The great challenge of regulation

The great challenge of regulation

Moving through regulatory objectives and principles, the gaming world searches for a difficult balance between the needs of state, society and industry.

By Michael Haile

“What is a gambling regulator?” If one asks a Chief Executive, a Financial Officer or a Regulatory Manager of a gambling company, or even to a player, one would receive different answers. These answers would diverge even more so if the question changes into “What is the role of a gambling regulator?”

The confusion at the root of all these different answers mainly derives from the politics of legislators in various jurisdictions. It is important to note that this confusion s not only limited towards the gambling world. When designing legislation it should be an imperative to distinguish between “principles”, which owns the spirt of the law and “objectives”, which is the desired end result.
However, this simple equation is often ignored due to political, economic and social issues and also cultural trends of the moment, often amplified by a media searching for a social scandal.

The social principles are obvious; safe and legal play, avoid social harm, fairness and the protection of minors and the vulnerable. Objectives are often dictated by the requirement of Treasury coffers and respect of the law so they tend to be procedure led, and cost of implementation. As a matter of fact, the procedures usually tend to be determined by those state agencies that collect tax revenue.

The destination of gambling tax differs from country to country. For example, in Italy all tax revenue that derives from gambling is mixed to the general taxation, while in the Uk, lottery money is earmarked for specific activities by legislation.
In fact, Uk lottery is a good example of the tension that exists between “principles” and “objectives” personified by three state agencies, the Treasury, which is principally concerned by the maximisation of lottery duty, the Department of Culture, Media and Sport (Dcms), which controls the gambling market and receives the bulk of lottery money for cultural activities, sport, heritage and for various charities and avoid political fallout that comes from gambling, and the Gambling Commission, the regulator that has a statuary mission of safe and fair play, harm minimisation and the functioning of the gambling market according to law. However it is the Commission that has to manage these different interests.

The Commission’s statuary objectives are clear enough as they were set by the legislator through law, the priority being harm minimisation. It is rather peculiar that gambling legislation is so strict while legislation aimed at alcohol use, or abuse, is relatively permissive as alcohol misuse causes more harm and cost to society than the gambling industry would be ever able to do.

We have to always assume that there will always be a tension between “principles” and “objectives”. Which of the two has the priority depends on the history, culture and economic needs of the various jurisdictions. It is the same difficult balance between gambling business needs and player and society protection.

In the Uk player and society protection is set as priority by law. It is not the same in all countries. In Italy, for example, gambling legislation is set by the
Economic ministry, as such tax collection takes precedence over all other considerations. The Italian regulator, in fact, takes illegal gaming rather seriously as it takes away tax revenue. In Scandivian countries illegal gaming is taken seriously mainly due to player protection. Same issue but two different priorities.

There are also other social priorities that have to be taken into account. Uk’s Gambling Commission, under the Ceo Sarah Harrison, took the issue of the misogeny in the industry quite seriously. But the Uk is also not immune to looking after the needs of the gambling sector. The Treasry usually takes a dim view of any regulation that limits the sector.

Generally the gambling industry does not enjoy a good press. This should make the industry think twice. It is not enough to follow the law to the letter but also follow the spirit that animates the law and listen to the concerns of the society in which they operate. This is particularly true of marketing methods and advertising.
Gambling advertising has become particulary pervasive in the last few years, specifically in sports, exposing minors to betting. Usually advertising is regulated by agencies other than the gambling regulator. The Commission in the Uk obtained the power to regulate gambling advertising only very recently.
But it is also true that many countries, Italy in particular, have to semplify gambling regulations. For example, there are countries, such as the Us and Germany that own different regulatory frameworks within their borders, quite challenging in the 21st century when technolgy has made regional and political borders obsolete.

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Regulatory semplification has to also go hand to hand by legislative stability and certainty. The gambling industry needs lasting rules, legislation cannot change at whim. Rules need time to be implemented and take hold.
Let’s go back to the question, “What should a regulator do?”. This question is relevant as the regulator’s position, as much legislator tries to make it clear, is always ambigous. The regulator always walks in a minefield made of economic, social, political and regulatory pressures. A regulator has also to take into account public opinion, which is often espressed by a media looking for a headline, and continously on the lookout to check what is legally, culturally and socially acceptable while at the same time check its tools to influence these contradictory issues while following its statuary mission. I have worked many years in the Uk.
The Uk has many regulators (transport, energy, gambling, other utilities etc.) because these sectors are run by the private sector. It is extremely rare that one commits suicide because they can not pay a train ticket or their gas bill, however it is not at all rare to read in the press about someone has committed suicide due to a gambling debt. When the press highlights these suicides the role of the
regulator, in a second, becomes more difficult. The mind set moves from being deliberative to reactive. I have seen the approval of stupid rules due to satisfy a press that is not able to analyse the context in which the gambling world operates.
But I also see many actors in the gambling industry behaving in a socially predatory manner, which feeds a general disgust in many sectors of society. This is the tightrope that many regulatory authorities have to walk through. This is also sadly conpounded when regulators are not given clear guidelines on their mission and legislative powers.

Italian gambling regulators, in this sense, are put in a difficult position, as gambling legislations are written in various fiscal budgets, where ,as previously stated, the priority is revenue collection. This revenue led approach becomes rather sensitive when it concerns the protection of minors from gambling harm.
This lack of concern o f society issues, particularly regarding minors, is a ticking bomb which will eventually create a lot of issues and concerns to legislators, regulators and society in the not too distant future.
Gambling, for the majority of people who like to play is an entertainment, but it has negative side effects. As thus, it is important, even vital, that all actors involved in the industry: companies, governments, regulators and civil activists co-operate to safeguard everyone’s interests.

Michael Haile-economist, Economic and Regulatory Consultant, former Market Policy Specialist for the Gambling Commission in the Uk, Senior Economist & Analyst at Gbgc in the Isle of Man and Senior Researcher at Censis and Centre of International Social Studies in Rome, Italy.

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