The online gambling industry has had a very good pandemic. With millions stuck at home due to lockdowns, many of them at least temporarily without work, thumbing digital slots through a mobile app or trying to win a few hands of online poker became an amusing way to fill the time, and maybe earn some quick cash if Lady Luck was feeling generous.
The results are plain to see in the earnings of many online betting companies, which have seen record jumps in revenues and profits. But the boom has a darker side reflected in recent headlines. “Coronavirus a ‘disaster’ for gambling addicts,” proclaims the BBC. “Covid: How online gambling addiction has become an added threat to our health,” warns the Edinburgh Herald in Scotland. “Gambling is an escape: Pandemic leads to the sharpest ever rise in women seeking help for addiction,” says Britain’s Independent newspaper.
These are not the headlines Jette Nygaard-Andersen wants to see. She’s the chief executive officer of Entain, one of the U.K.’s most successful online gambling companies and an increasingly important player in the global expansion of digital betting, including in the U.S.
(Entain is currently being pursued by sports betting giant DraftKings, which has offered $22.4 billion in an attempt to buy the company. For more on what has made Entain such an attractive prospect, read “Leading Las Vegas: A British firm is upending America’s booming online sports gambling market.”)
The CEO, who stepped into the top job earlier this year, says she took it in part because she saw an opportunity to reshape perceptions of the entire industry with both the public and regulators. She wants to get away from the perception that the industry encourages and preys on addicts and sees an increasing convergence between online gambling and other forms of media and entertainment.
Nygaard-Andersen says this view of the industry, which she blames partly on inflammatory media reports, is false. She cites 2020 data from the U.K. Gambling Commission that only about 0.3% of bettors are “problem gamblers,” meaning their gambling activity “compromises, disrupts or damages family, personal, or recreational pursuits,” according to the commission’s definition. This number has actually fallen, she notes, coming down from 0.6% in 2019. Meanwhile, the U.K. government says an additional 0.9% of people are at “moderate risk” and 2% at “low risk” for becoming gambling addicts. Still, with more and more people trying online betting, these figures still translate into increasing numbers of gambling addicts.
Regulators are circling
Entain hopes that by proving it cares about deterring problem gambling, the industry can avoid regulation that might crimp its growth. In the U.K., which has one of the most mature online gambling markets, the perception that online betting companies use technology and data analytics to foster addictive habits had created a mounting regulatory response even before the pandemic struck. The U.K. Gambling Commission banned the use of digital slot terminals in retail betting parlors and has brought in new rules to slow down how quickly online slot games can be played on mobile apps. It has cracked down on companies framing losses as achievements.
Further restrictions may be in the offing: In what would be a major blow to the industry, British authorities have also considered restrictions on how online gambling companies advertise. In Ireland, meanwhile, the professional organization for psychiatrists has called for an outright ban on ads for online gambling apps during sporting events. (During the first U.K. lockdown, U.K. gambling companies voluntarily agreed to suspend advertising on television and radio ads for six weeks.)
To head off this kind of crackdown, Nygaard-Andersen and Entain are wagering on new technology. It’s all part of what the gambling industry euphemistically calls “player protection.” In Entain’s case, it wants to demonstrate that the same data analytics the company uses to customize its apps for each player—and which have helped make Entain such an attractive takeover target for U.S. betting and casino companies—can also be used to discourage problem gambling.
In the U.K., the company is piloting a system called Advanced Responsibility & Care (ARC) that is designed to use machine learning to spot warning signs of problematic betting behavior before a player gets into trouble. ARC allows the company to intervene with players in real time, while they are using a betting app, suggesting they set a deposit limit or take a break, says Grainne Hurst, Entain’s director of regulation and safer gaming. If the player ignores warnings, the company can, again in real time, cut the player off, preventing the person from betting at all for a 24-hour period. It can then impose further 24-hour breaks, or ban them from using the app completely, if the problem behavior persists. These real-time interventions have already been rolled out across some, but not all, of Entain’s U.K. brands.
ARC represents a sea change from what Entain and others in the industry have done before now, Hurst says. For instance, Entain relied on a static risk-scoring algorithm based on certain predefined behaviors, such as chasing loses with increasing wagers. If a player’s risk score hits a certain threshold, that player is flagged to a human compliance officer for review, which often wouldn’t take place until days later. If the human decides the player is at risk, they would then be sent an email suggesting that they set a deposit limit.
Entain has promised that if ARC is successful in Britain, it will roll the system out internationally. But so far there’s been far less regulatory pressure in the U.S. over problem gambling. “As things stand, the U.S. market hasn’t evolved to the level of Europe where debate has moved on to incorporate more severe marketing restrictions, ‘affordability’ checks for customers, monitoring of betting patterns, and blanket stake or deposit limits, among other things,” says James Kilsby, vice president for the Americas at Vixio Gambling Compliance, a company that tracks betting regulations globally.
Keith Whyte, the executive director of the National Council on Problem Gambling in Washington, D.C., which is funded by the gaming industry, says that while his organization recommends that states legalizing online betting set aside 1% of the tax revenue they gain to programs to promote safer betting, a third of states authorizing sports betting have allocated no additional funds to discourage gambling addiction or treat it.
He says Entain and the other U.K.-based operators are miles ahead of American online gaming and casino companies in recognizing that problem gambling is a threat to the industry’s profits in the long term. Whyte says U.S. regulators should look at what is happening in Europe and consider mandating that companies adopt systems such as ARC. Without such mandates, he says, there is a disincentive for companies to implement safer gambling systems because it might deprive them of revenue in the short run.
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