INTERNET GAMBLING: PREVALENCE, PROBLEMS &

POLICY OPTIONS

AGRI 2011 ConferenceBanff, Alberta

Dr. Robert Williams University of Lethbridge

Lethbridge, Alberta; Canada

April 2011

Collaborator

Dr. Robert Wood; University of Lethbridge

Funder Ontario Problem Gambling Research

Centre

Internet Gambling: History

Oct 1995 Liechtenstein conducts online purchase of

lottery tickets

1996-1997 Caribbean & Central American countries begin hosting online

casinos &/or sports/race books Antigua; Netherland Antilles; Turks & Caicos; Dominican Republic;

Grenada; Costa Rica; Belize; Panama

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

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

Internet Gambling: History

Rapid Expansion from 1998 on

650 sites by end of 1999

1800 sites by end of 2002

2500 sites by end of 2006 (peak)

2377 sites by April 2011 (652 companies)

Internet Gambling: History

1995: Lotteries

1996: Casinos; Sports/Race Books

1998: Poker; Bingo

2000: Betting Exchanges

2004: Skill Games

Interactive Television (iTV)

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

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

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

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

France)

Current Internet Gambling (Apr 2011):

2377 Online Sites http://online.casinocity.com/

742

556

410

391

41 36 2114

Chart Titlecasinos

poker rooms

sports/race books

bingo

skill games

lottery

betting exchange

backgammon

Casinos

Sports/Race Books

Betting Exchanges

Skill Game Sites

Hong Kong Jockey Club

Current Internet Gambling: Jurisdictional Providers

76 jurisdictions

Major providers (# transactions; April 2011):

United Kingdom (116 sites) Isle of Man (45 sites) Netherland Antilles (327 sites) United States (28 sites) (skill games, horse

racing) Alderney (111 sites) Tasmania (3 sites) Kahnawake (177 sites) Costa Rica (199 sites) Gibraltar (294 sites) Antigua & Barbuda (66 sites)

~204 ways to pay

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

Other popular methods: Neteller (73% of sites); Bank Wire Transfer (65% of sites); Moneybookers (68% of sites); personal cheque (23% of sites).

Current Payment Methods

~$26 billion in 2009, with sports/race books, casinos and poker accounting for large majority (GBGC IGR, 2010)

~7% of worldwide gambling market (GBGC IGR, 2010)

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

these continents

Current Internet Gambling:

Market Share

Revenue

Revenue and market share continue to increase

However, still has a relatively low market penetration after 16 years of existence

Not much evidence of negative impact to land-based gambling

Prevalence of Internet Gambling

0% to 14% depending on the country 14% in U.K. in 2010 12% in Sweden in 2011 7% Norway in 2006 3% Northern Ireland in 2010 2% U.S. in 2007 2% in Canada in 2007 1.8% in South Korea in 2006/2007 ~1-2% Australia in 2006/2007 1% Singapore in 2008

Current Profile of the Internet Gambler

Wood & Williams (2009) 2 phased data collection:

Representative RDD telephone survey of 8,498 Canadians• 70.7% gamblers, and 2.1 % Internet gamblers (N = 179).

Self-selected online survey of 12,521 people from 105 countries.• Survey hosted at www.gamblinginformation.org• Banner ad-links placed at www.casinocity.com.• 24.7% Internet gamblers (171 Canadian Internet gamblers)

Canadian Internet gamblers from online sample weighted to match Canadian Internet gamblers from RDD sample. Same weights then applied to entire online sample.

Current Profile of the Internet Gambler

Logistic regression of characteristics differentiating Internet from non-Internet gamblers: # gambling formats engaged in (4.1 vs 2.6) CPGI score (1.8 vs 0.5) Region (Europe or Caribbean vs elsewhere) Male (78% vs 58%) Past Month Tobacco use (44% vs 33%) Age (46 vs 51) Monthly Gambling Expenditure ($195 vs $71) Household Income ($60.1K vs 57.6K) Past Month Illicit Drug Use (11.7% vs 5.5%)

Current Profile of the Internet Gambler

CPGI CategoryInternet

Gamblers (%)

Non-Internet Gamblers

(%)

Non-problem gambler 39.9 82.1

At-risk gambler 43.4 12.3

Moderate problem gambler 12.8 4.0

Severe problem gambler 3.8 1.7

Average CPGI score 1.80 .52

Internet Gambling: Legality 2010

Total prohibition Bermuda, Cambodia, China, Cyprus,

Greece, Pakistan, Portugal, Romania, Russia, Saudi Arabia, South Africa

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

Netherland Antilles, Panama, Philippines

Some forms legal Australia,Chile, Finland, Germany,

Hong Kong, Israel, Italy, Liechtenstein, Netherlands, New Zealand, Norway, South Korea, Sweden, Switzerland, Taiwan, U.S., Venezuala

Internet Gambling: Legality 2011

Only legal for residents Austria, Norway, Canadian provinces,

Finland,

Only legal for residents and residents cannot gamble online outside the country Czech Republic, Germany, Hong Kong,

Hungary, Israel, Norway, Slovakia

Only legal for nonresidents Papua New Guinea

Concerns with Internet Gambling

Unfair, Illegal, or Irresponsible Business Practices Not paying player winnings

Unfair odds

Free-Play sections with odds that favour the player

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

Concerns with Internet Gambling

Unfair or Illegal Player Practices Hacking sites to pay wins

Theft and fraud at skill game sites

‘denial of service’ attacks (extortion)

Money laundering

Player collusion

Poker bots

Poker Bot

Concerns with Internet Gambling

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

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

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

Problems with Internet Gambling

Nature of Internet Gambling makes it conducive to producing Problem Gambling 24 hr immediate access Solitary play Immersive interface ‘electronic cash’ Ability to play under influence of drugs

or alcohol

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

Concerns with Internet Gambling

Lack or weak Responsible Gambling Practices Failure to verify legal age Lack of, or revocable loss limits and self-

exclusion Lack of information on responsible

gambling and problem gambling

Future of Internet Gambling

Continued strong revenue growth

Particularly strong growth among the Asian market

Future of Internet Gambling

Market consolidation

Growth of other forms of remote gambling

Future of Internet Gambling

Increasing rates of problem gambling

Increasing use of online counselling services and interventions

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

Pros of Legalized Internet Gambling

Very difficult to effectively prohibit

2 approaches:

Prohibiting gambling-related financial transactions (e.g., Norway, South Africa, U.S.)

Spawns other financial intermediaries

Requiring ISPs to block online gambling sites (e.g., China, South Africa)

Technologically savvy citizens can circumvent this

Not good to have laws that are widely disregarded

Regulatory control would ensure fair games and better player protection

Much easier for consumers to implement pre-commitment limits of expenditure and frequency

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

Pros of Legalized Internet Gambling

Pros of Legalized Internet Gambling

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

Less regressive than other forms of gambling

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

It is inevitable

Cons of Legalized Internet Gambling

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

General disregard for rule of law is a risk when prohibiting something most people engage in (e.g., alcohol, 70%), not something 1-14% engage in

There will always be large numbers of online sites with unsatisfactory business practices

Online stock market trading has not been beneficial

Cons of Legalized Internet Gambling

Nature of online gambling makes it inherently more problematic

Legalization will increase rates of problem gambling

Significant % of online gambling revenue comes from problem gamblers (27% internationally)

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

Cons of Legalized Internet Gambling

Economically disadvantageous Legalization increases participation and

expenditure U.K. liberalized online gambling laws in 2007 prevalence went from <6% in 2007 to 14% in 2010 expenditures went from ~$1 billion <2007 to ~$4 billion in

2010

However, without ISP blocking you only capture portion of the market

only 25% of U.K. online gamblers currently patronize U.K. sites. Thus, prior to 2007, ~$1 billion was leaving U.K.

($0 staying). In 2011, upwards of $3 billion is leaving

($1 billion staying)

There are Intermediate Solutions between

Prohibition & Legalization

Less problematic forms could be legalized (e.g., lotteries)

Access to foreign sites could be prohibited through ISP blocking Israel, South Africa, (Norway), (France), (Italy),

(Estonia)

Countries with Internet Censorship

Blue = none; yellow = very limited; red = some; black = heavily censored

The Best Policy Approach Depends on a Jurisdiction’s

Situation

Depends on how ‘vulnerable’ the population is

Depends on the regional ‘context’

Depends on the size of the country

Depends on public attitudes

For More Information Williams, R.J., Wood, R.T., & Parke, J. (eds.) (~

Feb 2012). Routledge International Handbook of Internet Gambling. Routledge: London. http://www.routledge.com/books/details/9780415594431/

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

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

ISP Blocking in Canada

Internet content is not specifically regulated.

However:

There is voluntary blocking of child pornography sites by several major Canadian ISP providers

Canadian Human Rights Commission enforces laws prohibiting ‘hate messages’ over the Internet