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You are here: BAILII >> Databases >> United Kingdom Journals >> Online Gambling: Gambling with Regulation | Nair | European Journal of Law and Technology URL: http://www.bailii.org/uk/other/journals/EJLT/2012/03-3/165.html Cite as: Online Gambling: Gambling with Regulation , Nair , European Journal of Law and Technology

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Online Gambling: Gambling with Regulation

Abhilash Nair [1]

Cite as: Nair, Abhilash, 'Online Gambling: Gambling with Regulation', European Journal of Law and Technology, Vol. 3, No. 3. 2012

Abstract

In light of the myriad of regulatory challenges posed by the increasing availability of online gambling websites, there have, in recent years, been numerous calls for the reform of gambling regulation. This article explores certain key issues and regulatory challenges posed by online gambling from a UK and wider European perspective, with particular focus on the risks such activity poses in respect of children and young people. The article identifies the special characteristics of online gambling from a cross-disciplinary perspective, and stresses the need for protecting children and young people from the dangers of online and problem gambling. The article argues that, instead of piecemeal provision, what is needed is action which addresses the issues through the adoption of a robust, holistic approach that includes legal, social, and policy considerations, and advocates the use of technology in order to find an effective solution to protecting children and young people from the potential risks of online and problem gambling.

Keywords: Gambling, Internet, Children, Young people, Regulation

1. Introduction

Online gambling is a rapidly growing industry, and has been identified as the fastest growing segment within the overall gambling market in the EU, with annual revenues in the region of 9.3 billion Euros in 2011 [2], compared to 6.16 billion Euros in 2008 [3]. This is expected to grow in size by about 40% by 2015, with estimated annual revenues of around 13 billion Euros. [4]

Despite its entertainment value, gambling has been a controversial area historically, and often frowned upon by different societies for various reasons. [5] Hamilton and Rogers point out that 'gambling has always been a global phenomenon transcending time and sociological strata evoking strong moral approbation and social casualties.' [6] The perilous effect of gambling has been referenced in ancient Indian texts, most notably in the epic Mahabharata. [7] It is fair to state that the regulation of gambling is influenced by various cultural, religious and societal factors. As a result, the way gambling is regulated has also been quite territorial in nature. The Internet and consequent rise of online gambling has raised a number of challenges for this traditional model, due to the global nature of the Internet, and the numerous complexities associated with cross border gambling regulation.

Online gambling is regulated in many states both within and outside the EU, albeit with no uniformity with respect to the regulatory approach. [8] Currently, gambling is regulated based on two broad models within the EEA:

1. a licensing regime where gambling providers operate under a rather strictly regulated framework and,
2. a strictly controlled state or other monopoly regime.

There have been initiatives undertaken at European level to review the regulation of online gambling in the last few years, which led to the European Commission issuing a Green Paper in 2011, [9] followed by a Consultation on Online Gambling in the Internal Market. [10] The Consultation sought to receive feedback on the existing situation of the EU online gambling market and the key policy issues that the growth of online gambling generates across the EU, and received a number of responses from various stakeholders [11]. The background to the EC Consultation [12] was the widely different regulatory approaches to gambling among different Member States in the European Union. It is estimated that there is considerable illegal market for online gambling in the EU, and according to European Commission estimates, for each licensed online gambling website world-wide, there are more than five unlicensed web-sites offering online poker or sports betting. [13] Unregulated gambling websites pose a higher risk to children and young people, as the website operators will not be subject to any legislative control or obligations under domestic law. Enforcement of the law poses even bigger challenges due to jurisdictional issues, as experienced in other areas of Internet regulation such as defamation and pornography. [14] Further to the Green Paper and Consultation, the European Commission has recently adopted a Communication, 'Towards a comprehensive European framework on online gambling, [15] which is accompanied by a Staff working paper 'Online Gambling in the Internal Market', [16] The Communication and the Working paper identify the key challenges posed by the current regulatory frameworks within the Internal Market and, in light of the responses received to the Consultation, sets out an action plan, identifying five priority areas. [17] Protection of minors and vulnerable groups is one of the priority areas identified in this process.

The rationale for the regulation of gambling generally encompass many objectives, which include ensuring fair gambling and open practices, collection of duties and taxation, and protection of children and other vulnerable persons from the dangers of gambling. In the United Kingdom, the stated licensing objectives as per the Gambling Act 2005 include the prevention of gambling as a source of crime, ensuring that gambling is conducted in a fair and open way, and the protection of children and other vulnerable people. [18] At an international level, there are other factors that influence/necessitate gambling regulation, which include European trade regulations, international taxation issues and any other bilateral or multilateral free trade/open market agreements. The main focus, of this article, however, is the issue of protection of children and young people from the potential dangers of online and problem gambling.

The article will consider the special characteristics of online gambling and examines how it differs from traditional offline gambling, and argues that online gambling calls for a more robust and workable form of regulation in order to protect children and other vulnerable people. Although there is not a huge literature base currently available to analyse the pathological responses to online gambling per se, there is some data available to justify further regulatory responses in light of the potential risks involved in Internet gambling. The protection of children and other vulnerable groups from gambling addiction and problem gambling is a priority for a number of legal, policy and social reasons. The article will highlight the lacunae in the existing regulatory framework in the UK, and puts forth solutions that can be implemented at domestic level, which could also be used as a good practice model internationally. The article also notes that international co-operation in this respect is required, although this will take time and concerted efforts from the international community. The nature of gambling itself demands a broader approach to address the challenges, and due consideration ought to be given to its social, economic and psychological aspects, particularly in relation to problem-gambling. Whilst the UK regulatory model addresses some of these already, loopholes still remain, as evident from the rising prevalence of online and problem gambling, particularly from the perspective of children and other vulnerable groups. The article will also argue that regulatory reforms should harness the use of technology in order to achieve a workable and effective model for online gambling regulation.

2. Regulatory framework in the UK: An overview

There are a number of well known gambling operators that provide online gambling services in the United Kingdom. [19] In addition, there are also gambling operators that offer exclusively online services in the U.K. Most of these online providers are not UK companies and provide their service from abroad, often from non-EU countries and are therefore not regulated by the UK Gambling Commission, as discussed in more detail below [20]. This creates significant problems in relation to online gambling regulation, and therefore, it is pertinent to firstly examine the current UK regulatory model in light of its efficaciousness in regulating online gambling services provided from abroad and conduct business with consumers based in the U.K.

The main legislation that governs gambling in the UK is the Gambling Act 2005. The Act is implemented through bodies established under the Act such as the Gambling Commission [21], which works in partnership with local licensing authorities. The Gambling Commission is an independent non-departmental public body, sponsored by the Department for Culture, Media and Sports. [22] The remit of the Gambling Commission include providing licenses for a range of activities in Great Britain, including arcades, betting, bingo, casinos, supply and maintenance of gaming machine, supply of gambling software, external lottery managers, and remote gambling using British-based equipment (including betting online, by telephone, or via any other communication device).

Online gambling falls under 'remote gambling' mentioned above. Remote gambling is defined as gambling by the use of 'remote communication' [23], which include the Internet, telephone, television or radio communication and using any other kind of electronic or other technology for facilitating communication [24]. The definition is clearly broad and 'technology-neutral', and is capable of accommodating future changes in technology. However, the remit of the Gambling Commission with respect to online gambling is currently fairly severely restricted because of the British-based equipment requirement. This is because an operator does not require a license to run a remote gambling service to offer business in the UK if their gambling equipment is based outside Great Britain. This practically eliminates a number of online gambling operators offering services in the UK from the remit of the Gambling Commission, owing to the fact that there are currently a number of operators who do not use any equipment within the UK [25]. As at 31 March 2012, there were 288 remote gambling activity UK licences held by 207 operators. The actual number of operators offering online gambling services in the UK is significantly higher. According to estimates, the UK remote gambling consumer market (both regulated and unregulated) was worth £2 billion in 2010, which is approximately three times the size of UK regulated remote market. [26]

There is, however, restriction on advertising gambling services in the UK for foreign operators as advertising is only permitted for operators based in a 'white listed' country, or a country mentioned in the Gambling Act [27], which currently includes EEA Countries, Alderney, Antigua and Barbuda, Gibraltar, Isle of Man and Tasmania. However, those operators who are based in EEA countries (and white-listed countries) can advertise and offer their services in the UK, provided they do not use any gambling equipment in the U.K. The problems with this model are discussed in further detail later in the article.

The Gambling Commission works with the Responsible Gambling Strategy Board (RGSB), which advises on research, education and treatment programmes needed in order that problem gambling is understood and researched. [28] The Responsible Gambling Trust is responsible for raising the funding and delivering appropriate research, education and treatment, in line with the recommendations made by the RGSB. The Responsible Gambling Trust was created in April 2012, following the merger of the former Responsible Gambling Fund and GREaT. [29]

Online gambling provisions within the Gambling Act 2005 are currently under review following the Government announcement in 2011 that all remote gambling providers will be required to obtain a licence from the Gambling Commission to offer services in the UK. A private member's bill, the Offshore Gambling Bill, was introduced in the Parliament in June 2012, the second reading of which is scheduled for January 2013. [30] The bill aims to amend the Gambling Act 2005, and seeks to change the focus of regulation on a point of consumption basis, which will include, inter alia, all operators to hold a Gambling Commission license to transact with British customers and to advertise in the United Kingdom. These changes, once implemented, will shift the focus from the point of supply to the point of consumption, making remote gambling providers compliant with UK gambling laws if they wish to target consumers based in this country. This should ensure that all providers will also pay the UK remote gaming duty and pay a licence fee, and from a consumer point of view, the objective is that there should be consistent standards of protection irrespective of which gambling website they visit. As it currently stands, the focus of the proposed regulatory changes appears to focus mainly on addressing taxation issues and thereby generating more revenue, than other specific issues such as the protection of children and vulnerable people.

Protection of children and other vulnerable persons from the dangers of gambling is one of the main licensing objectives found in the Gambling Act 2005, and accordingly, one of the stated primary objectives of the Gambling Commission. Although there are regulatory and other mechanisms/bodies already in place to achieve this objective, the latest British Gambling Prevalence Survey [31] reported a 50% rise in problem gambling in the UK, compared to the figures prior to the implementation of the Act. This figure relates to adults over 16 years of age, which clearly is an indication that the existing model is not working well. As will be discussed further in the article, there is evidence to suggest that young people are particularly vulnerable to problem gambling, and therefore it calls for robust measures to be undertaken in order to protect them. At this point it is not certain whether the proposed changes to legislation will address these issues at a required level, failing which it will be a missed opportunity from a child and young people protection perspective.

3. Age verification

The minimum legal age for gambling is 18 in the U.K. It is an offence to invite, cause or permit a child to gamble. [32] A child is defined as anyone under the age of sixteen for this purpose [33] and 'young person' means anyone between the age group of 16-18. [34] It is also an offence for a young person to gamble, [35] subject to certain exceptions such as participating in private or non-commercial gambling. [36] There are also other advertising restrictions aimed at protecting children for offline gambling, including the prohibition of inviting or allowing a child or young person to enter premises as discussed earlier. [37]

As mentioned earlier, one of the main stated objectives of the Gambling Act 2005 is 'protecting children and other vulnerable persons from being harmed or exploited by gambling'. [38] The Act requires gambling providers to verify the age of customers, so that children and young people do not gamble. In traditional offline casinos, this was not much of a problem as staff or those responsible have more than one way of verifying age with some degree of authenticity. However, in the online environment, this is not always possible. For instance, if a credit card is the sole means of verifying age, a child could use someone else's credit card (normally a parent's) with or without their knowledge. The anonymity the Internet offers makes this harder to detect. It is not contended that gambling providers should be responsible for ensuring that children do not misuse their parents' credit card, but there is evidence to suggest that there is a credible risk of this happening. [39] For example, an OECD report identifies that children misusing credit cards or other means of payment such as mobile phones pose significant financial risk for parents, and more worryingly, is a potential source of psychological harm to the child concerned. [40] Parental controls on websites may offer a solution, but Chambers and Wilcox have identified in their research that there is a significant lack of parental controls on a majority of online gambling sites, as only twenty six per cent of all companies surveyed had any parental controls in place. [41] Mandatory parental controls, along with the existing mandatory age verification requirement in the UK, therefore, is something which needs to be seriously considered from a child protection point of view. This is especially the case because, as mentioned above, age verification alone cannot ensure that children do not access online gambling websites because of the possibility of using a parent's credit card, or by misusing other payment methods such as mobile phones without the bill payer's permission.

In some cases, it is also found that verification procedures come at a later stage than it prudently ought to, for instance, companies asking for customer identification documents after the wager is placed, but prior to withdrawal in the event of winning (and the information is often not requested if they lose). [42] This leaves the possibility of children and young people still being able to gamble online, although they will be unable to withdraw. Although this does not pose a financial risk as such (in the event of winning), it still leaves the opportunity to gamble open to children and young people. The potential risks of such gambling, albeit with no immediate financial implications, are discussed in more detail below.

In the event that it comes to the attention of a service provider that a child has gambled, section 83 of the Gambling Act requires the child's stake to be returned as soon as possible. However, if the child actually wins there is no requirement on the part of the child to return the winnings, but the stakes used must still be returned to the child (section 83(3)). Chambers and Wilcox point out that this is a lacuna, as it offers children a financial incentive to gamble. [43] It is questionable whether providing children with any financial incentive for trying to gamble (probably using an adult's card, for example) serves any purpose. As it is illegal anyway for a young person to gamble [44], the provision that enables them to keep the prize in the event they win (through what is essentially an illegal act), defies logic.

4. Advertising of online gambling

Advertising of gambling services are restricted in the UK to gambling providers that are based in the European Economic Area, Gibraltar and certain 'white-listed' countries. It is an offence under section 45 of the Gambling Act to invite, cause or permit a child or young person to gamble. 'Invite' in this context also includes sending a child or young person any document which advertises gambling, or bringing to the attention of a child or young person information with a view to encourage them to gamble (s 46(3)). The Act also provides a defence under section 63, where if a person charged with the offence of inviting a child or young person to gamble can prove that he took all reasonable steps to determine the individual's age, and he had reasonable belief that the individual was not a child or young person. It appears that this defence undermines the prohibition of advertisement considerably in the online environment, where it is more difficult to distinguish between adults and minors' spaces. According to a recent EU Kids Online report, 67% of children who use the Internet in the UK have their own social networking profile [45]. Despite most social networking sites having a minimum age of 13 for signing up, the report reveals that 28% of 9-10 year olds and 59% of 11-12 year olds have their own profile. [46] In light of this, it is arguable whether this defence would legitimise marketing communications that are placed on a social networking site (or sent to individual profiles), where there are no mandatory age verification mechanisms in place.

Advertisements are subject to two Codes of Practice in the UK, depending on the medium of advertisement - the CAP Code (UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing), and the BCAP Code (The UK Code of Broadcast Advertising). The Advertising Standards Authority (ASA) endorses and administers the Codes. The Codes have specific sections with respect to the advertising of gambling products and services. The remit of the Advertising Standards Authority was extended in March 2011 to include marketing and advertising information on companies' own websites and other non-paid space under their control, including social networking sites such as Facebook and Twitter. This is significant in light of the role of the Internet in digital marketing, and particularly in light of the significance of Internet advertising for online gambling. As a large number of children and young people use online social networking sites, this is a welcome step, especially in light of research by Consumer Focus and Childnet International, which found that 9% of the advertisements on websites favoured by children were for online gambling. [47]

Incidentally, Betfair, a gambling service provider, claims in their response to the EC Consultation on Online Gambling [48] that all their advertisements are 'pre-vetted by Facebook, and the advertisements only feature on pages accessible by users who have confirmed that they are at least 18 years of age'. [49] Considering that social networking sites do not currently have mandatory age verification requirements, this is hardly a reliable measure as there is no way of establishing that those who claim to be 18 or over are actually not minors. A related issue is the availability of online gambling applications on social networking sites, which offer free gambling games using play money. These are typically third party applications, such as Texas Holdem Poker, Zynga, promoted through the pages of social networking sites such as Facebook. Whilst there is usually no real money involved in these, and therefore no real monetary gambling, there is evidence that this will encourage children and young people to form a perception that gambling is harmless fun, and eventually leading to experimentation with real monetary forms of gambling. [50] This issue is discussed in more detail later in the article.

Remote advertising is a problematic area in other respects too. For instance, in the case of advertising that is broadcast by television, the provisions of Part 16 (Advertising) of the Code will only apply if the broadcaster is either under the jurisdiction of the U.K. for the purposes of Directive 89/552/EEC [51], or is not under the jurisdiction of an EEA state (if the broadcaster is based in an EEA State outside the UK, it will already be subject to proper regulation in their home country). However, as Nair and Mendis point out in their response to the EC Consultation on Online Gambling, [52] due to the lack of harmonisation in the regulation of online gambling across the EU, this would result in a situation where a broadcaster based elsewhere in the EEA can abide by their home country's regulation and, in theory, break UK law at the same time, calling for further harmonisation of law at EU level. Similarly, where advertising constitutes an information society service, these provisions only apply where the provider is either established in the United Kingdom or outside the EEA. Therefore, a more uniform approach for advertising at EU level, with a view to harmonising the relevant provisions among EEA states has very clear advantages and ought to be seriously considered.

There are a range of factors that render the regulation of online gambling problematic when compared to traditional casino based gambling. The following section considers the key characteristics of online gambling that render it different from traditional gambling, and as a result, makes it more challenging for the purpose of the protection of children and young people.

5. Online gambling: access, anonymity and play money

The Internet has raised new challenges for the traditional regulatory model for gambling, not just because of its borderless nature, but also because of certain characteristics that are unique to online gambling. The harm caused by excessive gambling is well documented, and it is not within the scope of this article to re-visit this. Online gambling aggravates the problem further, resulting in an even higher risk of harm, especially for children and young people. The special characteristics of online gambling have been noted both in case law of the CJEU, and also more generally by various academic literature as discussed below.

The Court of Justice has made clear that online gambling has special characteristics compared to traditional gambling in a number of cases. [53] In the case of Carmen Media Group [54] the Grand Chamber referred to the characteristics of online gambling, particularly in relation to young people as:

"It should be noted that, in the same way, the characteristics specific to the offer of games of chance by the internet may prove to be a source of risks of a different kind and a greater order in the area of consumer protection, particularly in relation to young persons and those with a propensity for gambling or likely to develop such a propensity, in comparison with traditional markets for such games. Apart from the lack of direct contact between the consumer and the operator, previously referred to, the particular ease and the permanence of access to games offered over the internet and the potentially high volume and frequency of such an international offer, in an environment which is moreover characterised by isolation of the player, anonymity and an absence of social control, constitute so many factors likely to foster the development of gambling addiction and the related squandering of money, and thus likely to increase the negative social and moral consequences attaching thereto, as underlined by consistent case-law." [55]

There are also academic studies that suggest that online gambling may be more harmful to players, especially for young persons, when compared to traditional casino gambling. [56] Arguably, online gambling poses a higher risk for a potentially vulnerable gambling addict, and there are several reasons for this. For instance, Griffiths attributes factors such as 'anonymity, convenience, escape, dissociation/immersion, accessibility, event frequency, interactivity, disinhibition, simulation, and asociabilty' that make online gambling potentially addictive. [57]

The relative ease of access to the Internet, which is becoming cheaper and faster, from the privacy of one's home has posed challenges for other sectors too, for instance pornography regulation. The increasing availability of illegal pornography and the ability for end users to act as distributors of content in the online environment resulted in substantial changes to the way pornography is regulated in the UK [58]. Similarly, the free and easy availability of adult pornography for children also has raised a number of issues, including the concern that over exposure may be detrimental to their best interests. [59] It is now passé to discuss at length the characteristics of the Internet that makes it unique from a regulatory point of view. Nevertheless, in order to form a better understanding of the issues relevant to online gambling, a brief discussion of how the Internet fuels addictive gambling behaviour merits consideration.

At a basic level, the Internet offers cheap, round the clock access to online gambling sites, practically bringing the casino to one's computer screen, without even having to step out from one's home (thus even cutting down on travel costs). Online gambling sites do not offer the same level of monitoring or supervision as in a traditional offline casino. For instance, in the traditional gambling environment, responsible members of the gaming industry will try to prevent children and other vulnerable individuals such as problem gamblers, alcohol or drug abusers from gambling in a casino. [60] Due to the nature of the Internet and the way it is accessed, similar level of monitoring is more or less impossible with respect to online gambling. Specifically with respect to children, whilst the Gambling Act 2005 prohibits children from gambling, it is not possible to always ensure that this does not happen in the online environment. This is particularly the case when the websites are accessed through portable devices such as Internet enabled mobile phones, due to their largely unsupervised nature. [61] According to the latest EU Kids Online report, half of UK children go online via a mobile device (26% have handheld access to the Internet and an additional 33% have access via their mobile phone). [62]

As discussed earlier, there is a mandatory age verification requirement under the Gambling Act 2005, although this is not always fool proof and there is no guaranteed way to ensure that everyone who accesses a gambling website is not a child. The Gambling Commission Industry Statistics 2008-2011 reveal that only 73 individuals were unable to prove their age when challenged when attempting to gamble online. [63] Whilst this figure looks promising at a first glance, the low numbers may be simply due to the technical difficulties in ascertaining the actual number of child gamblers. It is noteworthy that the 2010 British Gambling Prevalence Survey identified that 5% of British adult population aged over 16 admitted to gambling online, and if this is put in the context of the proportion of children and young people who use the Internet for gambling, the real figure may be substantially higher. In relation to online gambling providers from non-EEA countries (which are not regulated by the Gambling Commission), there is currently no such requirement, and therefore data of those children who used these websites may never become available. The risks from non-regulated foreign websites are generally higher for children and other vulnerable groups as discussed further in the article.

The anonymity that online gambling offers has an influence on some gamblers in that it offers a wider level of 'comfort zone' for the gambler. As Griffiths rightly identifies, the anonymity of the Internet enables the gambler to engage in gambling without worrying about social stigma, and also provides the added comfort that when losing, nobody will actually see the face of the loser. [64] Online gambling offers more 'equality' for all, because of the anonymity, unlike traditional casino based gambling where more experienced gamblers who bet with higher stakes receive special treatment in the casino. [65] Therefore, online gambling is an attractive option for children, who can conduct themselves as 'adults' without being treated (or refused entry) like a child, as would happen in an offline traditional casino.

Chance of winning money is one of the key motives for gambling and the basis for placing a stake. [66] In spite of the fact that there is always a risk of losing, the prospect of winning drives the player to place another stake. There are further risks associated with online gambling in this respect, because online gambling sites use electronic cash, the psychological value of which is less than real money, as it leads to a 'suspension of judgment'. [67] The analogy is similar to using chips and tokens in traditional casinos in order to scale down the value of real money. There is some evidence to support the view that people are more likely to gamble using electronic cash than real money. [68] Some gambling sites allow everyone to play without registering or paying a deposit, using play money (as opposed to real money). These sites tend to give out more 'prizes' than real gambling, thereby creating a potential risk of a distorted perception in the minds of gamblers that it is more rewarding and consequently, a false impression of a higher than actual likelihood of winning. Social networking sites such as Facebook provide numerous slot machine and poker games using virtual money. According to a study by Consumer Reports, it is estimated that there are 20 million minors who use Facebook in the United States, of which 7.5 million were younger than 13. [69] As identified in the EU Kids Online Report mentioned earlier, there are a sizeable number of children with their own profiles in the UK. [70] Even though players do not use real money in these sites, it is quite likely that the free online games will encourage children to think that gambling is harmless fun. Apart from the opportunities to win large amounts of virtual money (thus giving a false impression of the advantages of real gambling using real money), by the very nature of social networking sites, winning also attracts peer recognition and other rewards. King et al argue that it is quite possible that a novice adolescent player will 'become more confident and develop gambling strategies in the pursuit of greater levels of excitement and peer approval, which may lead to experimentation with monetary forms of gambling'. [71] Gambling using play money has undesirable effects on children and young people in particular, in light of the evidence that it promotes positive attitudes towards gambling, portraying it in a 'glamorised or misrepresentative' ways. [72]

In a 2007 study of British adolescents aged between 12 and 15 years of age, 8% admitted to gambling online, and about 29% of whom had played the free practice games with no real money. [73] A 2009 Ipsos MORI survey of school children revealed that over a quarter of those surveyed had played without paying any real money (play money, etc) in the week preceding the survey, and opportunities on social networking sites were found to be four to five times more popular than those available through real gambling sites. [74] The fact that such sites are freely available on the Internet, both as stand-alone sites as well as through popular social networking sites makes it worthy of attention from a regulatory perspective.

There are also other factors that render online gambling different from offline gambling [75]. Disinhibition in the Internet environment, for example, leads to more money being gambled, arguably increasing the risk for the vulnerable. [76] Whilst these are only a few examples of the specific risks associated with online gambling, there are studies that conclude that the Internet generally has a tendency to exacerbate the effects of certain behaviours because of its ease of access and convenience. [77] From a gambling perspective, this means a higher risk of problem gambling, and the following section discusses the potential risks for children and young people in this context.

6. The risk of problem gambling

Problem gambling is widely recognised as a public health issue, and it has been identified that approximately 0.5-1% of the adult population have serious gambling problems in Western societies. [78] Problem gambling is not unique to the Internet; it has existed long before the Internet came into being. However, the Internet has raised further challenges for problem gambling, and a number of empirical studies have reported that problem gambling is more prevalent among Internet gamblers compared to traditional gamblers. [79] There is evidence to suggest that young people, in particular, adolescent Internet gamblers are significantly more likely than non-Internet gamblers to be problem gamblers. [80]

The Internet offers gambling opportunities and games where gamblers can use their skills, as opposed to merely betting or gambling against fixed odds as in a traditional roulette wheel for example. For instance, online poker and online betting exchanges are two fast growing areas on the Internet, and Griffiths identifies three reasons for their popularity - a/ financial revenue for the gambler, b/ potential to win because there is an element of skill in placing their bets, and c/ gamblers can directly compete with other gamblers. [81] Parke et al argue that problem gamblers are significantly more likely to be competitive when compared to non-addicted gamblers. [82] The opportunity to use skills, as opposed to mere chance, encourages the competitive problem gambler to gamble even more on the Internet when compared to traditional casino based gambling. From a young person perspective, this is significant because of the evidence that young people tend to overestimate the role of skill in gambling, believing that practice will improve the prospect of winning as in other types of games. [83]

Research on the prevalence of problem gambling among children and young people have been carried out in many countries internationally. Shaffer and Hall (1996) estimate that between approximately five and seven percent of young people in North America show patterns of compulsive gambling and approximately 10-14% of this group are at risk of developing into problem gamblers. [84] Valentine's research identifies that these figures are broadly similar to a range of studies carried out in the UK, Nordic countries, Australia and New Zealand. [85] It has also been identified that 'problem gambling is inversely related to age with a higher prevalence of gambling amongst young people', [86] and that the modal prevalence rate of young people's gambling is over three times the prevalence rates of problem gambling in the adult population. [87]

Research shows that there are a number of socio-demographic factors associated with problem gambling, including being male, being separated or divorced, having a parent who is or has been a problem gambler. [88] It is also the case that people with low income, poor health and housing, low educational qualifications, and who are unemployed have significantly higher rates of problem gambling. [89] The British Gambling Prevalence Survey 2010 found that problem gamblers were more likely to be 'male, younger, have parents who gambled regularly and had experienced problems with their gambling behaviour and be a current cigarette smoker'. [90] Empirical data is not available in abundance. However, research published by NatCen in 2011 found that areas with a higher density of gambling machines were likely to be poorer, with lower than average economic activity and people in lower paid jobs. [91] The research offers some guidance and empirical data on the characteristics and demographics of problem gamblers. [92] Many children get introduced to gambling through parents or a member of the family, which has the effect of normalising the activity as acceptable. [93] Valentine argues that the strong link between parents' and young people's gambling is a cause for concern in light of the other research evidence that the earlier children start to gamble the more they are likely to progress into problem gamblers. [94]

The possibility that Internet gambling might promote addictive tendencies is identified in British Medical Association's research. [95] However, there is lack of evidence to suggest that there is a demonstrable risk of a pathological response to online gambling compared to traditional casino gambling. [96] The structural characteristics of the Internet and the ease of access to gambling round the clock could nevertheless pose a risk to someone who is vulnerable. In this respect, parallels can be drawn to licensing hours for bars and public houses serving alcohol - the longer they remain open, the higher the chance of people drinking. Applying the same logic to gambling, the twenty four hours availability of online gambling sites will do no favours to the vulnerable addict or a potential addict. It should be noted that the argument here is not that Internet gambling per se fuels any pathological responses, but it is the Internet itself and its addictive nature (which has been established in other fields such as gaming, pornography, etc) which renders online gambling more addictive than casino gambling.

The Internet therefore poses rather unique challenges in relation to problem gambling, and children and young people are particularly vulnerable to these risks. [97] In terms of the current regulatory approach, UK law does recognise the protection of children and young people as a key issue, as mentioned earlier. However, loopholes still exist and the vulnerable remain at considerable risk, especially in light of the fact that a number of gambling websites accessible from the UK (those who do not use 'British based equipment') are not regulated by the Gambling Commission.

In order to address the issue of problem gambling and protect children and other vulnerable groups, a holistic regulatory approach is required, which goes beyond just state legislation. The United Kingdom model is somewhat laudable in this respect, as the legislation recognises this need and there are specific bodies that deal with the social, educational and research aspects. [98] The current initiative for regulatory reform aims to tackle some of the problems of online gambling, but the focus of the reforms seems to be centred more on taxation issues, etc. than child protection. For instance, the government issued a consultation recently, [99] with details of the proposed changes, the most important of which is to tax online gambling providers on a point of consumption basis. [100] In other words, gambling providers will need to pay tax on all revenue generated from UK based customers, irrespective of where the company is actually based. Whilst this will create a level playing field for all gambling providers offering their business in the UK from a tax point of view, there is little achieved in terms of real protection of children and other vulnerable groups.

The traditional regulation of gambling was influenced to a great extent by governments' desire to prevent or regulate a 'vice'. As attitudes changed, gambling became more acceptable and there are wider questions that could be asked regarding the state's right to determine how individuals spend their time and money. Nevertheless, unrestricted availability of gambling or a totally unregulated gambling sector will be detrimental to problem gamblers, and the state does have an interest in preventing the exploitation of children and other vulnerable gamblers. In this sense, it could be argued that the protection of public health and morals could provide the rationale for legitimising further state intervention by means of stricter gambling controls. There are a number of studies that have examined problem gambling from a public health perspective, encouraging governments to do more to explore the issues in more detail and to adopt appropriate strategies. [101]

This is not to suggest that stricter legislation alone will resolve the problem. As discussed earlier, gambling and problem gambling are intrinsically linked to a range of factors - social, demographic, educational and economic, and therefore the regulatory response ought to be as broad and holistic. It appears that there is little public awareness about the potential risks or concerns associated with underage gambling, when compared to other risk taking behaviours such as alcohol or drug abuse. [102] Public education, including strategies to better equip young people with the skills to understand the negative impact of gambling and the risk of problem gambling, therefore, ought to be a priority. Valentine argues that lessons can be learnt from the harm reduction strategy adopted for alcohol abuse in the UK, and similar cross-departmental initiatives from the government are needed covering the various policy domains including public health, criminal justice, education, and culture media and sport. [103]

In terms of preventing problem gambling, it may be a good idea to impose some level of legal obligation on online gambling operators to adopt strategies and methods to detect behaviour that signal pathological gambling. [104] This cannot be achieved without industry co-operation, but its implementation needs to be backed by legislative provision. It is worth exploring whether it will be possible to issue a standardised guidance for all online gambling providers, with binding obligations imposed for this purpose by the Gambling Commission.

The European Commission, in the recent Communication [105] and Staff Working Paper [106] following the Green Paper and Consultation of 2011 [107], proposes a number of measures to be undertaken at EU level from a protection of minors perspective. Apart from stressing the need for further public education and awareness, the Commission also recommends further initiatives leading to clear and transparent information available on websites, for example, prominently displaying the message 'no underage gambling' as standard, and creating awareness and encouraging further parental responsibility. [108]

Conclusion

After the Gambling Act 2005 came into force there have been two British Gambling Prevalence Surveys carried out by the Gambling Commission, [109] which surveyed the participation in gambling, and the prevalence of problem gambling in Great Britain. The 2010 Survey was the first to be conducted after the full implementation of the Gambling Act 2005. It has revealed a two percent rise in participation in online gambling (on poker, bingo, casino and slot machine style games). [110] In light of the risks posed by online gambling to children and young people, it is clear that the approach to gambling regulation needs to be revisited. Whilst there are proposals to amend existing legislation, due to the very nature of gambling related problems, legislation alone cannot achieve the objectives. A holistic approach, with due consideration to the social, economic and demographic factors affecting gambling behaviours and problem gambling is required for efficacious regulation. While the UK has addressed some of these within its existing regulatory framework, it appears that there are significant loopholes with respect to online gambling, especially in the context of protecting children and young people from the risks of underage and problem gambling. As it has been seen in other areas such as pornography and copyright, regulating the Internet (and activities on the Internet) has proved to be a problematic issue. In light of the special characteristics of online gambling and the potential danger it poses to children and other vulnerable groups, further measures need to be considered, in addition to the existing and proposed legislative framework.

Due to a number of practical, legal and political reasons, it may not be possible to achieve international consensus with respect to gambling regulation in the immediate future. In the European Union, the principle of free and fair trade requires Member States not to discriminate against providers of services from other Member States, unless explicit exceptions are granted and are justified. Gambling services have enjoyed such an exceptional status because of its perceived real and moral challenges, with the result of vastly different regulatory models across different Member States. [111] Current initiatives at EU level may change this situation with some level of harmonisation of gambling laws at some point. However, gambling regulation will ultimately remain largely within the remit of each State, and therefore solutions that can reconcile each country's domestic requirements with the international dimension of the Internet need to be explored.

With this in mind, it is proposed that a single gateway is set up for all Internet gambling providers interested in doing business with consumers in the UK. This could act as a single official gateway for foreign remote operators to register, and for UK consumers to verify if a website is a registered, officially approved gambling site (perhaps taking them to the destination websites through the gateway). It could take the form of a simple website, where customers are required to register their details (thereby enabling some form of age verification), and once approved, access can be provided to all approved gambling sites. [112] This will enable the UK regulatory bodies to ensure that foreign gambling providers listed are vetted properly for compliance with UK law, and will also ensure that they continue to do so. It will improve consumer confidence. This could also act as an effective, workable mechanism for reporting illegal activity or receiving complaints from the public. Consequently, there needs to be an appeals process and systems in place for transparent and open handling of disputes.

Obviously, there will be gambling providers who do not want to be part of the system for various reasons. There will also be consumers who may not want to use the system, for instance for privacy reasons. This is where education and creating awareness can help. If the public are educated about the advantages of accessing gambling services through the official gateway website (and also about the dangers of gambling on non-approved websites), gradually more and more people will use this feature and will result in the decline of rogue gambling websites in the UK.

A study undertaken by the Swiss Institute of Comparative Law suggested that controlling Internet gambling via the banking industry will offer a realistic solution to some of the problems. For instance, credit card companies could be made to assume more responsibility for preventing problem gambling by legislating to the effect that debts owed to credit card companies through Internet gambling are not enforceable at law. As pointed out in VISA Europe's response to the EC Consultation [113], it is possible for credit card companies to monitor and control the use of a payment card in the gambling environment using the Merchant Category Code (MCC). [114] It also enables banks to intervene and stop transactions if they are illegal in the local jurisdiction, or if the customer makes a request. Requiring credit card companies and banks to take a more active role in preventing illegal and problem gambling is, therefore, feasible and appropriate legislative responses will be welcome. However, there are also some risks as identified by the Swiss Institute of Comparative Law study. First of all, without legislative intervention, this is not always practical. Secondly, it is possible to make disguised payments (where the transaction will not be officially recorded or conducted as a gambling transaction). Finally, there is a potentially dangerous risk of extra-legal methods of enforcement by rogue gambling providers when payments due to them are not honoured.

Whilst these are only some suggestions intended to tackle some of the problems and loopholes that currently exist within online gambling regulation, further research needs to be carried out in order to comprehensively address the issues discussed in this article. As the prevalence of online gambling and problem gambling continue to be on the rise, it is imperative that adequate measures are adopted at both domestic and international level for effective regulation. Governments have an interest in maintaining a properly regulated gambling industry for a variety of reasons, including revenue and tax. Protection of children and other vulnerable groups deserve equal priority, and in light of the risks posed by the Internet and online gambling, the regulatory approach ought to be equally robust, and holistic.