The truth about iGaming: Myths vs Facts

Fact

Gambling is already a popular entertainment past time for Canadians, as consumers have embraced online gaming as a form of legitimate entertainment. An April 2010 Ipsos-Reid survey found that 71% of Canadians do not believe that gambling or wagering money over the Internet is illegal and that 55% of the public believe that Internet gambling should be permitted as long as it’s regulated by the government.

“The idea of Internet gambling appears to be gaining acceptance in North America, with more people expressing an interest to see it legalized with proper regulation.” (Ipsos-Reid)

Fact

The risk with land-based casinos is that a person can just walk in and play. Thanks to technology, tools have been developed to offer a more robust system of checks and balances for online gambling than land-based gaming, including enabling players to set limits on their play if they choose and blocking access to those who should not gamble online.

The rate of problem gambling in Canada (1 % of the general population) has remained constant for many years, despite increased access to gaming across the country (Canadian Gaming Association, 2011 Economic Impact Update).  In the UK, a recent study on the prevalence of problem gaming found that the rate of problem gamblers also remained the same before and after the introduction of regulated Internet gambling.

The IGC Code of Conduct states that IGC Members will promote responsible gambling measures and, where applicable, implement procedures aimed at identifying and curtailing compulsive / problem gambling. Furthermore, the procedures instituted should be consistent with the IGC’s Responsible Gambling Guidelines, including, but not limited to, providing referral and direct access to help and counseling organizations.

Fact

The bottom line is that kids shouldn’t gamble. Ever. The IGC strongly believes that if policy makers want to protect children, individuals that suffer adverse consequences of excessive gambling, and the general public, then the true and only response is regulation.

On proper online web sites, players need to produce a credit card and answer detailed questions before they are cleared. There are a series of checks and balances, including verification of age, that have to occur before any player can deposit, play or withdraw.

Problem gaming remains an issue for any government agency, regulator or operator in this industry. Dealing with youth prevention, responsible gambling, and problem gambling requires an investment not only in the tools, but also in the approach. IGC members already safeguard players as a consequence of being responsible corporate citizens and working with their regulators in first tier jurisdictions. As noted in the IGC’s Code of Conduct, members must institute controls aimed at preventing minors from accessing their gaming systems and cannot employ a minor in the operation of their business.

The reality is that the activity is already taking place here, as it is around the world, but without government safeguards. Governments in European jurisdictions feel strongly about raising awareness of responsible gambling practices and ensuring barriers to youth gaming, and IGC Members would like to see those protections offered to Canadian players. Fortunately, the technology available and in use by IGC Members allows for better controls, including self-exclusion and age verification.

Preventing identity fraud, including access by minors

• Verify the age of prospective players and do not allow access to under aged gamblers.
• Restrict the type of payment of winning by non-negotiable instrument only to the account holder to avoid paying unauthorized persons, such as minors.
• Have procedures allowing persons to voluntarily exclude themselves from participation or to set deposit limits on the gaming site.
• Provide information to players regarding available blocking software that will allow parents to restrict access by their children.

Fact

A number of IGC Members are located in banking hubs in G8 nations, which are closely regulated by securities commissions – leaving no room for criminal activity. Unlike land-based casinos, every financial transaction and keystroke are electronically tracked and events are easily re-created/reported.

Operators are required to maintain a minimum bankroll or reserves to assure that players will have their deposits returned and any winnings paid.

As an example, IGC Members are required under the Isle of Man (IOM) license to hold all player funds in a separate account, which must equal or exceed the amount of all player-owned funds on deposit.  This is frequently monitored by IOM regulators.

Fact

Monopolies are not possible with Internet gambling, because for a monopoly to exist an organization or a government must have the ability or authority to control the supply of a product or service.  The monopoly must be able to create and sustain insurmountable barriers to entry from competitors.

By way of example, in Canada most provincial governments have chosen to create Crown agency monopolies for the sale of beverage alcohol.  Provincial governments can easily enforce these monopolies because the sales facility must be located in the jurisdiction.

Fact

The European experience has proven otherwise. A number of jurisdictions such as Denmark, Italy, Spain, and Belgium, attempted to operate a monopoly. However, many discovered that they were unable to maintain it, and those countries are now moving toward an open, regulated marketplace. 

Careful attention should be paid to the reversals of these European jurisdictions that have abandoned the monopoly model because it failed to capture a significant percentage of the global gaming revenue or provide adequate player protections, due to the ongoing existence and popularity of more established non-local operators.

Providing multiplayer games such as poker or single player games typical of an online casino is technically challenging and the products currently available in the market are the result of many years of research, development and experience.  It is doubtful that a lottery corporation operating under a monopoly model would be able to successfully acquire the skills (which are not limited to technical ability but include the capability to market the casino or poker room) to successfully compete with the current market providers. 

Instead of having governments trying to compete for players against well-established and well-capitalized brands and garnering only a partial market share, creating an open regulated market allows regulators to capture almost the entire market.  It extends their ability to protect all consumers, and to review the fairness and legitimacy of all service providers.

An open and competitive market also drives product improvements provides the maximum choice for consumers, and would also allow government agencies to collect some level of tax revenue from nearly 100% of the operators.

Benefits of a regulated market:

• Captures nearly 100% of the market share.
• Different operators bring different strengths to the table.
• Multiple operators appeal to different market segments, provide their government partner with options and a range of advice related to the online gaming industry.
• Provides the maximum choice for consumers to experiment with different sites. 
• Drives product improvements and provides choice for consumers.
• Provides players with the most cost effective solutions/odds.

Fact

The reality is that we live in an online world.  Based on the rollout of online gaming in the UK, legal online poker did not cannibalize casinos’ revenues. In fact, many believe that the popularity of online poker is responsible for the resurgence or increase in land-based gambling.

• In the UK, a decline in land-based gaming was not experienced after the launch of online gambling.
• During the iGaming North America 2011 spring conference, Bellagio poker operations director Doug Dalton said that online poker had driven the growth of the hotel-casino’s poker offerings.
• “Brick-and-mortar casinos were concerned online poker would take a lot of customers. What we found was it brought people into our poker room,” Dalton said.

Fact

It is not correct to represent companies who are unable to apply for a license in Canada as “unregulated”. Online gaming operators who provide services globally (and in regulated environments) do so under licenses granted by their home jurisdictions.

In Europe, the general trend is to allow licensing of independent companies who meet the relevant regulatory requirements and government standards.  IGC Members are licensed in European countries and territories such as the UK, Denmark, France, Italy, Malta, Gibraltar, and the Isle of Man. These countries all require high standards on such matters as under-age gambling, money laundering, responsible gambling, player protection and third-party testing of systems for fairness and security.

European operators do business under stringent licensing regimes and must remain compliant in order to retain their licenses.