INTERNET GAMBLING: INTERNET GAMBLING: SETTING THE STAGESETTING THE STAGE

AGRI Annual ConferenceAGRI Annual ConferenceBanff, AlbertaBanff, Alberta

Dr. Robert Williams & Dr. Robert Williams & Dr. Robert WoodDr. Robert Wood

University of LethbridgeUniversity of LethbridgeLethbridge, AlbertaLethbridge, Alberta

March 27, 2009March 27, 2009

Internet Gambling: Internet Gambling: HistoryHistory

Oct 1995Oct 1995 Liechtenstein conducts online purchase of lottery Liechtenstein conducts online purchase of lottery

ticketstickets

1996-19971996-1997 Caribbean & Central American countries begin hosting online Caribbean & Central American countries begin hosting online

casinos &/or sports/race books: Antigua; Netherland Antilles; Turks casinos &/or sports/race books: Antigua; Netherland Antilles; Turks & Caicos; Dominican Republic; Grenada; Costa Rica; Belize; & Caicos; Dominican Republic; Grenada; Costa Rica; Belize; PanamaPanama

Online casinos &/or sports/race books offered by a few U.K. and Online casinos &/or sports/race books offered by a few U.K. and Australian based companiesAustralian based companies

Online lotteries conducted in Finland and Coeur d’Alene tribe in Online lotteries conducted in Finland and Coeur d’Alene tribe in Idaho Idaho

Internet Gambling: Internet Gambling: HistoryHistory

Most of the new sites were companies not Most of the new sites were companies not associated with any land-based venues.associated with any land-based venues.

1995: Lotteries1995: Lotteries 1996: Casinos; Sports/Race Books 1996: Casinos; Sports/Race Books 1998: Poker; Bingo1998: Poker; Bingo 2000: Betting Exchanges2000: Betting Exchanges 2004: Skill Games2004: Skill Games

Interactive Television Interactive Television (iTV)(iTV)

iTV launched in late 1990s (iTV launched in late 1990s (e.g., movies on demand)e.g., movies on demand)

Has expanded to include shopping, banking, Has expanded to include shopping, banking, music selection, video game playing + music selection, video game playing + GAMBLINGGAMBLING Interactive lotteries, bingo, horse racing, sports Interactive lotteries, bingo, horse racing, sports

bettingbetting TVG 1999 in U.S. (horse race betting)TVG 1999 in U.S. (horse race betting)

Still very small percentage of ‘remote’ gambling Still very small percentage of ‘remote’ gambling marketmarket Primary penetration in Europe (U.K. & France)Primary penetration in Europe (U.K. & France)

Current Internet Gambling: Current Internet Gambling:

2093 Online Sites 2093 Online Sites http://online.casinocity.com/ http://online.casinocity.com/

Casinos Casinos http://www.freecasinogames.com/enter.html

Poker Rooms Poker Rooms http://www.online-http://www.online-

gambling.com/freecasinogames/Poker.htmlgambling.com/freecasinogames/Poker.html

Sports/Race Books Sports/Race Books https://www.bwin.com/sportsbook.aspx https://www.bwin.com/sportsbook.aspx

Skill game sites Skill game sites http://www.king.com/ http://www.king.com/

Current Internet Gambling: Current Internet Gambling: ProvidersProviders

48 jurisdictions48 jurisdictions

Major providers are: Major providers are: Gibraltar (208 sites)Gibraltar (208 sites) United Kingdom (98 sites)United Kingdom (98 sites) Malta (314 sites)Malta (314 sites) Alderney (62 sites)Alderney (62 sites) Isle of Man (14 sites)Isle of Man (14 sites) Netherland Antilles (257 sites)Netherland Antilles (257 sites) Austria (9 sites)Austria (9 sites) Costa Rica (218 sites)Costa Rica (218 sites) Antigua (76 sites)Antigua (76 sites)

World’s 2World’s 2ndnd Largest Provider Largest Provider

Canada!Canada!

Kahnawake Mohawk Territory in Quebec Kahnawake Mohawk Territory in Quebec hosts the world’s second highest number of hosts the world’s second highest number of online gambling sites (n = 256)online gambling sites (n = 256)

http://www.mohawk.ca/default.php http://www.mohawk.ca/default.php http://www.kahnawake.com/gamingcommission/ http://www.kahnawake.com/gamingcommission/

~150 ways to pay~150 ways to pay

Visa and MasterCard most popular, and Visa and MasterCard most popular, and accepted by 90% of sites (not from U.S. accepted by 90% of sites (not from U.S. players)players)

Other popular methods: Neteller (72% Other popular methods: Neteller (72% of sites); Bank Wire Transfer (58% of of sites); Bank Wire Transfer (58% of sites); Moneybookers (50% of sites); sites); Moneybookers (50% of sites); personal cheque (25% of sites).personal cheque (25% of sites).

Payment MethodsPayment Methods

~$15-20 billion in 2008, with sports/race ~$15-20 billion in 2008, with sports/race books, casinos and poker accounting for books, casinos and poker accounting for large majoritylarge majority

~4-5% of worldwide gambling market~4-5% of worldwide gambling market

Patronage uncertain: North America (30-Patronage uncertain: North America (30-35%) Asia (11 – 49%); Europe (23-44%)35%) Asia (11 – 49%); Europe (23-44%) U.S., China, U.K. largest single markets within U.S., China, U.K. largest single markets within

these continentsthese continents

Current Internet Gambling: Current Internet Gambling:

Market ShareMarket Share

RevenueRevenue

Past Year Gambling Participation Past Year Gambling Participation in Canada in 2007 amongst in Canada in 2007 amongst

GamblersGamblers

Prevalence of Internet Prevalence of Internet GamblingGambling

0% to 7% depending on the country0% to 7% depending on the country 7% in U.K. in 2008 (9% if include iTV)7% in U.K. in 2008 (9% if include iTV) 7% Norway in 20067% Norway in 2006 1-3% U.S. in 2006/20071-3% U.S. in 2006/2007 2.1% in Canada in 2007 2.1% in Canada in 2007 ~1-2% Australia in 2006/2007~1-2% Australia in 2006/2007 1% Singapore in 20081% Singapore in 2008

growinggrowing

Internet Gambling: Internet Gambling: Legality 2009Legality 2009

Total prohibitionTotal prohibition U.S., China, Russia, Greece, Portugal, U.S., China, Russia, Greece, Portugal,

Bermuda, Pakistan, Saudi Arabia, Cambodia Bermuda, Pakistan, Saudi Arabia, Cambodia

All forms legalAll forms legal U.K., Gibraltar, Antigua, Malta, Netherland U.K., Gibraltar, Antigua, Malta, Netherland

Antilles, PanamaAntilles, Panama

Some forms legalSome forms legal Sweden, Finland, Germany, Hong Kong, Sweden, Finland, Germany, Hong Kong,

Liechtenstein, New ZealandLiechtenstein, New Zealand

Internet Gambling: Internet Gambling: Legality 2009Legality 2009

Only legal for residentsOnly legal for residents Finland, Austria, Norway, Canadian provincesFinland, Austria, Norway, Canadian provinces

Only legal for residents and residents Only legal for residents and residents cannot gamble online outside the cannot gamble online outside the countrycountry Czech Republic, Denmark, France, Germany, Czech Republic, Denmark, France, Germany,

Hong Kong, Hungary, Italy, Norway, Slovakia, Hong Kong, Hungary, Italy, Norway, Slovakia, SwedenSweden

Only legal for nonresidentsOnly legal for nonresidents Australia, Papua New GuineaAustralia, Papua New Guinea

Provinces can operate all forms of Internet Provinces can operate all forms of Internet gambling (except horse racing) as long as gambling (except horse racing) as long as patrons are residents of the provincepatrons are residents of the province In 2004, Atlantic LC & British Columbia LC began In 2004, Atlantic LC & British Columbia LC began

providing online sports betting, interactive lotteries, providing online sports betting, interactive lotteries, & lottery ticket sales& lottery ticket sales

http://www.bclc.com/Default.asp http://www.bclc.com/Default.asp

Federal govt oversees horse racing, and began Federal govt oversees horse racing, and began allowing online bets in 2003.allowing online bets in 2003. In 2004, Woodbine Entertainment in Ontario began In 2004, Woodbine Entertainment in Ontario began

taking online horse race betting for tracks around taking online horse race betting for tracks around the worldthe world

http://www.horseplayerinteractive.com/ http://www.horseplayerinteractive.com/

Canadian Regulatory Canadian Regulatory FrameworkFramework

Legality of Canadians placing online bets Legality of Canadians placing online bets outside their province is unclearoutside their province is unclear

Certain Canadian First Nations groups: Certain Canadian First Nations groups: Kahnawake (QU), Ochapowace (SK), Six Kahnawake (QU), Ochapowace (SK), Six Nations Grand River (ON), Alexander Nations Grand River (ON), Alexander (AB) have hosted online gambling(AB) have hosted online gambling

Canadian Regulatory Canadian Regulatory FrameworkFramework

Concerns with Internet Concerns with Internet GamblingGambling

Unfair, Illegal, or Irresponsible Business Unfair, Illegal, or Irresponsible Business PracticesPractices Not paying player winningsNot paying player winnings

Unfair oddsUnfair odds

Free-Play sections with odds that favour the playerFree-Play sections with odds that favour the player

1/3 of online players report having had a 1/3 of online players report having had a dispute with an online casino or poker dispute with an online casino or poker websitewebsite

Concerns with Internet Concerns with Internet GamblingGambling

Unfair or Illegal Player PracticesUnfair or Illegal Player Practices Hacking sites to pay winsHacking sites to pay wins

Theft and fraud at skill game sitesTheft and fraud at skill game sites

‘‘denial of service’ attacks (extortion)denial of service’ attacks (extortion)

Money launderingMoney laundering

Player collusionPlayer collusion

Poker botsPoker bots

Poker BotPoker Bot

Concerns with Internet Concerns with Internet GamblingGambling

Internet gambling by prohibited Internet gambling by prohibited groups (underage, site employees, groups (underage, site employees, self-excluded)self-excluded) 50% of N.A. high school and 50% of N.A. high school and

college/university students have played college/university students have played on free play online gambling site on free play online gambling site (Derevensky et al., 2006(Derevensky et al., 2006))

2% - 9% of North American youth report 2% - 9% of North American youth report having gambled online for moneyhaving gambled online for money

Problems with Internet Problems with Internet GamblingGambling

Nature of Internet Gambling makes it Nature of Internet Gambling makes it conducive to producing Problem Gamblingconducive to producing Problem Gambling 24 hr immediate access24 hr immediate access Solitary playSolitary play Immersive interfaceImmersive interface ‘‘electronic cash’electronic cash’ Ability to play under influence of drugs or alcoholAbility to play under influence of drugs or alcohol

In general, evidence suggests the prevalence of In general, evidence suggests the prevalence of problem gambling is problem gambling is 3 to 4 times higher 3 to 4 times higher in in Internet gamblersInternet gamblers

Problem Gambling in Problem Gambling in Canada in 2007Canada in 2007

Wood & Williams, 2009; n = 8,498

Concerns with Internet Concerns with Internet GamblingGambling

Lack of Responsible Gambling Lack of Responsible Gambling PracticesPractices Failure to verify legal ageFailure to verify legal age Lack of information on responsible Lack of information on responsible

gambling or problem gamblinggambling or problem gambling Lack of self-exclusion optionsLack of self-exclusion options

Future of Internet Future of Internet GamblingGambling

Continued strong revenue growthContinued strong revenue growth

Particularly strong growth among the Particularly strong growth among the Asian marketAsian market

Strong growth in Betting Exchanges Strong growth in Betting Exchanges and Skill Gamesand Skill Games

Future of Internet Future of Internet GamblingGambling

Market consolidationMarket consolidation

Growth of other forms of remote Growth of other forms of remote gamblinggambling

Future of Internet Future of Internet GamblingGambling

Increasing rates of problem gamblingIncreasing rates of problem gambling

Increasing use of online counselling Increasing use of online counselling services and interventionsservices and interventions

Movement toward legalized and Movement toward legalized and regulated markets (with some later regulated markets (with some later regrets?)regrets?)

Pros of Legalized Internet Pros of Legalized Internet GamblingGambling

Extremely difficult to prohibitExtremely difficult to prohibit

Not good to have laws that are widely Not good to have laws that are widely disregardeddisregarded

Regulatory control would ensure fair games and Regulatory control would ensure fair games and better player protectionbetter player protection

Regulatory control would accrue economic Regulatory control would accrue economic benefits that are currently leaving the jurisdiction benefits that are currently leaving the jurisdiction ($$$ then applied to prevention/treatment)($$$ then applied to prevention/treatment)

Pros of Legalized Internet Pros of Legalized Internet GamblingGambling

Govt should not be regulating people’s Govt should not be regulating people’s leisure behaviour or how they spend their leisure behaviour or how they spend their moneymoney

Less regressive than other forms of Less regressive than other forms of gamblinggambling

Even if does increase problem gambling, Even if does increase problem gambling, this would only be temporarilythis would only be temporarily

Cons of Legalized Internet Cons of Legalized Internet GamblingGambling

Purpose of law is not to conform to behaviour, Purpose of law is not to conform to behaviour, but help shape it and codify societal valuesbut help shape it and codify societal values

General disregard for the rule of law is a risk General disregard for the rule of law is a risk when prohibiting something most people when prohibiting something most people engage in (e.g., alcohol, 70%), not something engage in (e.g., alcohol, 70%), not something 1-7% engage in1-7% engage in

Unsatisfactory business practices of many sitesUnsatisfactory business practices of many sites

Legal domestic sites will only be patronized if Legal domestic sites will only be patronized if they offer a competitive advantage (difficult)they offer a competitive advantage (difficult)

Cons of Legalized Internet Cons of Legalized Internet GamblingGambling

Legalization will increase the rates of problem Legalization will increase the rates of problem gamblinggambling

Nature of online gambling makes it inherently Nature of online gambling makes it inherently more problematicmore problematic

Significant % of online gambling revenue comes Significant % of online gambling revenue comes from problem gamblers (41% in Canada; 27% from problem gamblers (41% in Canada; 27% internationally)internationally)

Legalizing online gambling and redirecting $ into Legalizing online gambling and redirecting $ into treatment does not offset the harm causedtreatment does not offset the harm caused

For More InformationFor More Information

Wood, R.T. & Williams, R.J. (2009Wood, R.T. & Williams, R.J. (2009). Internet Gambling: ). Internet Gambling: Prevalence, Patterns, Problems, and Policy Options.Prevalence, Patterns, Problems, and Policy Options. Report Report prepared for the Ontario Problem Gamblingprepared for the Ontario Problem Gambling Research Research Centre, Guelph, Ontario, Canada. January 5, 2009. Centre, Guelph, Ontario, Canada. January 5, 2009. http://hdl.handle.net/10133/693 http://hdl.handle.net/10133/693

Williams, R.J. & Wood, R.T. (2007). Williams, R.J. & Wood, R.T. (2007). Internet Gambling: A Internet Gambling: A Comprehensive Review and Synthesis of the Literature.Comprehensive Review and Synthesis of the Literature. Report prepared for the Ontario Problem GamblingReport prepared for the Ontario Problem Gambling Research Centre, Guelph, Ontario, Canada. Aug 31, 2007. Research Centre, Guelph, Ontario, Canada. Aug 31, 2007. http://hdl.handle.net/10133/432 http://hdl.handle.net/10133/432