Regulatory controls key to success of social casino model
Farmville, Mafia Wars, Candy Crush Saga… the list goes on. Social gaming is truly everywhere. So, it’s not surprising that the gaming industry is moving full steam ahead with the integration of social gaming into both brick-and-mortar and Internet product offerings.
The industry sees this as an opportunity to draw customers beyond the simple hopes of hitting a jackpot, developing brand devotion through the use of rewards and competitions and the ability for users to brag about their wins on social media. Social gamers are already willing to shell out big bucks just for the opportunity to play the game. The emerging industry is expected to reach total revenues of $17.4 billion by 2019, according to a Transparency Market Reach study. Combining interest in the simple pleasure of the game with the opportunity to win money is a winning formula.
As the gaming industry dives deeper into the marriage between social gaming and gambling, regulators will play a key role in protecting the industry’s integrity during this important expansion. Three critical issues requiring regulatory oversight include problem gambling, age verification and digital currencies.
Combating and preventing the spread of problem gambling is always a serious focal point for preserving the integrity of the industry. As gaming moves online, into our homes and out of public sight, regulators are especially concerned about the “hidden” elements of the harmful condition. Similarly, as Internet gaming expansion goes mobile, youths are likely to be more susceptible to problem gambling—requiring special recognition and attention from the industry’s regulators. For example, in the UK, the number of 18- to 35-year-olds in contact with GamCare (the country’s leading provider of information, advice, support and free counselling for the prevention and treatment of problem gambling) rose in each of the last three years. In the U.S., a 2011 University of Buffalo study found that problem gambling was more prevalent among American adults than alcohol dependence.
As gaming companies become more innovative with product offerings, those that also tackle potential drivers of problem gambling will see solid support from regulators.
Operators need to address the potential increased risk of problem gambling when implementing game mechanics that require longer time-of-play for earning rewards. Service providers should consider live web counseling for problem gamblers. Such counseling could become a regulatory mandate if service providers fail to step up to the plate and make access to counseling available to customers.
Another effort that operators may employ to combat problem gambling is improved player tracking. Such tracking could detect problem gambling even before a player bets a single dollar. In some ways, this will prove easier online than tracking in the brick-and-mortar world, where problem gambling detection is heavily (but not entirely) dependent on player self-identification.
It is clear that new capabilities in collecting vast amounts of player information is a huge bonus for service providers in the online gaming and social gaming worlds. How operators use this information, not only to their benefit but to assist in the prevention and spread of problem gambling, will be very important to the successful expansion of Internet gaming.
The prevention of underage gambling is another area of considerable interest for regulators as the worlds of social games and real-money gambling converge. While age verification requirements are already an industry standard in both online and at brick-and-mortar casinos, as games become more enticing (or targeted) to a younger crowd, regulators will be looking for operators to strengthen age verification measures.
With the rising tide of mobile Internet gaming, such measures could include scanning requirements—such as thumbprint, verifiable identification (i.e. driver’s license) or even retinal scans—to ensure identity compliance. While it is virtually impossible to stop parents from allowing their children to use their account to gamble, requiring more than a username and password could be the norm in the industry in the years to come. Identity check-ins could also become more frequent—rather than allowing a player to gamble for an indefinite session using an initial log in, identity rechecks every 30 minutes may be an attractive additional safeguards for regulators.
Virtual currencies could prove to be the most complex issue the industry faces in the next few years. Players are rewarded for accomplishing tasks. These rewards include points, levelling up, trophies, badges, etc. Such rewards are considered virtual currencies. While they may or may not have an exchangeable value for cash, do these virtual currencies have a form of value that regulators can or should be monitoring and regulating?
For example, under New Jersey’s Casino Control Act, complimentary services and items are regulated, requiring a casino licensee to count and report them as indirect payments to customers. The definition of a complimentary service or item (“a service or item provided at no cost or at a reduced price”) is broad enough that it could encompass virtual rewards/currencies, requiring casinos to calculate the cost of providing such services in connection with certain reporting requirements under the Act.
Regulators also have yet to fully address the use of existing mainstream digital currencies, like Bitcoin, in the Internet gaming world, a topic on which I’ve written extensively in the past. Regulators are already paying closer attention to illegal gambling sites—for example, Kentucky has been battling with Internet gaming operators for years after seizing 144 domain names, and the New Jersey Division of Gaming Enforcement recently issued cease-and-desist letters to marketers of illegal gambling operations.
As the offerings continually change and as new digital currencies arise, the regulatory landscape will no doubt have to evolve and adapt
Problem gambling, age verification and the treatment of virtual currencies are just three issues that regulators will need to examine closely and continuously as the industry’s gamification trend continues. If service providers begin to tackle these issues head on, there will be an opportunity to lead the discussion rather than play catch-up with new, costly regulatory requirements.