After what appears to be a long-cycle swing towards greater permissiveness of gambling, both in the USA and in the rest of the world, it remains true that most Americans cannot legally bet on sports events, most Europeans have no access to modern style casinos and mainland Chinese can only play the lottery.
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The most commonly offered reason by the world’s lawmakers as a justification for such restrictions is that they seek to mitigate social disruption associated with problem gambling behavior. Admittedly this hasn’t stopped governments making money out of gambling themselves, either through taxes, auctioning of gambling licences and ownership of gaming facilities. Indeed the European Court of Justice recently noted that there is a growing inconsistency between the supposed social case for state gambling monopolies and their tendency to spend large amounts on promoting their own products.
Yet whilst there are grounds for cynicism about what really drives gambling policy, it is true that problem gambling issues are serious. The latest research available suggests that as many as 1.5% of US gamblers have an issue.
It’s also clear that the dangers of problem gambling have been politicised. Research conducted on behalf of the US gambling commission at the end of the last century indicated that casino gaming creates jobs and reduces the level of unemployment and government assistance in communities that have legalized it. The University of Chicago’s National Opinion Research Center (NORC) found that communities closest to casinos experienced a 12 percent to 17 percent drop in welfare payments, unemployment rates and unemployment insurance after the introduction of casino gaming. NORC also found that communities with casinos have 43 percent higher earnings in their hotel and lodging sectors than those communities farther from casinos.
Whilst there is evidence to suggest that the creation of gambling facilities in areas where problem gamblers live increases the odds of negative behaviour, there are often difficulties extrapolating this data and applying it to whole populations. Indeed research conducted by the Scottish Executive Social Research suggests that lobbyists on either side of the gambling fence should calm down. The research report says “claims that casinos create significant wealth, new jobs and regenerate local economies; or that they create massive social problems through increases in problem gambling and crime tend to be exaggerated”.
Yet if the evidence against gambling being harmful is so inconclusive why have lawmakers been relatively slow to peel back legislation?
UK gambling consultant Steve Donoughue believes one reason is that lawmakers are themselves trapped in a paternalist tradition, which is historically rooted in class prejudice. He says, “gambling by the working class was integral to society and culture, endemic and restrained, with very little evidence of excessive gambling.” Yet this didn’t stop what Donoughue describes as a cycle of moral panic, where over a sustained period of time UK legislators introduced laws that were both deeply prejudicial to working class gamblers and also highly ineffective.
Whilst such heavy handedness might seem more excusable in less enlightened times, nowadays it seems more out of place. In fact a recent piece of analysis produced by the University of Salford in Manchester suggests that most gamblers are happy with their lot, a state of mind partly attributed to the mental rewards they derive from the pastime. The authors argue that restricting choice risks lowering the utility of those who choose to gamble,who in their view aren’t in need of paternalistic constraints.
Donoughue believes that contrary to popular perception the gambling industry hasn’t been that successful at lobbying for greater liberalization, which is perhaps one of the reasons that some recent innovations within the industry are challenging the business model that underpins it. Perhaps this isn’t that surprising since eye-wateringly high customer acquisitions costs and increasing levels of customer churn are practically endemic industry features. Indeed a former head of one of the UK’s biggest bookmakers recently said “The very last thing that any sane person should consider launching right now is an online gambling business.”
However a number of new firms appear to be looking to not only challenge the model, but effectively return to the type of focus that surrounded betting practices long before they became anything resembling an industry. They hark back to an era when betting invariably involved a two-horse race, with wagers between individuals rather than a bookmaker and the incentive less about financial windfalls and more to do with providing the odd treat, like meat for dinner.
In the USA, New Jersey based Gamblino has demonstrated that peer-to-peer sporting competition can be used to create a currency of bar bets and meals, redeemable where sports fans congregate. On the opposite coast, YouBetMe has recently released analysis of user behavior, which shows that people are interested in betting for social rewards, with over half of the bets made on its platform for beer wagers and a remarkable 18% for what are termed affection and sexual favours. Jason Neubauer CEO of YouBetMe says that betting between individuals is as socially bonding today as it used to be in bygone days.
Such thinking is evident in two new UK based businesses. Bragbet allows groups of friends to discuss sporting events and decide which events are worth a bet. Whilst Sporting Mouth (in which I have a declared interest) is aiming to take this one step further by allowing friends to compete against each other for a wide variety of social rewards, without betting for money.
The hope is that such businesses can re-equip gambling with a social purpose that will eventually diminish the dangers of problem gambling. If they can achieve that, the odds might even shorten on gambling becoming a force for good.
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