Here’s to igaming regulators

 

iGaming regulators aren’t out to get you..

Regulators are not particularly popular with casinos generally. The mistake many governments seem to make is in creating regulatory bodies staffed by bureaucrats, former policemen and very few people with actual real-life experience of the area under scrutiny. This has definitely been the case with igaming regulation in the past.

Regulators can also cause problems with vague rulings that are open to interpretation, an uncertain approach to enforcement which often leads to companies ‘chancing their arm’
and either ignoring rulings or seeing how far they can push them.

This approach often results in small fines and slaps on the wrist for a while until the regulator begins to feel like they are not being taken seriously and, like a beleaguered referee losing control of a match throwing out red cards, they start to issue fines completely out of proportion with the actual misdemeanour, this culminates in a headline grabbing fine to deter the rest of the industry.

That’s all well and good but it can mean two companies, guilty of the same infraction being hit with wildly different punishments ranging from a slap on the wrist to millions of pounds in fines.

We need the regulator to be upfront and consistent.

The only fair way to approach this is to set out at the start, very clearly, what the rule is and what the punishment will be for breaking it.

That requires a level of forethought and subject experience that is sufficient to anticipate the loopholes, grey areas and get-out clauses that players will utilize in order to gain an advantage over the operator. Forcing even the most compliant companies to react as profits are hit.

It also requires enough industry knowledge to work through the ways in which determined companies will attempt to ignore or bend the new rules.

We’re yet to see that addressed properly in a regulator and, until they start to hire former gaming employees, or they set-a-thief-to-catch-a-thief by hiring bonus abusers we will still have problems with new laws and diktats.

The punishment must fit the crime when rules are broken. That means very clearly setting them both out.
It may seem tempting to adopt a proportionate punitive tariff, like the Swedish approach to speeding tickets. The problem with that is that it would be very quickly exploited by start-ups, shell companies and companies looking to gain a foothold in the market and seeing a fine as accost of doing business.
It’s definitely not easy being a gaming regulator.
 

Internal struggles caused by regulation.

Another issue that gaming companies struggle with is operational interpretation and implementation of the rules.

Many commercial people will erroneously think that everything the regulator requests is bad and therefore they’ll dedicate time and resources to countering them.

Companies have a tendency to react to this by hiring legally qualified staff to implement the rules.

This results in them effectively mirroring the regulator and bringing all the problems faced by lack of industry knowledge and on-the-ground experience into their own operations.

The legal appointee must have the ability to overrule the commercial teams to avoid heavy fines but they mustn’t do this by insisting that everything that the regulator suggests must be implemented immediately and to the letter. Often it’s something that  the regulator doesn’t expect at all.

This creates an internal problem which is exacerbated by the frequent changes in the rulings, importance of each element, and changing deadlines that the less-proficient regulator brings as they effectively learn-on-the-job.

The almost universal (although not inevitable) showdown of legal versus commercial can have only one winner as despite both departments falling back on the timeless “I’m just doing my job/following orders” excuse.  The CEO often has no option but to back legal in most cases.

It’s something I’ve witnessed too many times in the early years of proper regulation and it risks spreading resentment throughout the commercial teams, badly denting morale, and I’ve known it result in resignations and staff moving to better organized or aligned competitors.

It doesn’t have to be that way. I’m relieved to say that it’s something I haven’t had to deal with for a long time.  It appears to be a tangled web but it that can be unravelled quite simply with a bit of dedication.

Resolution.

1: Education:

It’s important to educate both sides into the challenges each faces.

Legal are not anti-revenues, they don’t exist to kill competition, they are not, a term I have actually heard used frequently over the years , “just trying to kill the business completely”, nor is the regulator.

They have a clear role from the board, they are in some cases legally liable (although this isn’t nearly as frightening as it sounds, nor as they would have you believe) and they have a relatively simple set of tasks to achieve and it’s difficult for them to see why these items can’t “just be done immediately”.

Commercial are not entirely naive, they’re not all anti-regulation and they’re not blocking these legal items for the sake of it. They have a roadmap with interdependencies.

A poor igaming regulator can stretch these relationships to breaking point when regulators throw in last minute requests or unrealistic deadlines, but a well aligned team can cope with these much more comfortably.

2: Transparency

Most gaming companies are still years behind the rest of e-commerce when it comes to processes, staff engagement and systems.

A simple T&C or page layout change for example that should take minutes to edit, deploy and publish can often take days. Weeks if you’re really struggling with your systems and setup.  Commercial and the development dept owe it to Legal to take time to explain the problems they face and to reassure them that they are not being overlooked or deliberately delayed.

Legal for their part must be completely transparent about rulings and dates.

The legal representative should always point the commercial head to the relevant published directive to explain what they are working towards.

It takes a little more time initially and the legal rep may  justifiably feel that they should just be trusted. All too often a legal rep will offer a vague rationale for work items, will be unable to provide the written ruling they are addressing and will therefore be left open to accusations of overcomplicating or misinterpreting the rules.

3: Communication

The simple act of bringing together legal and commercial reps to discuss new rulings and their resolution can prevent misunderstanding, reduce work and improve working relationships.

Legal should come armed with the documented ruling or a written request from the regulator.

Commercial can then help them to interpret how the item can be translated to the site or company processes. This will also bring up potential pitfalls and in some cases things that the regulator has clearly missed and which, as we’ve seen in some cases in the past, are not even possible to address.

Assuming the regulator hasn’t made a mistake then legal and commercial can agree on a plan of action that will satisfy the legal requirements and minimize disruption to the player and commercial process.

The agreed plan of action, deadlines and outcomes should then be discussed with their development team rep to be entered into the roadmap. This will often bring up additional issues of course but that’s something a product team faces frequently and by taking this approach you have at least maximized the time they have to find a solution to the regulatory requirement. They can then be confident that the business and legal are aligned and that they are not being asked to do something that is extraneous or convoluted.

The perfect solution would be to have a person who is commercially-minded, has broad experience with all aspects of gaming operations at the coal-face, has an interest in the law and regulation (and can be trained to the regulator’s satisfaction) and understands the challenges faced by the developers and system owners as well as the needs of the player.

If you find that person grab them, triple what they are currently earning and tie them in for a decade or so.

I know one suitable candidate but he’s well on his way to becoming a gaming billionaire…

4: Empathy

It’s easy to sink into a spiral of blaming the  regulator, even if you have a process that works for you and this particular igaming regulator is a well-oiled-machine, someone is always going to make a mistake, miss a deadline or misinterpret something and issue the oft-heard line “don’t shoot the messenger, it’s not my fault, blame the regulator”.

If you hear this from your teams its vital that you nip it in the bud. Never let it go unchallenged or it becomes a crutch and quickly fosters resentment.

  • The regulator is not the bad guy.
  • The regulator is not anti commerce.
  • They don’t want to kill the industry.

iGaming Regulation is positive, it restricts the rogue operators, protects the players and improves the perception of the industry.

Regulation can even lead to improved profits.

Take the subject closest to my heart – eradication of bonus abuse.

While I would always advise players not to take bonuses, they are still pervasive (actually it’s usually about 50/50 for many operators but that’s still significant).

I’ve always had two problems with casino bonuses

1: They are a honey trap for decent players (see previous article that led into this one.

2: They only actually favor bonus abusers due to all the necessary restrictions and wagering requirements.

A few years ago I successfully lobbied a company I worked with to adopt what I termed the second-chance bonus. It was lobbying because the fear from the business was considerable. It’s not easy convincing the CFO and CEO that being fairer to players will result in growth. In fact it’s tricky to convince anyone who doesn’t see things from a player perspective. That’s sadly still the case at many large gaming companies.

At the time it was rare to have this type of setup and offered something that could be marketed as a USP, now it’s now widely known as a parachute or lifeline bonus.

It worked, numbers grew and player complaints and contacts declined considerably.

This is the only bonus that is fair to the player and the casino, it is unfortunately still attractive to determined abusers but that can be mitigated.

The regulator in the UK had the foresight to mandate this type of bonus and it’s likely that all regulators will follow this lead.

How a second chance bonus works

Funds are split into two pots. Player deposit (and remaining funds) and Player’s bonus.

If a player wins with the first pot then he can withdraw the balance at any time.
If the player loses his own funds then he gets a second chance with bonus money – this bonus money comes with wagering requirements.

The crucial difference between these and the previously prevalent bonus is of course that casinos cannot tie-in a players deposit. If a player wins when using his own money he can withdraw his winnings immediately – the bonus will be forfeit but that’s acceptable as the bonus was there as a lifeline/second-chance in the event of the player losing his own funds.

Prior to this ruling most casinos would use bonuses as a Honey Trap.

How a Honey trap bonus works

Deposit £100 and get a “free” £100 in bonus. That gives you £200 to play with.

You now have £200 but no withdrawal can be made until you have turned over (cumulative bet amount) £7000.

So, because the “free” £100 is put into the same pot as the £100 deposit the wagering requirements on the bonus are also effective on the players own money meaning that the player couldn’t get his own money back, let alone any winnings until he had bet, on average, at least £7000 pounds. It’s not fair, it never was fair.

Kudos to the regulator.

It’s getting better…

What we have now, in the UK and some other jurisdictions (but expect it to become ubiquitous) is:

  • Better for the player as they get their legitimate winnings owed to them.
  • Better for the casino as they are seen as fairer and more transparent by players.

This was a game changer for the industry and for players and the regulator should be lauded for it.

Try to see all sides, you’ll feel better for it and your organization will benefit from it.

In the immortal words of John Lennon ‘we’re all just doing what we can’.

Please feel free to comment, challenge or tear my assumptions apart and if you think you’ve got a better solution – we’d all love to see the plan.

 
Andy BB

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