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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Keeping the Online Gaming Industry in Line

Companies / Gambling Jun 14, 2019 - 03:21 PM GMT

By: Submissions


A unique set of circumstance and conditions mean that gambling sites have to be some of the most tightly regulated online businesses there are. Arguably, they are second only to financial institutions in terms of the rules that they need to comply with and they also have some additional regulations on top.

But then, they do have a great deal in common with other organisations that are in charge of large sums of customers’ money, not to mention being a very attractive investment opportunity provided that one chooses the right one.

At the very heart of the regulations governing online casinos is the need for them to be 100% trustworthy. It’s only through being legitimate and honest businesses that they will attract and retain customers, essential if they are to be a success.

Inevitably, all of the major names comply with the regulations but it is some of the smaller, more opportunistic online gaming sites that choose to bend the rules and threaten to bring the whole industry into disrepute. Fortunately, robust measures have been put in place to identify and sanction those who contravene the rules.

These differ greatly around the world, and even within countries. For example, in the U.S. laws differ from state to state, including many where online gambling is completely outlawed.
But one aspect that most legislatures have in common is that laws tend to focus on the operators rather than the players on a site. So, while it is often not expressly stated that playing on sites is legal, it’s not illegal either. It’s this grey area that adds to the pressure on reputable operators to follow the letter of the law themselves.

Regulations can be split into the following six areas and failure to comply with any of these can lead not only to a significant fine, but also the loss of an operator’s licence.

Suitability of owners

For obvious reasons, there are very strict rules regarding the ownership of sites and there are a number of requirements that all directors must achieve. Obviously, those with criminal records are generally excluded, particularly when the offence may have been gambling related. Similarly, any kind of record of financial crime would also automatically mean that a person could not have any part in running an online gaming company. They must also not be barred from directorships, for example by being an undischarged bankrupt or having other rulings against them.

Auditing and accounting procedures

Some of the largest online gaming sites have annual turnovers running into seven figures or more so they are duty bound to have very stringent auditing procedures allowing them to issue accurate annual reports and accounts. For example, 888poker reported their revenue at $77.9 million, although this was a decrease on the previous year, they were obliged to share the figure with the public. Not only is this important for their shareholders to see, it’s also an essential compliance issue linked to their continued eligibility to trade. One area that is particularly important is having a clear separation between where players’ deposits are stored and the rest of the organisation’s money reserves. This is because it’s still the property of the players and is simply being safeguarded by the operator until it’s used as stake money.

Fairness of gaming

Unlike “real life” casino games that rely on the random dealing of cards or the spin of a roulette wheel, in the online environment this has to be recreated using technology. This is achieved through an algorithm-generating piece of software called a random number generator. This ensures that outcomes are impossible to predict – but to ensure this really is the case, there are frequent checks made on online gambling sites to check that the gaming is genuinely fair and that the technology is doing its job effectively.

Help for problem gamblers

While the vast majority of people treat gaming as an enjoyable and fun pastime, there are a small proportion for whom it encourages reckless play with money that perhaps they can’t afford to use. There is a duty of care for all gambling sites to do all they can to identify when a player may be getting themselves into a difficult situation and step in to help. They also have to offer the option for the player to step in themselves and ask for their account to be blocked. There have been cases where some online gambling companies have been found to fall short of their responsibilities, for which they have been fined.

Avoiding underage play

Similarly, there are many steps that a gambling site is expected to take in order to ensure that players are over 18. In May 2019 the UK’s Gambling Commission announced a new ruling that sites had to verify a person’s age before they are allowed to play whereas before they had 72 hours to carry out the process. This now even extends to preventing under 18s from playing the free games many sites offer, even though they are not technically gambling.

Offering a robust complaints procedure

The final requirement for all operators is to have an established and straightforward complaints procedure designed to deal with issues fairly, effectively and within a reasonable period of time. Details of the procedure also have to be easily accessible on the site with full instructions of how to use it.

As to whether these regulations are proving to be effective, it appears that they are. So, considering the many numbers playing on sites and the large amounts of money involved, there is relatively little action that has to be taken – and long may this remain to be the case!

By Jamie

This is a paid advertorial.

© 2019 Copyright Jamie - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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