Sports Betting Hall of Famer Sue Schneider is back with more monthly insights. This time, she shares concerns over the future of a divided gaming industry facing new challenges.
Frankly, I’m worried about our industry. Having been in it for over 30 years and having fought some serious battles, I’m not immune to nor naïve about the challenges we face. But today, things feel very different.
Some of our problems are self-inflicted. Marketing practices like promos and bonuses have created issues. Based on today’s criticisms, they pull people into gambling in spite of stated responsible gambling efforts. And because of promo cost deductions, these incentives have yielded fewer tax revenues for many jurisdictions than they expected based on forecasts that they were offered. This is likely one of the reasons spawning a bevy of tax increase proposals in jurisdictions around the world.
Ubiquitous advertising has also not been positive for the industry in the long term. It’s everywhere … especially in jurisdictions new to offering iGaming and/or sports betting services. A study in Ontario recently said that 21% of the advertising during sporting events featured sports betting operators. New restrictions on using celebrities and athletes in gambling ads have cropped up in Australia and Canada. Gambling sponsorships on team jerseys and in stadiums are also restricted in the UK and other jurisdictions. Add in the unregulated sweepstakes ads (which fall between the regulatory cracks), and it’s just too much for many.
A more recent complaint about the use of AI algorithms as a way to tailor offers to players is instead seen as a way to hook people and is simply a new twist on an old issue. These are the same issues at play with social media in general, as evidenced by the recent Meta lawsuit focused on addiction. So, opponents point to the dual issues of smartphone addiction and gambling addiction as being particularly problematic for at-risk people.
Add to this the complaints of players who state that they’ve been blocked and/or limited for winning. This also has led to rules by some regulators (e.g. Massachusetts) to limit this practice, requiring operators to notify bettors and explain why they’re being blocked or limited.
We’re seeing the backlash now for industry practices like these. Various jurisdictions around the world are curtailing the use of credit cards as the fear of increased bankruptcies comes to the fore for policymakers. Crackdowns on advertising are also cropping up globally as a means of player protection. It has even spawned some draft legislation to keep sports betting operators from using AI, bills with a dubious enforcement method.
Prediction markets present different challenge for gaming
This has all been exacerbated by the debate on prediction markets. The concerns about insider trading or offering markets on wars, deaths and other controversial contracts are in the media almost daily now.
The prediction markets have tried to set themselves apart from ‘gambling’ but concerns about these new entrants in the industry are growing. This is especially true when the federal regulatory body overseeing them states that they expect to offer a ‘light touch’ approach to regulation.
Given the lack of regulatory oversight of prediction markets, that absence would normally be filled by industry self-regulation. As the founder of the Interactive Gaming Council in 1996, we attempted to offer self-regulation in the void since there was little to no regulation of iGaming or online sports betting at that point.
But so far, it would appear that the prediction markets don’t have the appetite for such self-regulation. That would typically mean, if history serves us, that the government will sit more and more. And, given that this is an election year, gambling may well become an issue in the mid-terms… something that some analysts predict and, frankly, will NOT be a good thing for the industry as a whole.
The negative media stories are coming fast and furious these days. These are mainstream media outlets that are taking a hard look at how our industry operates. And, to be honest, it’s truly hard to refute many of their charges.
We have governors expressing remorse over advocating for sports betting in their respective states and, in at least Ohio, leading to a call to outlaw online bets. A Canadian MP who was a leading advocate of legalization there said that it’s gone too far. At a minimum, it will make it harder to get other gaming legislation passed. At worst, we could see some enabling legislation recalled or have clampdowns that will make it even more difficult for the industry to move forward in the future.
Can ‘coopetition’ win the day?
Those of you who know me are aware of my decades-long concern about how the industry advocates for itself. One of my favorite terms is “coopetition” … the ability of competitors to come together for the greater good. But, in spite of a plethora of associations in the industry now representing every vertical, we’ve never really been that great at it, especially when the chips are down. There’s advocacy, alright, but for the industry itself, not for how it’s viewed by the public. And given all of the fractures in the industry, I don’t see that leadership emerging. We’re going down the route of other ‘sin’ industries like alcohol and tobacco without, apparently, learning from their examples.
This is exacerbated, at the moment, by the split (most evident in the U.S.) in which those operators and suppliers that function in the state-sanctioned regulatory systems have drawn a line in the sand about the federally regulated prediction markets. Some are trying to straddle both sides of that fence, so it will be most interesting to see how it turns out for those.
So there are battle lines drawn. In the U.S., the states (legislators and regulators) are on the side with many of the commercial operators, as well as Indian country, against the prediction markets. The long-term viability of the prediction markets will likely be tied up in the courts for a long time until there’s a Supreme Court decision. And, given today’s political climate, it may be a long shot to see if the federal regulatory body overseeing them in the U.S. actually comes up with the regulatory guardrails that are hoped for in the name of player protection.
The reason that it seems more serious this time than in the past is personal and anecdotal. At home, in speaking with friends and family (including those who enjoy gambling), it feels different. People who know what I do are asking, “Isn’t this all too much?” In lunch conversations with 92-year-old cousins, they say they’re sick of all of the ads. Others are concerned about the prediction markets taking contracts on absolutely anything in life, and they have concerns about the manipulations which they fear will abound in an unchecked environment.
So, I’m not sure what the answer is. But, I do know that something has changed, and not for the good. Listening to those criticisms and responding to them in a way that shows that the industry is attempting to be responsible corporate citizens should be our aim at this point.
