1. INTERNET GAMBLING: PREVALENCE, PROBLEMS & POLICY OPTIONS AGRI 2011 Conference Banff, Alberta Dr. Robert Williams University of Lethbridge Lethbridge, Alberta; Canada April 2011

2. Collaborator Dr. Robert Wood; University of Lethbridge Dr. Robert Wood; University of LethbridgeFunder Ontario Problem Gambling Research Centre Ontario Problem Gambling Research Centre

3. Internet Gambling: History Oct 1995 Liechtenstein conducts online purchase of lottery tickets Liechtenstein conducts online purchase of lottery tickets1996-1997 Caribbean & Central American countries begin hosting online casinos &/or sports/race books Caribbean & Central American countries begin hosting online casinos &/or sports/race books Antigua; Netherland Antilles; Turks & Caicos; Dominican Republic; Grenada; Costa Rica; Belize; Panama Antigua; Netherland Antilles; Turks & Caicos; Dominican Republic; Grenada; Costa Rica; Belize; Panama Online casinos &/or sports/race books offered by a few U.K. and Australian based companies Online casinos &/or sports/race books offered by a few U.K. and Australian based companies Online lotteries conducted in Finland and Coeur d’Alene tribe in Idaho Online lotteries conducted in Finland and Coeur d’Alene tribe in Idaho

4. Internet Gambling: History Rapid Expansion from 1998 on 650 sites by end of 1999 650 sites by end of 1999 1800 sites by end of 2002 1800 sites by end of 2002 2500 sites by end of 2006 (peak) 2500 sites by end of 2006 (peak) 2377 sites by April 2011 (652 companies) 2377 sites by April 2011 (652 companies)

5. Internet Gambling: History 1995: Lotteries 1995: Lotteries 1996: Casinos; Sports/Race Books 1996: Casinos; Sports/Race Books 1998: Poker; Bingo 1998: Poker; Bingo 2000: Betting Exchanges 2000: Betting Exchanges 2004: Skill Games 2004: Skill Games

6. Interactive Television (iTV) iTV launched in late 1990s ( e.g., movies on demand) iTV launched in late 1990s ( e.g., movies on demand) Has expanded to include shopping, banking, music selection, video game playing + GAMBLING Has expanded to include shopping, banking, music selection, video game playing + GAMBLING Interactive lotteries, bingo, horse racing, sports betting Interactive lotteries, bingo, horse racing, sports betting TVG 1999 in U.S. (horse race betting) TVG 1999 in U.S. (horse race betting) Still very small percentage of ‘remote’ gambling market Still very small percentage of ‘remote’ gambling market Primary penetration in Europe (U.K. & France) Primary penetration in Europe (U.K. & France)

7. Current Internet Gambling (Apr 2011): 2377 Online Sites http://online.casinocity.com/ http://online.casinocity.com/

8. Casinos Sports/Race Books Sports/Race Books Sports/Race Books Sports/Race Books Betting Exchanges Betting Exchanges Betting Exchanges Betting Exchanges Skill Game Sites Skill Game Sites Skill Game Sites Skill Game Sites

10. Hong Kong Jockey Club

11. Current Internet Gambling: Jurisdictional Providers 76 jurisdictions 76 jurisdictions Major providers (# transactions; April 2011): Major providers (# transactions; April 2011): United Kingdom (116 sites) United Kingdom (116 sites) Isle of Man (45 sites) Isle of Man (45 sites) Netherland Antilles (327 sites) Netherland Antilles (327 sites) United States (28 sites) (skill games, horse racing) United States (28 sites) (skill games, horse racing) Alderney (111 sites) Alderney (111 sites) Tasmania (3 sites) Tasmania (3 sites) Kahnawake (177 sites) Kahnawake (177 sites) Costa Rica (199 sites) Costa Rica (199 sites) Gibraltar (294 sites) Gibraltar (294 sites) Antigua & Barbuda (66 sites) Antigua & Barbuda (66 sites)

12. ~204 ways to pay ~204 ways to pay Visa and MasterCard most popular, and accepted by 90% of sites (not from U.S. players) Visa and MasterCard most popular, and accepted by 90% of sites (not from U.S. players) Other popular methods: Neteller (73% of sites); Bank Wire Transfer (65% of sites); Moneybookers (68% of sites); personal cheque (23% of sites). Other popular methods: Neteller (73% of sites); Bank Wire Transfer (65% of sites); Moneybookers (68% of sites); personal cheque (23% of sites). Current Payment Methods

13. ~$26 billion in 2009, with sports/race books, casinos and poker accounting for large majority (GBGC IGR, 2010) ~$26 billion in 2009, with sports/race books, casinos and poker accounting for large majority (GBGC IGR, 2010) ~7% of worldwide gambling market (GBGC IGR, 2010) ~7% of worldwide gambling market (GBGC IGR, 2010) Patronage uncertain: North America (30-35%) Asia (11 – 49%); Europe (23-44%) Patronage uncertain: North America (30-35%) Asia (11 – 49%); Europe (23-44%) U.S., China, U.K. largest single markets within these continents U.S., China, U.K. largest single markets within these continents Current Internet Gambling: Market Share

14. Revenue Revenue and market share continue to increase Revenue and market share continue to increase However, still has a relatively low market penetration after 16 years of existence However, still has a relatively low market penetration after 16 years of existence Not much evidence of negative impact to land-based gambling Not much evidence of negative impact to land-based gambling

15. Prevalence of Internet Gambling 0% to 14% depending on the country 0% to 14% depending on the country 14% in U.K. in 2010 14% in U.K. in 2010 12% in Sweden in 2011 12% in Sweden in 2011 7% Norway in 2006 7% Norway in 2006 3% Northern Ireland in 2010 3% Northern Ireland in 2010 2% U.S. in 2007 2% U.S. in 2007 2% in Canada in 2007 2% in Canada in 2007 1.8% in South Korea in 2006/2007 1.8% in South Korea in 2006/2007 ~1-2% Australia in 2006/2007 ~1-2% Australia in 2006/2007 1% Singapore in 2008 1% Singapore in 2008

16. Current Profile of the Internet Gambler Wood & Williams (2009) 2 phased data collection:  Representative RDD telephone survey of 8,498 Canadians 70.7% gamblers, and 2.1 % Internet gamblers (N = 179). 70.7% gamblers, and 2.1 % Internet gamblers (N = 179).  Self-selected online survey of 12,521 people from 105 countries. Survey hosted at www.gamblinginformation.org Survey hosted at www.gamblinginformation.orgwww.gamblinginformation.org Banner ad-links placed at www.casinocity.com. Banner ad-links placed at www.casinocity.com.www.casinocity.com 24.7% Internet gamblers (171 Canadian Internet gamblers) 24.7% Internet gamblers (171 Canadian Internet gamblers)  Canadian Internet gamblers from online sample weighted to match Canadian Internet gamblers from RDD sample. Same weights then applied to entire online sample.

17. Current Profile of the Internet Gambler Logistic regression of characteristics differentiating Internet from non-Internet gamblers: Logistic regression of characteristics differentiating Internet from non-Internet gamblers: # gambling formats engaged in (4.1 vs 2.6) # gambling formats engaged in (4.1 vs 2.6) CPGI score (1.8 vs 0.5) CPGI score (1.8 vs 0.5) Region (Europe or Caribbean vs elsewhere) Region (Europe or Caribbean vs elsewhere) Male (78% vs 58%) Male (78% vs 58%) Past Month Tobacco use (44% vs 33%) Past Month Tobacco use (44% vs 33%) Age (46 vs 51) Age (46 vs 51) Monthly Gambling Expenditure ($195 vs $71) Monthly Gambling Expenditure ($195 vs $71) Household Income ($60.1K vs 57.6K) Household Income ($60.1K vs 57.6K) Past Month Illicit Drug Use (11.7% vs 5.5%) Past Month Illicit Drug Use (11.7% vs 5.5%)

18. Current Profile of the Internet Gambler CPGI Category Internet Gamblers (%) Non- Internet Gamblers (%) Non-problem gambler39.982.1 At-risk gambler43.412.3 Moderate problem gambler12.84.0 Severe problem gambler3.81.7 Average CPGI score1.80.52

19. Internet Gambling: Legality 2010 Total prohibition Total prohibition Bermuda, Cambodia, China, Cyprus, Greece, Pakistan, Portugal, Romania, Russia, Saudi Arabia, South Africa Bermuda, Cambodia, China, Cyprus, Greece, Pakistan, Portugal, Romania, Russia, Saudi Arabia, South Africa All forms legal All forms legal U.K., Gibraltar, Antigua, Malta, Netherland Antilles, Panama, Philippines U.K., Gibraltar, Antigua, Malta, Netherland Antilles, Panama, Philippines Some forms legal Some forms legal Australia,Chile, Finland, Germany, Hong Kong, Israel, Italy, Liechtenstein, Netherlands, New Zealand, Norway, South Korea, Sweden, Switzerland, Taiwan, U.S., Venezuala Australia,Chile, Finland, Germany, Hong Kong, Israel, Italy, Liechtenstein, Netherlands, New Zealand, Norway, South Korea, Sweden, Switzerland, Taiwan, U.S., Venezuala

20. Internet Gambling: Legality 2011 Only legal for residents Only legal for residents Austria, Norway, Canadian provinces, Finland, Austria, Norway, Canadian provinces, Finland, Only legal for residents and residents cannot gamble online outside the country Only legal for residents and residents cannot gamble online outside the country Czech Republic, Germany, Hong Kong, Hungary, Israel, Norway, Slovakia Czech Republic, Germany, Hong Kong, Hungary, Israel, Norway, Slovakia Only legal for nonresidents Only legal for nonresidents Papua New Guinea Papua New Guinea

21. Concerns with Internet Gambling Unfair, Illegal, or Irresponsible Business Practices Unfair, Illegal, or Irresponsible Business Practices Not paying player winnings Not paying player winnings Unfair odds Unfair odds Free-Play sections with odds that favour the player Free-Play sections with odds that favour the player 1/3 of online players report having had a dispute with an online casino or poker website 1/3 of online players report having had a dispute with an online casino or poker website

22. Concerns with Internet Gambling Unfair or Illegal Player Practices Unfair or Illegal Player Practices Hacking sites to pay wins Hacking sites to pay wins Theft and fraud at skill game sites Theft and fraud at skill game sites ‘denial of service’ attacks (extortion) ‘denial of service’ attacks (extortion) Money laundering Money laundering Player collusion Player collusion Poker bots Poker bots

23. Poker Bot

24. Concerns with Internet Gambling Internet gambling by prohibited groups (underage, site employees, self-excluded) Internet gambling by prohibited groups (underage, site employees, self-excluded) 50% of N.A. high school and college/university students have played on free play online gambling site (Derevensky et al., 2006 ) 50% of N.A. high school and college/university students have played on free play online gambling site (Derevensky et al., 2006 ) 2% - 9% of North American youth report having gambled online for money 2% - 9% of North American youth report having gambled online for money

25. Problems with Internet Gambling Nature of Internet Gambling makes it conducive to producing Problem Gambling Nature of Internet Gambling makes it conducive to producing Problem Gambling 24 hr immediate access 24 hr immediate access Solitary play Solitary play Immersive interface Immersive interface ‘electronic cash’ ‘electronic cash’ Ability to play under influence of drugs or alcohol Ability to play under influence of drugs or alcohol In general, evidence suggests the prevalence of problem gambling is 3 to 4 times higher in Internet gamblers In general, evidence suggests the prevalence of problem gambling is 3 to 4 times higher in Internet gamblers

26. Concerns with Internet Gambling Lack or weak Responsible Gambling Practices Lack or weak Responsible Gambling Practices Failure to verify legal age Failure to verify legal age Lack of, or revocable loss limits and self-exclusion Lack of, or revocable loss limits and self-exclusion Lack of information on responsible gambling and problem gambling Lack of information on responsible gambling and problem gambling

27. Future of Internet Gambling Continued strong revenue growth Continued strong revenue growth Particularly strong growth among the Asian market Particularly strong growth among the Asian market

28. Future of Internet Gambling Market consolidation Market consolidation Growth of other forms of remote gambling Growth of other forms of remote gambling

29. Future of Internet Gambling Increasing rates of problem gambling Increasing rates of problem gambling Increasing use of online counselling services and interventions Increasing use of online counselling services and interventions Movement toward legalized and regulated markets (with some later regrets?) Movement toward legalized and regulated markets (with some later regrets?)

30. Pros of Legalized Internet Gambling Very difficult to effectively prohibit Very difficult to effectively prohibit 2 approaches: 2 approaches: Prohibiting gambling-related financial transactions (e.g., Norway, South Africa, U.S.) Prohibiting gambling-related financial transactions (e.g., Norway, South Africa, U.S.)  Spawns other financial intermediaries Requiring ISPs to block online gambling sites (e.g., China, South Africa) Requiring ISPs to block online gambling sites (e.g., China, South Africa)  Technologically savvy citizens can circumvent this

31. Not good to have laws that are widely disregarded Not good to have laws that are widely disregarded Regulatory control would ensure fair games and better player protection Regulatory control would ensure fair games and better player protection Much easier for consumers to implement pre- commitment limits of expenditure and frequency Much easier for consumers to implement pre- commitment limits of expenditure and frequency Regulatory control would accrue economic benefits that are currently leaving the jurisdiction ($$$ then applied to prevention/treatment) Regulatory control would accrue economic benefits that are currently leaving the jurisdiction ($$$ then applied to prevention/treatment) Pros of Legalized Internet Gambling

32. Govt should not be regulating people’s leisure behaviour or how they spend their money Govt should not be regulating people’s leisure behaviour or how they spend their money Less regressive than other forms of gambling Less regressive than other forms of gambling Even if does increase problem gambling, this would only be temporarily Even if does increase problem gambling, this would only be temporarily It is inevitable It is inevitable

33. Cons of Legalized Internet Gambling Purpose of law is not to conform to behaviour, but help shape it and codify societal values Purpose of law is not to conform to behaviour, but help shape it and codify societal values General disregard for rule of law is a risk when prohibiting something most people engage in (e.g., alcohol, 70%), not something 1-14% engage in General disregard for rule of law is a risk when prohibiting something most people engage in (e.g., alcohol, 70%), not something 1-14% engage in There will always be large numbers of online sites with unsatisfactory business practices There will always be large numbers of online sites with unsatisfactory business practices Online stock market trading has not been beneficial Online stock market trading has not been beneficial

34. Cons of Legalized Internet Gambling Nature of online gambling makes it inherently more problematic Nature of online gambling makes it inherently more problematic Legalization will increase rates of problem gambling Legalization will increase rates of problem gambling Significant % of online gambling revenue comes from problem gamblers (27% internationally) Significant % of online gambling revenue comes from problem gamblers (27% internationally) Legalizing online gambling and redirecting $ into treatment does not offset the harm caused Legalizing online gambling and redirecting $ into treatment does not offset the harm caused

35. Cons of Legalized Internet Gambling Economically disadvantageous Economically disadvantageous Legalization increases participation and expenditure Legalization increases participation and expenditure  U.K. liberalized online gambling laws in 2007  prevalence went from <6% in 2007 to 14% in 2010  expenditures went from ~$1 billion <2007 to ~$4 billion in 2010 However, without ISP blocking you only capture portion of the market However, without ISP blocking you only capture portion of the market  only 25% of U.K. online gamblers currently patronize U.K. sites. Thus, prior to 2007, ~$1 billion was leaving U.K. ($0 staying). In 2011, upwards of $3 billion is leaving ($1 billion staying)

36. There are Intermediate Solutions between Prohibition & Legalization Less problematic forms could be legalized (e.g., lotteries) Less problematic forms could be legalized (e.g., lotteries) Access to foreign sites could be prohibited through ISP blocking Access to foreign sites could be prohibited through ISP blocking Israel, South Africa, (Norway), (France), (Italy), (Estonia) Israel, South Africa, (Norway), (France), (Italy), (Estonia)

37. Countries with Internet Censorship Blue = none; yellow = very limited; red = some; black = heavily censored

38. The Best Policy Approach Depends on a Jurisdiction’s Situation Depends on how ‘vulnerable’ the population is Depends on how ‘vulnerable’ the population is Depends on the regional ‘context’ Depends on the regional ‘context’ Depends on the size of the country Depends on the size of the country Depends on public attitudes Depends on public attitudes

39. For More Information Williams, R.J., Wood, R.T., & Parke, J. (eds.) (~ Feb 2012). Routledge International Handbook of Internet Gambling. Routledge: London. http://www.routledge.com/books/details/9780415594431/ Williams, R.J., Wood, R.T., & Parke, J. (eds.) (~ Feb 2012). Routledge International Handbook of Internet Gambling. Routledge: London. http://www.routledge.com/books/details/9780415594431/ http://www.routledge.com/books/details/9780415594431/ Wood, R.T. & Williams, R.J. (2009). Internet Gambling: Prevalence, Patterns, Problems, and Policy Options. Report to the Ontario Problem Gambling Research Centre, Guelph, Ontario, Canada. January 5, 2009. http://hdl.handle.net/10133/693 Wood, R.T. & Williams, R.J. (2009). Internet Gambling: Prevalence, Patterns, Problems, and Policy Options. Report to the Ontario Problem Gambling Research Centre, Guelph, Ontario, Canada. January 5, 2009. http://hdl.handle.net/10133/693 http://hdl.handle.net/10133/693 Williams, R.J. & Wood, R.T. (2007). Internet Gambling: A Comprehensive Review and Synthesis of the Literature. Report to the Ontario Problem Gambling Research Centre, Guelph, Ontario, Canada. Aug 31, 2007. http://hdl.handle.net/10133/432 Williams, R.J. & Wood, R.T. (2007). Internet Gambling: A Comprehensive Review and Synthesis of the Literature. Report to the Ontario Problem Gambling Research Centre, Guelph, Ontario, Canada. Aug 31, 2007. http://hdl.handle.net/10133/432 http://hdl.handle.net/10133/432

40. ISP Blocking in Canada Internet content is not specifically regulated. Internet content is not specifically regulated. However: However: There is voluntary blocking of child pornography sites by several major Canadian ISP providers There is voluntary blocking of child pornography sites by several major Canadian ISP providers Canadian Human Rights Commission enforces laws prohibiting ‘hate messages’ over the Internet Canadian Human Rights Commission enforces laws prohibiting ‘hate messages’ over the Internet