in combating Norway’s gambling problems, it is unlikely these measures will work in any other European country. In Norway and also here in Finland we will have a discussion sooner or later about gambling monopolies. The states must find the best balance to prevent gambling problems and offer customers the best products possible. That leaves one final question; does the monopoly system still offer the best way to achieve that?