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Online Gambling Regulation: The Pros and Cons of Online Gambling

19 December 2009 by Devon Chappell

For online gambling to get regulated and legalized in the U.S., or even in individual State’s for that matter, there is still a long way to go down the legislative and societal path. It is certainly understandable to think that widespread resistance to any activity would denote there is something inherent in the activity itself – that which degrades the general public health and welfare, not to mention the “infrastructure” i.e., family values, of society.

But then again, if we’re talking about the U.S. (and I’m a U.S. citizen, mind you), this is the same society that says legal marriage can only take place between a man and a woman, regardless of just how much “love” actually exists in the relationship, while gay couples with even stronger relationship values than most heterosexual couples are shunned because of “religiously” influenced values. But don’t get me started on that…and for that matter, global warming and climate change.

While there are many opponents of online gambling and gambling in general, I can appreciate that a percentage of these opponents, albeit the minority, are not in favor of legalizing online gambling because of moral concerns – i.e., underage gambling and gambling addiction. I can even understand why many of these same opponents believe that online gambling is an illicit vehicle for fostering such negative consequences. They believe that the internet is an unsafe and lawless environment that cannot be policed simply because that’s what they’ve been told by the opposition.

In addition to the religious fanatics spreading untruths about online gambling, it’s media outlets like the “San Francisco Chronicle“, i.e., “SF Gate” that are guilty of spreading these untruth’s, whether it’s simply the personal view of an author, or bad reporting – i.e., simply not digging deep enough and taking the time to look into the facts of the matter. I mean, isn’t that one of the golden rules of journalism?

What really has me ticked about the “SF Gate” is a recent article about legalizing online poker in the State of California, entitled, “State’s Dependence on Gambling Revenue Grows”. In the piece, an unnamed author states, “Then there are the social costs to Internet poker. Gaming is one of the easiest ways for criminal gangs to launder money. It would be impossible for the state to prevent underage online gambling. Studies have shown that the more proximity there is to gambling opportunities, the greater the negative impact on the public (think bankrupt families).”

From the perspective of a journalist, that is some serious misreporting. And you know what? It’s not that uncommon. Call it an op-ed, or what you will. I call it being guilty of spreading biased untruth. Uhm, sure it would be impossible to prevent underage gambling…especially when it’s legal for banks to give out debit cards to 16 year olds. Yeah it’s impossible, just like it’s impossible to prevent underage drinking or driving while under the influence, or shoplifting or adultery or dropping out of school. Gaming is one of the easiest ways for criminal gangs to launder money? Now, should I be listening to the SF Gate or the U.S. Government Accountability Office, which reports that banking and gaming regulatory officials strongly believe that online gambling is not particularly susceptible to money laundering? I think I’ll go with the GAO on that one.

And the bit about “studies have shown” angers me even more. First of all, what studies? Secondly, since when does “negative impact” equated to “bankrupt families”? Sure, that’s a possibility. But don’t just present one extreme example.

While this author obviously did not cite any studies or stats to even back up this claim, it probably wouldn’t make a difference anyways since there are plenty of false and misleading studies backed and promulgated by online gambling opponents. Admittedly, there are spins and doctored studies coming from the side of gambling proponents as well.

So, who’s right? What studies should we be looking at to better gauge just how online gambling is affecting minors and criminal activity?

The obvious answer in my book are places where online gambling is already regulated, and whose societies mirror that of the United States. And there’s really just one place, and the most perfect one at that, to use as a benchmark: the United Kingdom.

The UK passed a law to regulate online gambling in 2005, and has since shown that online gambling is anything but a haven for problem/underage gamblers and organized crime. In fact, studies show (I’ll get to those in just a second) that remote technologies used on the internet are actually more proficient at preventing and identifying criminal activities and underage gambling.

Lest I also be guilty of saying “studies show” without any mention of said studies, let’s take a look at what the numbers really show. Mind you, these are the numbers reported by the UK Gambling Prevalence Study, which is a comprehensive, independent study that takes place every three years. The last published study was in 2007, with the results of the current study scheduled to be released in 2010.

Further helping the credibility of the UK Gambling Prevalence Study, which was prepared by the National Center for Social Research (Nat Cen), two internationally recognized scales – the Diagnostic and Statistical Manual of Mental Disorders (4th Edition) Index and the Canadian Problem Gambling Severity Index were used to check for reliability within the survey and to compare findings in similar studies around the world. Both indexes showed that 0.5 to 0.6% of the adult population had a problem gambling disorder, which is the same percentage found in the 1999 (2000) study.

Overall, the 2007 survey showed that 68% of the population had engaged in an at least one form of gambling activity for the prior year, which was down from 72% in 1999 (before online gambling was even regulated in the UK). Furthermore, 57% of all gambling activity was in the form of lottery bets (down 10% from 1999), 20% scratch cards, 17% horserace betting and 14% for brick ‘n mortar slot machines. Only 3% of all gambling activity was attributed to online gambling.

Regarding age demographics, the only increase in overall gambling activity was for people age 65 and over. All other age sectors saw a decrease in gambling, with minors (age 16-24), dropping nearly 10% from 1999. Minors also composed the lowest percentage of people engaging in gambling activities at approximately 58%. Keep in mind, this doesn’t mean that 58% of 16 year olds are gambling online. The age sector spans to 24 years of age. Furthermore, as additional stats show, the National Lottery once again took in the most business of all other forms of gambling. 39% of the 58% of 16-24 year olds who gambled in the last year, 39% did so at the National Lottery, while only 6% did so gambling online. See the accompanying charts below:

Gambling Activity by Age

In terms of problem underage gambling, the 2007 UK Gambling Prevalence Study shows the 16-24 age demographic as making a large improvement across the boards in 2007. While in 1999 (which once again, was BEFORE online gambling became regulated in the UK), 1.7% of 16-24 year old’s who gambled online were identified as having a gambling problem, while in 2000 this figure dropped to .9%, which was in line with all other age demographics up to 44 years old, which on the contrary, saw small increases (not statistically significant) in the numbers of problem gamblers. See last chart for details.

Gambling Activity by Age

Type of Gambling Activity Percentages

Overall, the 2007 UK Gambling Prevalence Study showed there has been little change in the percentage of people participating in gambling activities and problem gambling cases between 1999 and 2007 (overall a slight decrease), while participation and problem cases amongst young people had significantly fallen in 2007. The one exception in which associations of increased gambling problems were obtained was in areas of education and ethnicity – once again, more indicative of societal inequalities than negative consequences of gambling. Compared to other countries where online gambling isn’t even legalized, the prevalence of problem gambling in the UK was relatively low.

Problem Gambling Prevalence

Problem Gambling Activity by Age

So, the next time you read some article stating, “Gaming is one of the easiest ways for criminal gangs to launder money”, and that “It would be impossible to prevent underage online gambling”, look into all the facts before coming to the same conclusions held by biased gambling opponents and the non-informed, uneducated. Take a look at the UK, and you will see a fitting example of how online gambling can be successfully regulated and actually bring down cases of problem/underage gambling, not to mention billions in badly needed tax revenue.

3 Responses to “Online Gambling Regulation: The Pros and Cons of Online Gambling”

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