Casino & Gaming International: Issue 5 by Casino & Gaming International

2006 ISSUE 4

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hen the bottom line is threatened, in this case by one of the world’s largest online gambling markets suddenly forbidding access - except to jail, it is no surprise that a collective pall of gloom descends along with plummeting share prices. Strategic re-thinking has not suffered paralysis though: many companies had long taken cognisance of the more determined bite in US politics and diversified their interests accordingly. As it happens, that is necessary business development logic irrespective of the anti-Internet gambling UIGE bill now signed into law, especially given the vast potential of gaming opening up worldwide. Of course, no one in the main wants to bypass the North American market since, with the right product portfolio, it will remain there for re-entry while European and Asian markets beckon. Wounded online gambling pacesetters inevitably attract rivals seeking to demonstrate a new and perhaps defiant advantage, operating on a forearmed is forewarned basis but still courting the risk of legal action. There are no doubt a few guinea pigs out there, even lemmings, but the overwhelming consideration now is to reposition, readjust and take measured steps in preparation for medium term change within the law. It is of no immediate comfort, but there is hardly a dotcom-style meltdown here and even that contained bigger seeds of recovery. The source of the malaise may differ, but global expansion and a powerful technological flux usually ensures such setbacks are soon turned into its opposite. Indeed, hand-held devices and broadband are doing just that. Nevertheless, the blow is significant enough to cause the core financial and banking fraternité pause for thought precisely at a point of opening up. Embracing online gambling has understandably faltered while legal eagles pick apart the new US law. And however much the way the result was arrived at may be decried it is not unusual for the Senate political process to operate this way. Even so, such is the resilience and compelling pressure for online gambling in its multi-faceted forms that a very different approach in the not too distant future is in the offing. Indeed, in some ways, this creates a period for business rejuvenation, regional priority setting and the spreading of eggs into more baskets, even a spur to innovation. Lift-off for mobiles, for one, though successively expected to occur over the last few years is looking more likely over the next two years for a number of reasons: banking, video and jurisdictional changes among others. There is significant value in current industry concerns, even though publicity has predominantly emphasised the damage caused to gaming stocks and company operations. The ten-year grey area ‘lease’ may have ended, but the political ramifications of the legal outcome in the US do not contradict the bi-partisan interest in following through on a Congressional study commission next year to investigate the feasibility of providing comprehensive safeguards that meet objections currently fuelling UIGE. The UK Government’s online gaming legislation is considered by many authorities to be a comparative model to appraise, and the commission could possibly be reaching a conclusion as the 2005 Gambling Act is implemented in September 2007. If by design, that could mean a bill that is mindful of the effects of the UK Act in operation. We will see. The strength of that path is further emphasised by key Las Vegas casino owners who are apparently also seeking an online gambling stake. Private equity corporations have recently made a bid for Harrah’s – all part of the gaming world becoming ‘mainstream’ financial. It is at this level that ‘integration’ has potent meaning since, in the final analysis, from solid earth to the intangible ether, gambling in all its forms is meeting here. It turns out the casino really is the ‘casino economy’. And that being so, equilibrium has to be found between public and private: government, industry and regulators guaranteeing a brake on addictive gambling and its effects. Derek Auret: “The emerging global consensus is that because humankind’s urge to gamble is a reality and particularly prone to criminal or antisocial behaviour if forced underground, public policy must accept its inevitability and find ways of constraining rather than suppressing society’s desire to take risks and lay wagers.”

Stephen Lawton is editor of Casino & Gaming International Casino & Gaming International ■ 1

CONTENTS

FEATURES 7

STRENGTH, GROWTH, CONTROVERSY: AN UNPARALLELED GAMING BUSINESS SUCCESS BY FRANK J. FAHRENKOPF, JR. RUNNING FOR COVER - BUT IS THE SKY REALLY FALLING? BY JOE KELLY AND ALEX IGELMAN

TIME IS RIGHT FOR INTERNATIONAL SAFEGUARDS BY BRIAN CULLINGWORTH

WHAT CAN LOOKING AT THE PAST TELL US ABOUT THE FUTURE? BY MARK GRIFFITHS

MILESTONES IN A REMARKABLE DECADE OF SOUTH AFRICA’S CASINO REGULATION BY DEREK AURET

EVERY BUILDING SHOULD TELL A UNIQUE STORY INTERVIEW WITH THOMAS HOSKENS

THE PUZZLES BEHIND THE MANIA: MACAU’S UNFINISHED PROJECTS BY RICARDO SIU Casino & Gaming International ■ 3

CONTENTS

FEATURES 65

THE IRRESISTIBLE ALLURE OF CASINO JOBS FOR MACAU’S YOUTH BY SOO-MAY CHENG

ACADEMY IN POLE POSITION TO REAP BENEFITS OF CASINO GROWTH BY EMMA ELSON

THE NEW UK GAMBLING ACT: SOME SALUTARY LESSONS BY PETER COLLINS

BACKWARDS OR FORWARDS? GAMBLING REGULATION IN HISTORICAL PERSPECTIVE BY JULIAN HARRIS

PERNICIOUS VICES AND THE 100 YEAR PASSAGE FROM PROHIBITION BY GREGORY ANDERSON

TURNING THE PUZZLE OF ADDICTION INTO POSITIVE EXPRESSIONS OF EXPERIENCE CHERYL LEWIN INTERVIEW WITH HOWARD SHAFFER

Casino & Gaming International ■ 5

Coming soon from www.interblock.eu

US CASINO & GAMING SCENE

STRENGTH, GROWTH, CONTROVERSY: AN UNPARALLELED GAMING BUSINESS SUCCESS BY FRANK J. FAHRENKOPF, JR.

Despite the stark challenges we faced in 2005, the U.S. gaming industry remained overwhelmingly strong and, in fact, a new milestone was reached as the 455 commercial casinos in 11 states nationwide generated more than $30 billion in gross gaming revenues for the first time. The technological advancement having the most impact on the global gaming industry as a whole right now is Internet gambling, which continues to be one of the most controversial and dramatic trends in our industry. With so much growth on the horizon, the future is bright for gaming in the U.S. and around the world.

t is an honour to contribute the lead editorial to Casino & Gaming International (CGI) as it celebrates its first anniversary, and it is difficult to imagine a better year than this past one to launch an international gaming publication. The 12 months that have passed since the first edition in October 2005 have been full of interesting gaming news, much of it reinforcing the international nature of the gaming industry today, and publications such as CGI are essential to keeping that fact front-of-mind. From the expansion of gaming in the United States and the United Kingdom to the growth of gaming in Macau, the international nature of the business is clear. And, although it may be somewhat parochial on my part – after all I do represent the American Gaming Association – I believe the state of the industry in the U.S. is critical to the state of gaming worldwide. In my mind, the U.S. gaming industry has demonstrated incredible strength and growth this past year that indicate the continued health and success of the global gaming industry in the coming years. As CGI’s first magazine was being published last Autumn, the U.S. gaming industry was just beginning to understand the full impact of the double disasters of Hurricanes Katrina and Rita. The devastation those storms brought to the people of the Gulf Coast region was utter and complete, but I am proud to say the gaming industry has led the way to recovery. Our companies have provided tens of millions of dollars in support for their employees and, more importantly, we rushed to rebuild so there would be jobs and income for the citizens of Mississippi and Louisiana when they returned to their homes. This August, the Grand Casino Biloxi with 1,500 employees and the Beau Rivage with 3,800 employees,

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became the sixth and seventh properties in the Biloxi/Gulfport area to reopen since the storm. Almost all of the casinos damaged in Louisiana also have reopened, and more properties on the Gulf Coast are expected to open later this year. Amazingly, with little more than a year gone by, our industry is nearly back to full capacity in the region. With thousands of Gulf Coast residents now back to work at our properties – and with a significant portion of those being rehires – the seeds of redevelopment and rejuvenation for this region have been firmly planted. We know that there is more work to be done, but it’s clear that the gaming industry has generated a significant amount of progress in advancing our employees and host communities on the path to recovery. Despite the stark challenges we faced in 2005, the U.S. gaming industry remained overwhelmingly strong and, in fact, a new milestone was reached as the 455 commercial casinos in 11 states nationwide generated more than $30 billion in gross gaming revenues for the first time. Native American gaming also continued to thrive, with the National Indian Gaming Association reporting that tribal governments generated $22.6 billion in gross gaming revenues in 2005, a more than 15% increase over 2004 figures. This strength also is evident in the fastest growing sector of the U.S. commercial gaming industry: racetrack casinos— or racinos. Racinos are formed when state governments allow pre-existing racetracks to add slot machines and, in some cases, table games to their facilities. In 2005, these racinos showed exceptional growth. Employing more than 17,000 people, the 29 racinos in nine states generated $3.12 billion in gross gaming revenues and distributed $1.28 billion in direct gaming taxes to state and local governments. And new domestic markets continue to show promise as Pennsylvania and Florida are set to open their first gaming facilities sometime next year. On a broader front, there’s no question the financial strength of gaming in the U.S. is providing a source of substantial investment in new gaming ventures around the world, and it seems the international industry is expanding at an incredible rate. The advent of world class casino entertainment in Great Britain is the latest salvo of the industry that is showing signs of healthy growth all over Europe, and Russia and South America also are major growth markets. However, perhaps nowhere is the excitement and growth potential of gaming more evident than in Asia. Singapore recently awarded Las Vegas Sands the first of two gaming licenses in that country, with bids for the second license due this Autumn. And in Macau, the gaming business is booming. Gaming revenue in Macau has more than doubled in the past four years, soaring to $5.6 billion last year. The growth shows no signs of slowing, with some analysts even predicting Macau’s revenues will overtake those on the Las Vegas Strip as early as next year. The advent of amenity-filled casino resorts in Macau like the recently opened property from Las Vegas Sands has truly revolutionised the idea of what an Asian casino can be. This past June, I announced that the AGA and our trade show partner, Reed Exhibitions, have purchased the rights to the Asian Gaming Expo and in June 2007 will launch G2E Asia, an event that will bring the success and opportunity of Global Gaming Expo in Las Vegas to the Eastern hemisphere. We are committed to building G2E Asia into a truly world 8 ■ Casino & Gaming International

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class event that will provide unparalleled networking opportunities and access to all that is new and exciting in our industry and, as with our flagship show in the United States, will evolve each year to keep participants ahead of the latest trends driving the industry. Two of the trends driving increased revenues for gaming around the world right now are the growth of amenities and advancements in technology. The growth in amenities such as five-star restaurants, shopping complexes, spas and world-class performance experiences have changed the entire gaming experience for U.S. gaming patrons. As you are well aware, Las Vegas has become one of the premier dining destinations in the world. But make no mistake—this trend is not limited to the Strip. Other markets are following Vegas’ lead and the establishment and marketing of amenities is showing up across the nation. With so many options, casinos are attracting visitors looking to do more than gamble. In fact, recent reports show that more than half of MGM MIRAGE’s annual revenues now come from non-gaming amenities. This would have been unheard of 15 or even 10 years ago, and it is indicative of a whole new kind of customer gaming markets in our country are attracting. In fact, according to a recent public opinion poll commissioned by the AGA, Americans by a more than twoto-one margin say they enjoy casinos more for the food, shows and entertainment than for the gambling. This trend no doubt will be mirrored around the world. In order to compete in this new environment, global gaming operators must be mindful of creating first-rate entertainment experiences well beyond the casino floor. Technology is another area driving global gaming business forward. Specifically, there are three major technological changes taking place within casinos right now that are having a dramatic impact on the industry. All three are aimed at streamlining the slots management process, increasing security and better serving customers’ needs. The first – ticket-in/ticket-out technology (TITO) — has been in place for some years, but now has grown so popular there is a general overall movement toward completely cashless slot floors in most major casinos across the U.S. Ticket-in/ticket-out technology benefits both the customer and the casino operator. Removing coins from the equation is more convenient for customers—keeping them from having to juggle or carry coins, and they no longer have to wait for cash payouts. For the operator, TITO dramatically decreases cash handling costs. The next great slot advancement is server-based games. These games were introduced at Global Gaming Expo last year and have been tested in a handful of gaming facilities around the country, most notably Treasure Island in Las Vegas and Barona Valley Ranch in California. Server-based technology eliminates manually changing slot machines and allows operators to make changes from a single secure computer server within the casino. Every machine is electronically linked to this central computer file server, and changes can be made in the time it takes for software download. Multiple slot machines, or even a whole floor, can be changed at once. By having the ability to change games instantly, floor managers will be able to analyse which games and denominations perform best at any particular time of the day. Casino & Gaming International ■ 9

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They can also alter hold percentages within regulatory parameters, and even tailor their games to player preference. Regulations to govern server-based gaming are being developed in individual U.S. states. For example, in Nevada, new regulations prohibit the casino from changing the game while a customer is playing. The machine must be idle for four minutes before a change is made, and then after the change, another four minutes must pass before anyone can play the machine. The third innovation poised to change gaming as we know it is RFID, or radio frequency identification, a technology that has been used in shipment tracking and other applications for years, but now it is finding new uses in the gaming industry. Several casinos, including Wynn Las Vegas, are using RFID technology in their casino chips to help with security, player tracking and increase the rating integrity of both players and dealers. The technology helps increase efficiency on the gaming floor, can help detect cheating or counterfeit chips, and leads to more accurate comping of table game players. There are several other technologies coming online that also are of interest. One is mobile gaming, which was approved in Nevada last year and is being considered in other U.S. jurisdictions as well. Players would be able to use devices similar to Blackberries or pagers to play games while they are at the pool or on some other area of the gaming resort property. It remains to be seen what the impact of this and other technologies will be. Beyond these innovations, it’s clear that the technological advancement having the most impact on the global gaming industry as a whole right now is Internet gambling, which continues to be one of the most controversial and dramatic trends in our industry. Currently, it is illegal for U.S. companies to operate Internet gambling businesses, but the global enterprise is thriving. In 2005, it is estimated that Internet gambling revenues topped $12 billion worldwide, with more than half of that revenue coming from U.S. customers. Who is it that is spending this more than $6 billion? According to a survey of 552 Internet gamblers commissioned by the AGA earlier this year, the average Internet gambler is a college-educated male under the age of 40 who uses the

>> Washington, D.C., attorney and gaming expert David Stewart recently developed a paper for the AGA’s 10th Anniversary White Paper series that shows prohibition still permits a high volume of Internet gambling while imposing no regulatory policies to protect gamblers. And while this new legislation might protect some U.S. customers from the potential hazards of the current illegal, offshore, unregulated online gaming market, these measures alone will not solve the problem. Instead, as Stewart advocates, what is really needed is a oneyear Congressional study commission to evaluate the impacts of Internet gaming in the U.S. Such a commission would consider policy issues ranging from how best to protect children and problem gamblers to whether Internet gambling can be effectively legalised and regulated in the United States rather than leaving bettors to fend for themselves on illegal, unregulated offshore sites. The study also should include consideration of recent WTO rulings indicating the United States’ position on Internet gaming may be in violation of international trade obligations >> 10 ■ Casino & Gaming International

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Internet for a wide variety of tasks and has an annual income of more than $60,000. The survey, conducted by the U.S. research firm Peter D. Hart Research Associates, appeared as a special section in this year’s State of the States: The AGA Survey of Casino Entertainment. The survey also found that while the number of Americans who gamble online still is relatively small, at four percent of the U.S. adult population, it is growing. In fact, a full 38 percent of the online gamblers surveyed said they started the activity within the last year, and 70 percent said they began only within the last two years. And as you may have gathered from the profile described, online gamblers as a group are younger; more highly educated and have larger annual household incomes than both the general public and the patrons of bricks-and-mortar casinos. The survey also found that online gamblers are extremely Internet savvy in their general day-to-day lives, with a huge majority of them going online to do everything from get driving directions, purchase airline tickets, manage their bank and credit card accounts, and more. Nearly half of the respondents – 48 percent – cited convenience as the biggest

reason they engage in online gambling activity. As far as the games they prefer, the survey found that 80 percent of respondents played poker for money online last year, and 78 percent said they played casino games. While the survey represents the growing popularity of Internet gambling, it also indicates Internet gambling remains a source of confusion and, in a significant number of cases, one of apprehension as well. This can be seen in the results, which show more than half the online gamblers surveyed reporting they are at least somewhat concerned that online casinos find ways to cheat players, and just under half believe other players who gamble online find ways to cheat. This apprehension is perhaps fueled by the confusion surrounding current laws applying to Internet gambling in the U.S. According to the U.S. Justice Department, Internet gambling currently is illegal under the Wire Act of 1961. Yet the survey found that fewer than one in five (19 percent) of online gamblers realise – or are willing to admit – that the activity currently is illegal in the U.S. And, while a bit higher, the percentage of all Americans who think Internet gambling is illegal is still only 38 percent. It seems that the complex legislative and regulatory environment surrounding this issue is the cause of pervasive confusion. Elected officials in the U.S. remain very negative toward Internet gambling, and the U.S. Congress’ decision late this summer to make it illegal for a U.S. credit card company or other U.S. financial institution to collect on a debt incurred on an illegal online gambling site has already had a significant impact on international online gaming companies. Notwithstanding the fact that the legislation does not define what is in fact illegal, we all saw the investors in online gaming companies drive the prices down dramatically. There were many factors behind the passage of this legislation – real concern about children gambling on the Internet, reaction to the scandals surrounding lobbyist Jack Abramoff, moral opposition to any gambling – but, the legislation passed raises more issues than it resolves. For example, it does not resolve the Wire Act dispute and define what is illegal online gambling; it does not address the horse racing industry’s claim that it is exempt; nor, does it answer the question of how Native American online gaming would be addressed. Congress has no idea if the legislation will address the issues that spawned it. The fact is that millions of Americans want to gamble online. As I mentioned earlier, our State of the States survey found that four percent of adults in the U.S. gambled during the previous year; what will they do now that this legislation has passed? We don’t know, but it is a good bet that a significant number of them will find a way to continue to gamble on the Internet. Washington, D.C., attorney and gaming expert David Stewart recently developed a paper for the AGA’s 10th Anniversary White Paper series that shows prohibition still permits a high volume of Internet gambling while imposing no regulatory policies to protect gamblers. And while this new legislation might protect some U.S. customers from the potential hazards of the current illegal, offshore, unregulated online gaming market, these measures alone will not solve the problem. Instead, as Stewart advocates, what is really needed is a one-year Congressional study commission to evaluate the impacts of Internet gaming in the U.S. Such a commission would consider policy issues ranging from how best to protect children and problem gamblers to Casino & Gaming International ■ 11

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>> There were many factors behind the passage of this [UIGE] legislation – real concern about children gambling on the Internet, reaction to the scandals surrounding lobbyist Jack Abramoff, moral opposition to any gambling – but, the legislation passed raises more issues than it resolves. For example, it does not resolve the Wire Act dispute and define what is illegal online gambling; it does not address the horse racing industry’s claim that it is exempt; nor, does it answer the question of how Native American online gaming would be addressed. Congress has no idea if the legislation will address the issues that spawned it. The fact is that millions of Americans want to gamble online >> whether Internet gambling can be effectively legalised and regulated in the United States rather than leaving bettors to fend for themselves on illegal, unregulated offshore sites. The study also should include consideration of recent WTO rulings indicating the United States’ position on Internet gaming may be in violation of international trade obligations. Legislation to create a comprehensive study commission has already been proposed by 44 members of the U.S. House of Representatives. The Bill won’t pass this year, but its introduction lays the groundwork for it to be reintroduced in future Congresses. The fact is, a prohibition such as Congress is seeking to impose is short-sighted, and with a number of foreign nations, including Great Britain, in the process of legalising, licensing, regulating and taxing Internet gaming operators, it’s time for the U.S. to take a serious look at ways to regulate it. The growth of Internet gambling, coupled with the highrate of international expansion of the industry, has also sparked a renewal of concern over problem gambling. The more gaming expands the more important it is that the entire gaming industry addresses this critical issue. The AGA and the National Center for Responsible Gaming (NCRG) are committed to collaborating with international organisations on the problem. The first step is acknowledging the issue. We have said since the AGA was created that there is no doubt that there are individuals who cannot gamble responsibly. And, as gaming becomes more ubiquitous, we can expect the issue to continue to grow with us. The AGA and our member companies have contributed more than $15 million through the NCRG to fund research on the issue and spent hundreds of millions of dollars on programmes to encourage responsible gaming and fund problem gambling awareness programmes. For its first decade, the NCRG’s almost exclusive mission has been funding research and facilitating the exchange of research information among scientists, academics and clinicians. The NCRG expanded that mission two years ago when it developed a second track at its annual Conference on Gambling and Addiction. This second track was developed to encourage greater attendance among lawmakers, regulators and other policy-makers, and it has been successful in doing so. Now the NCRG is prepared to make the next step and is working closely with the AGA to begin an aggressive outreach and public education effort. This effort will take the research that has been developed with NCRG research dollars and begin to offer the industry and the public practical, science12 ■ Casino & Gaming International

based information and programmes to help promote responsible gaming. The first of these programmes is called EMERGE (Executive, Management & Employee Responsible Gaming Education). EMERGE is a ground-breaking, Web-based training programme developed by scientists at Harvard Medical School. It is the only online training programme that translates the most up-to-date scientific research on gambling disorders and information about responsible gaming for gaming employees at all education levels. This programme will be tested by several NCRG contributing gaming companies during the coming months and is expected to be available for the entire gaming community sometime next year. Once the testing phase is complete, the NCRG intends to work with the Institute for Research on Pathological Gambling and Related Disorders to begin modifying the programme for use in international venues. The NCRG also has included resources to modify for international audiences many of the materials that have been created by the AGA to help address problem gambling. We look forward to working closely with the international gaming community in the coming years to ensure that responsible gaming remains a business imperative no matter where in the world we do business. We also look forward to working with the leaders in Asia to help lead that region forward through G2E Asia. With so much growth on the horizon, the future is bright for gaming in the U.S. and around the world. We plan to be at the forefront of the next generation of global gaming, and anxiously await new challenges that lie ahead. FRANK J. FAHRENKOPF, JR. Frank J. Fahrenkopf, Jr. is President and CEO of the American Gaming Association (AGA) in Washington, D.C. In his role as chief executive of the AGA, Fahrenkopf is the national advocate for the commercial casinoentertainment industry and is responsible for positioning the association to address related regulatory, political and educational issues. A lawyer by profession, Fahrenkopf gained prominence during the 1980s, when he served as national chairman of the Republican Party during the presidency of Ronald Reagan.

US GAMBLING ACT: AFTERMATH

RUNNING FOR COVER - BUT IS THE SKY REALLY FALLING? BY JOE KELLY AND ALEX IGELMAN

In the following analysis we attempt to give an overview of the recently passed U.S. antiInternet gambling bill and explain why the new law might not have expanded its definition of prohibited gambling. Any gaming operator who accepts U.S. betting customers may seriously consider postponing travel plans to the U.S. and avoid any stopover flights with a U.S.

t is unclear what impact the recently-passed anti-internet gambling bill might have on online gaming operators. As of 2nd October 2006, companies such as PartyGaming plc have decided to no longer accept U.S. customers. Similarly 888 Holdings recently suspended U.S. activities. Playtech Ltd., a software developer for online gambling, stopped licensing software to gaming operators who accept U.S. customers and has asked its licensees to block access to U.S. gamblers. FireOne Group plc, a global payment processing company, announced on 10th October 2006 that it would continue to â&#x20AC;&#x153;offer its multi-currency credit and debit card and FirePay electronic wallet processing to the online gambling industry originating from non-U.S. consumers and not

connection.

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prohibited by the Act”. (emphasis added) (“FireOne Group plc – Further re US Legislation”, AFX News Limited, 10th October 2006). World Gaming even declared it may be forced out of business because of the new U.S. law. (“World Gaming suspended amid fears of imminent collapse”, The Independent, 10th October 2006.) Is the sky really falling? Publicly-traded companies might conclude termination of U.S. gamblers would be legally advisable. Private companies may not, however, conclude the new law will mandate withdrawal from the U.S. market. What is the legal impact of the Unlawful Internet Gambling Enforcement Act (UIGE) on an interactive privately held offshore gaming operator? The UIGE was attached to an unrelated bill, the Safe Port Act, just before the U.S. Senate recessed for a national election campaign and passed both Houses of Congress on 30th September 2006.

DOES THE ACT BROADEN THE DEFINITION OF PROHIBITED ONLINE GAMBLING? The definition of gambling in the UIGE Act is located in §5362: ■ “(A) means the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome; ■ “(B) includes the purchase of a chance or opportunity to win a lottery or other prize (which opportunity to win is predominantly subject to chance); ■ “(C) includes any scheme of a type described in section 3702 of title 28; (This pertains to the Professional and Amateur Sports Protection Act, which in effect prohibits sports betting except for Nevada)” At first glance, this language would seem to prohibit all internet wagering except for exemptions specified in §5362 such as free games, fantasy sports, intrastate transactions, intratribal transactions and Interstate Horseracing. The bill, (§ 5362) however, contains the following provision: ■ “(10) UNLAWFUL INTERNET GAMBLING.■ “(A) In General- The term ‘unlawful Internet gambling’ means to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State Law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made. (emphasis added) Because of the wording in §5362(10) and since Representative Bob Goodlatte has made public statements that it is still his intention to seek the adoption of a bill amending the Wire Act (18 U.S.C. § 1084) this bill does not add any additional prohibited forms of gambling that were not present prior to the passage of the UIGE. This would bring us back to the legal status prior to the passage of the UIGE where most legal scholars and case law indicated that non-sports betting transactions were in a grey area of law and the consensus was that only online sports betting was prohibited by the Wire Act while other types of online 16 ■ Casino & Gaming International

gambling such as poker or casino style games were not. Notwithstanding the aforementioned consensus, the U.S. Department of Justice has always insisted that all internet gambling is illegal. The uncertainty of whether this bill expands the definition of legal gambling is further exacerbated by a statement in the “Congressional Findings and Purpose (§5361)”: ■ “(b) Rules of Construction – No provision of this subchapter shall be construed as altering, limiting, or extending any Federal or State law or Tribal-State compact prohibiting, permitting, or regulating gambling within the United States.” The UIGE is specific in that §5363 specifically states, “No person engaged in the business of betting or wagering may knowingly accept, in connection with the participation of another person in unlawful Internet gambling.....” financial payment through methods such as credit cards or other forms of credit, electronic fund transfers or other means of money transmitting, checks or similar instrument and any other means set forth in the still to be drafted regulations. The UIGE sought to prevent these methods of funding for Internet gambling but did nothing to amend the Wire Act (18 U.S.C. § 1084), which the Department of Justice relies upon in support of its opinion that all online gambling is illegal. Thus it could be argued that the sole purpose of this bill was to penalise gaming operators who accepted credit cards and electronic cash for prohibited gambling, i.e., sports betting and only sports betting. Under the UIGE Act the financial transaction provider is not considered to be in the business of betting or wagering (§5362) (2) unless it operates, owns or controls an Internet wagering site (§5367). These provisions should have no realistic impact on any offshore provider as long as it remains totally offshore and its executives do not visit the United States. Legal experts that have been involved in the field of Internet gambling such as I. Nelson Rose have serious doubts as to the expansion of criminal liability. In commenting on the Act, Rose opined: “That’s a major weakness of the new measure…. It left out expanding the reach of the Wire Act, so poker sites can say “we’re not covered by that’”. (“Bad Luck for Online Gaming”, Los Angeles Times, 3rd October 2006). Similarly, Anthony Cabot, an internet gaming expert, in an opinion for Fun Technologies Inc. (AIM:FUN) stated: “If skill games are not unlawful under applicable state or Federal law, then they are not unlawful under this Act. The sponsors of this legislation repeatedly asserted that nothing …. in this Act converts currently legal activities to unlawful activities (“Fun Technologies – Statement”, 9th October 2006, AFX News Limited) Unfortunately for skill-based gaming providers, the UIGE did not expand permitted gambling. The original Goodlatte bill (HR 4777, the Internet Gambling Prohibition Act), attempted to amend the Wire Act, and might have significantly expanded the definition of permitted gambling: ■ “Section 2, Definitions… ■ (6) The term ‘bets or wagers’■ “(A) means the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game predominantly subject to chance, upon an agreement or understanding

US GAMBLING ACT: AFTERMATH

that the person or another person will receive something of greater value than the amount staked or risked in the event of a certain outcome;” (emphasis added) The Department of Justice testified before a Congressional subcommittee on 5th April 2006 that it had concerns with some of the Goodlatte bill definitions and stated: “For example, since the definition of the term ‘bet or wager’ requires that the activity be ‘predominately subject to chance,’ we are concerned whether this definition is sufficient to cover card games, such as poker.” While this language was not in the final bill adopted by Congress, it does indicate, however, that the Department of Justice may be aware of the distinction between games of skill and games of chance and may explain why there has been minimal federal interest in interactive poker.

IF THE ACT DOES NOT EXPAND PROHIBITED GAMBLING, WHAT IS THE PRESENT LEGAL STATUS OF AN ONLINE GAMING SITE LOCATED OUTSIDE THE UNITED STATES WITH REGARD TO FEDERAL LAW? The issue is complicated by the fact that the U.S. Department of Justice’s opinion has been that all interactive gambling, including interactive, state-licensed horseracing is illegal. Furthermore, advertisers and suppliers may be in violation of the United States Code for aiding and abetting online gaming operators. The U.S. Justice Department warned the U.S. Virgin Islands (2nd January, 2004) that its present interactive gambling law would violate federal law. It also informed the State of North Dakota (7th March 2005) that its proposed legislation, which would have regulated interactive poker, would be a violation of federal law. The Department of Justice has even asserted in a letter to Rep. John Conyers, 14th July 2003, that the December 2000 amendment to the Interstate Horseracing Act did not legalise interstate interactive horserace wagering between states that have licensed companies such as Youbet. Thus, according to the Department of Justice, Youbet and other companies accepting interactive horserace wagering from different states are in violation of federal law. The Justice Department in support of their opinion relies primarily on three federal statutes that were passed long before the development of interactive gaming, viz., the Wire Act (18 U.S.C. § 1084), the Travel Act (18 U.S.C. § 1952), and the Anti-Gambling Act (18 U.S.C. § 1955).

(A) THE WIRE ACT An Internet gaming operator might be liable under the Wire Act if it participates in offshore sports betting, e.g., U.S. v. Cohen (260 F.3d 68, 2nd Cir. 2001), but likely would not be liable if it engaged in a contract concerning a U.S. bettor that involved offshore casinos, poker or lotteries. While the

Justice Department may insist the Wire Act prohibits all Internet gambling, the Wire Act was specifically found by the Fifth Circuit Court of Appeals to apply only to sports betting. In In Re MasterCard International Inc., (132 F. Supp. 2d 468 (E.D. La. 2001), aff’d 313 F.3d 257 (5th Cir. 2002)), a district court had to determine in multidistrict litigation whether numerous plaintiffs who lost money while wagering at offshore casinos could recover losses from their credit card companies. The plaintiffs had hoped to obtain class status to pursue a civil Racketeer Influenced and Corrupt Organizations Act (RICO) claim against credit card companies such as MasterCard. In order to assert a RICO claim, the plaintiffs would have to show, inter alia, “that Internet gambling violates the several federal and state statutes as alleged in the complaint” (In Re MasterCard at 478). The district court concluded that the Wire Act (18 U.S.C. §1084) was applicable only to sports wagering. “However, even a summary glance at the recent legislative history of Internet gambling legislation reinforces the Court’s determination that Internet gambling on a game of chance is not prohibited conduct under 18 U.S.C. § 1084. Recent legislative attempts have sought to amend the Wire Act to encompass “contest[s] of chance or a future contingent event not under the control or influence of [the bettor]” while exempting from the reach of the statute date transmitted “for use in the new reporting of any activity, event or contest upon which bets or wagers are based.” See S. 474, 105th Congress (1997). Similar legislation was introduced in the 106th Congress in the form of the “Internet Gambling Prohibition Act of 1999.” See S. 692, 106th Congress (1999). That act sought to amend Title 18 to prohibit the use of the Internet to place a bet or wager upon “a contest of others, a sporting event, or a game of chance …” As to the legislative intent at the time the Wire Act was enacted, the House Judiciary Committee Chairman explained that “this particular bill involves the transmission of wagers or bets and layoffs on horseracing and other sporting events.” See 107 Cong. Rec. 16533 (Aug. 21, 1961). Comparing the fact of the Wire Act and the history surrounding its enactment with the recently proposed legislation, it becomes more certain that the Wire Act’s prohibition of gambling activities is restricted to the types of events enumerated in the statute, sporting events or contests. Plaintiffs’ argument flies in the face of the clear wording of the Wire Act and is more appropriately directed to the legislative branch than this Court.” (In Re MasterCard at 480-481). The United States Court of Appeals affirmed the district court’s analysis of the inapplicability of the Wire Act to anything other than sports wagering. “The district court concluded that the Wire Act concerns gambling on sporting events or contests and that the plaintiffs had failed to allege that they had engaged in Internet sports gambling. We agree with the district court’s statutory interpretation, its reading of the relevant case law, its summary of the relevant legislative

>> Lord Denning, Master of the Rolls in the mid 1960’s, [said] it is very difficult to take criminal action against gaming corporations because they have “no body to be imprisoned and no soul to be damned.” This is especially true when the corporation is in a different country >> 18 ■ Casino & Gaming International

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history, and its conclusion. The plaintiffs may not rely on the Wire Act as a predicate offence here …. Because the Wire Act does not prohibit non-sports Internet gambling, any debts incurred in connection with such gambling are not illegal.” (In Re MasterCard Int’l Internet Gambling Litig., 313 F.3d 257, 262, 263 (5th Cir. 2002). In In Re MasterCard, the standard of proof was a preponderance of the evidence. In a criminal case, the federal government would have to prove a violation of the law beyond a reasonable doubt. If the Court rejected the argument in In Re MasterCard because they could not show a violation of a statute by a preponderance of the evidence, then how could the government prove a Wire Act violation beyond a reasonable doubt? It should be noted that the U.S. Department of Justice was not a party in the In Re MasterCard case.

(B) TRAVEL ACT AND ANTI-GAMBLING ACT The Justice Department also relies on the Travel Act and the Anti-Gambling Act which provide harsh criminal penalties. ■

The Travel Act states in relevant part: 18 U.S. @ §1952. Interstate and foreign travel or transportation in aid of racketeering enterprises (a) Whoever travels in interstate or foreign commerce or uses the mail or any facility in interstate or foreign commerce, with intent to - (i) distribute the proceeds of any unlawful activity; or (ii) commit any crime of violence to further any unlawful activity; or (iii) otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of an unlawful activity.

■

The Anti-Gambling Act states in relevant part: 18 U.S. @ §1955. Prohibition of illegal gambling businesses (a) Whoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be fined under this title or imprisoned not more than five years, or both. (b) As used in this section - (i) “illegal gambling business” means a gambling business which - (A) is a violation of the law of a State or political subdivision in which it is conducted; (emphasis added) (B) involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and (C) has been or remains in substantially continuous operation for a period in excess of thirty-days or has a gross revenue of $2,000 in any single day.

Both acts require either a violation of state law or alternatively, the Travel Act would require a violation of some other federal law or some state law. In other words, the activity must already be illegal prior to prosecution under either statute. An interesting case was Casino City v. Justice Department where the advertising entity sought a declaratory judgment (an advisory opinion) that its First Amendment rights were in jeopardy because it might be found to be aiding and abetting a criminal activity. One 22 ■ Casino & Gaming International

US GAMBLING ACT: AFTERMATH

commentator, in discussing this case, stated: “Due to this inherent limitation, the DoJ has not relied heavily on these statutes [Travel Act and Anti-Gambling Act]. In its motion to dismiss Casino City’s complaint, the DoJ did not offer any justification as to why it believed Internet gambling was illegal under the Travel Act or the Illegal Gambling Business Act,” (Megan E. Frese, “NOTE: Rolling the Dice: Are Online Gambling Advertisers ‘Aiding and Abetting’ Criminal Activity or Exercising First Amendment-Protected Commercial Speech?” 15 Fordham Intell. Prop. Media & Ent. L.J., 547,552). At a minimum, it would seem that under current federal laws interactive gaming such as poker, and casino style gaming may not be illegal as a result of the In Re MasterCard case.

WOULD STATE LAW OR PROHIBITION POSE A SIGNIFICANT RISK TO AN ONLINE POKER OPERATOR? Except for sporadic criminal action by states, such as Wisconsin, Missouri, and Minnesota in the late 1990’s, action since 2000 in states such as New York and New Jersey has been limited primarily to respective civil proceedings against financial transaction providers such as Citibank or offshore sports operators. Interestingly, 49 state attorneys general supported federal prohibition of Internet gambling which is most unusual since states are often wary of federal encroachment on their jurisdiction. (“Attorneys General for 4(9) States Seeking Congressional Help”, Journal Record Legislative Report, 23rd March 2006). Approximately eight states (Illinois, Indiana, Louisiana, Michigan, Nevada, Oregon, South Dakota, and Washington) have passed legislation to prohibit Internet gambling. The most extreme was a Washington state bill (S.B. 6613) which amended a state statute in 2006 to make Internet gambling, even by a punter, a Class C felony which would be similar to a sexual assault allegation. There have been few prosecutions under state statutes and the only player to be charged was a North Dakota resident who received a $500 fine and a oneyear deferred sentence. Recently, Louisiana has taken action against an online gaming operator. The Louisiana statute is so broad that it might be considered to include everyone involved in Internet gambling except passive investors or players. It states: “E. Whoever designs, develops, manages, supervises, maintains, provides, or produces any computer services, computer system, computer network, computer software, or any server providing a Home Page, Web Site, or any other product accessing the Internet, Word Wide Web, or any part thereof offering to any client for the primary purpose of the conducting as a business of any game, contest, lottery, or contrivance whereby a person risks the loss of anything of value in order to realize a profit shall be fined not more than twenty thousand dollars, or imprisoned with or without hard labour, for not more than five years, or both.” La Rs 14:90 (3)(E)”Gambling by Computer” Unlike Louisiana, Michigan has realised the futility of proceeding against online gaming operators. In March 2006, a Michigan resident won a 1.7 million dollar jackpot at an online Caribbean based casino. The Michigan AttorneyGeneral had threatened to confiscate the winnings because the player had violated Michigan’s 1999 Anti-Internet Gambling Law. The Attorney-General did not consider taking Casino & Gaming International ■ 23

US GAMBLING ACT: AFTERMATH

action against the online casino. “The grey area lies in determining which jurisdiction’s laws apply. (The attorneygeneral’s) office said that because Casino Tropez is based in the Caribbean, the state has no authority in the matter and should be handled by the federal government.” (Interactive Gaming News, 21st March 2006). One cautionary note, the UIGE Act §5362 (10)(A) defines unlawful Internet gambling to be the receiving of a bet where it is unlawful “under any applicable federal or state law….” (emphasis added). Thus it might be advisable to exclude players from those eight states that have prohibited Internet gambling by statute. However, there are two arguments against the assertion that the UIGE might have made a federal crime out of illegal state interactive gaming. First, any state anti-internet gambling statute might be in violation of the commerce clause of the U.S. Constitution. Second, it could be argued that the federal government already has authority to prosecute illegal state gambling under the Anti-Gambling Act (18 U.S. @ §1955).

THE DORMANT COMMERCE CLAUSE It is uncertain whether any state Internet gambling legislation might violate the dormant Commerce Clause of the United States Constitution. Joseph M. Kelly, one of the authors of this publication, asserted in an article entitled “Internet Gambling Law” 26 Wm. Mitchell L. Rev. 117, 170-171 (2000) that state regulation of the Internet may be a violation of the dormant Commerce Clause. Other authorities on Internet gaming have reached the same conclusion. Lawrence Walters Esq. concludes in an article “Will the Commerce Clause Save Online Gaming?”: “As individual states start enforcing online gambling restrictions against players and gambling enterprises, Commerce Clause issues are certain to be raised as a defence. Legal experts and the courts will likely debate these issues for years to come, but one thing is certain: The dormant Commerce Clause creates significant uncertainty regarding the ability of state governments to constitutionally regulate Internet gambling activities.” (Interactive Gaming News, 15th July 2005) In American Libraries Association v Pataki, (969 F. Supp.160, 168-169 S.D.N) (1997) a New York state law prohibiting Internet child pornography was challenged as unconstitutional because it was in violation of the First Amendment and the Interstate Commerce Clause of the United States Constitution. The judge did not reach the First Amendment issue, because she concluded that the state law concerning the Internet violated the Commerce Clause. This decision is not binding on all US courts, but may be indicative of any judicial analysis of state Internet legislation.

THE ANTI-GAMBLING ACT The Anti-Gambling Act may have already criminalised state anti-gambling law. It is worth noting that the Department of Justice has rarely prosecuted any criminal cases against a casino, poker or bingo site prior to the passage of the UIGE. Whether their position will change with the adoption of the UIGE is anyone’s guess. However, unless it could be clearly shown that the law with regard to unlawful Internet gaming has changed to include poker and casino sites, prosecution may be unlikely under Federal statutes. This does not mean that they could not prosecute under the laws of one of the states that prohibit Internet gambling, though the Department of Justice could have prosecuted under state law pursuant to 24 ■ Casino & Gaming International

the Anti-Gambling Act (18 U.S.C. §1955) and never did so.

CAN YOUR JOB GET YOU ARRESTED If one works for an online gaming corporation that accepts bets from a prohibited jurisdiction, it is possible you and not the company will be arrested and even imprisoned. As explained by Lord Denning, Master of the Rolls in the mid 1960’s, it is very difficult to take criminal action against gaming corporations because they have “no body to be imprisoned and no soul to be damned.” This is especially true when the corporation is in a different country. For example, BetonSports has “principle offices in London and in Costa Rica.” When the U. S. Justice Department brought civil charges against BetonSports, it proved extremely difficult to serve process on BetonSports from the U.S. (U.S. v. BetonSports 2006 U.S. Dist. Lexis 55553, which concluded U.S. attempted service at that time was inadequate). Recently, the gaming community was startled to discover that the U.S. Government had arrested David Carruthers, then C.E.O. of BetonSports and that Louisiana state had issued a warrant which resulted in the arrest of Peter Dicks, then a non-executive Director of SportingBet. The French Government also arrested two executives of BWIN. All four defendants were released on bail ranging from $50,000 for Dicks, €300,000 each for the BWIN executives and $1m for Carruthers. What are the chances of imprisonment? It would seem that Carruthers is not a major character in the indictment of 11 persons and 4 companies by the U.S. attorney. In fact he is barely mentioned in the indictment and it would seem the federal authorities are really after Gary Kaplan, a bookie with an alleged shady past (“Carruthers May Strike Plea Bargain”, 22nd August 2006, I Gaming Business). When the U.S. government in 1998 had gone after 21 defendants for conspiring to violate the Wire Act, none of the defendants were sentenced to prison except for Jay Cohen, who voluntarily returned from Antigua to fight the charges. If Cohen had agreed to a plea bargain after failing to win dismissal of the charges in pre-trial motions, it is probable he would not have served prison time. For example, Allen Ross, one of the 21 defendants, tried to get the charges dismissed. When he failed (U.S. v Ross, 1999 U.S. Lexis 22351) he reached a plea bargain with the U.S. Government and served no jail time. Unlike the 1998 indictments, nobody really knows whether he/she may be on a secret list of individuals who might be subject to arrest even while travelling through the United States. Moreover, a supplier of online gaming services to an online operator could result in detention based on the charges of aiding and abetting. Concerning a passive shareholder, Louisiana law enforcement stated they were targeting “people directly involved in online gambling operations and … shareholders in the companies were not at risk of arrest.” (“Dicks decision in balance”, Financial Times, 22nd September 2006) Yet even a janitor who only served coffee to bettors and stacked chairs was found guilty for conducting an illegal gambling business (U.S. v. Merrell, 701 F. 2d 53, 6th cir 1983). While Carruthers is under house arrest awaiting a 22nd January 2007 evidentiary hearing, his lawyers will be waging an aggressive defence. For example, in an unsuccessful motion to compel the government to produce non public

US GAMBLING ACT: AFTERMATH

grand jury and petit jury material, at least 11 major law firms represented various defendants in the Carruthers/ BetonSports proceedings. (U.S. v. BetonSports et al, 2006 U.S. Dist. Lexis 63824). The Louisiana arrest of Dicks is a totally different situation from that of Carruthers. Unlike Carruthers, Dicks was a non-executive director of SportingBet who was arrested when arriving in New York for business unrelated to gaming. Louisiana is one of eight states that has enacted antiinternet gambling legislation, but is the only state that has recently prosecuted an online gambling executive without allegations of fraud. Apparently there are over 50 outstanding warrants against online executives whose companies accept Louisiana customers. (The Times, 15th September 2006). Unlike almost any other jurisdiction, the decision to prosecute was made by a zealous state policeman who is not a lawyer. Governor George Pataki of New York refused to extradite Dicks once it was disclosed that Dicks had not been in Louisiana for decades. However if Dicks were to fly to Dallas airport in Texas, for example, it is possible he could still be extradited to Louisiana pursuant to the outstanding warrant. The French government, through at least ten police officers, and perhaps inspired by the U.S., has arrested two executives of the Austrian company BWIN. Unlike the U.S., the executives were arrested for violation of French legislation which only permits wagering by licensed monopolies. (“Number up for gaming executives, says French state Lottery” The Times, 16th September 2006.”) The executives were arrested in France while publicising an agreement with a French soccer team. Most experts speculate the arrest was a result of pressure brought by state-owned monopolies, Francaise des Jeux (FdJ), which operates the national lottery, football pools and scratch cards as well as Pari Mutuel Urbain (PMU) which has a horse racing wagering monopoly. In fact, an FdJ spokesperson stated: “We are doing exactly the same as the authorities in the U.S. who arrested the British executives.”(“French police arrest heads of Austria’s BWIN for allegedly marketing online gambling,” A.P., 15th September 2006.) Apparently the French magistrate had been investigating alleged illegal Internet wagering since November 2005 and PMU and FdJ had filed a complaint against BWIN in April 2005. The two executives were kept in jail over the weekend and released on €300,000 each and informed by the French magistrate that they could be imprisoned for up to three years if convicted of violating French gaming laws. Unlike the United States, France is subject to the laws of the European Community. The Gambelli decision had prohibited member state discrimination concerning licensed wagering in other member countries without a good reason. Gambelli left uncertain what constitutes “necessary and not discriminatory”. By mid-September the European Commission announced it was scrutinising France and seven other states for impermissible gaming discrimination. A spokesperson for the EU Market Commission, while refusing to comment directly on the arrest of the two executives, stated: “You cannot say to Operator A, which happens to be a state monopoly making a lot of money, ‘Yes, you can do this,’ and then tell Operator B, which is in the private sector, that it cannot do the same thing.” (Eric Pfanner, “Privatepublic clash on gambling; Detention of executives seen as move to protect state revenue,” International Herald Tribune, 19th September 2006) France, along with Italy and Austria 26 ■ Casino & Gaming International

was informed in a “letter of formal notice” that its gambling laws may be in violation of European Union rules. (EU Nations Face Censure over Curbs on Gambling, Austria Today, 10th October 2006.) Anyone connected with the online gaming business must take care when visiting the U.S. or France. It would appear that the spirit of 17th century Star Chamber and the Inquisition of Torquemada is alive and well. ■ The Authors wish to thank Frank Catania for his assistance in preparing this article.

JOE KELLY & ALEX IGELMAN Joseph M. Kelly, Ph.D., J.D., is a consultant with Catania Consulting Group and a Professor of Business Law at SUNY College at Buffalo . He is licensed to practice law in Illinois, Nevada, and Wisconsin. He is also coeditor of Gaming Law Review. Dr. Kelly has been a speaker on gaming topics throughout the world, including Berlin, Barcelona, Madrid, Cannes, Edinburgh, New Delhi, Australia, Costa Rica, South Africa, and Switzerland. He has written extensively on British, German, Native American, West Indian, and Internet gambling law. His law review publications have been cited as authority by federal district and appellate courts, as well as state appellate and supreme courts, e.g., Confederated Tribes v. Johnson, 958 P.2d 260 (Wash. 1998). Dr. Kelly’s article on Internet gambling law has been cited in the chapters on Internet gambling by The Gambling Review Report, which was presented to Parliament by the Secretary of State of Culture Media and Sport in July 2001. He co-authored Antigua’s interactive gambling regulations and had been a consultant for Antigua in Washington D.C. Alex Igelman is Counsel to Goodman and Carr LLP, practicing exclusively gaming and entertainment law. In 1992, as a sole practitioner, Alex pioneered the enforcement and collection of gambling debts in Canada on behalf of many Nevada based casino-hotels and to this day continues to act on their behalf. Since 1996, Alex has been involved in the interactive gaming arena and has focused on the regulatory and business aspects of the industry advising land-based casino operators, Governments, and i-gaming companies alike. The author of numerous publications, Alex is considered an authority in interactive gaming and is one of a few lawyers in Canada that specialises in Gaming Law.

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THAT WAS THE YEAR THAT WAS BY ROGER RAATGEVER, CEO, MICROGAMING

A year ago, the management started to put in place plans to consolidate the business under one single brand – Microgaming. In addition to the rebrand there was a commitment towards strengthening the public face to the industry and player community. More evolution than revolution but we recognised that future growth in this industry would involve a period of consolidation in the market, as the big players sought to flex their muscles and take advantage of new growth areas. The recent merger and acquisition activity has served to support our thoughts and the larger players will play a key role in shaping the future of the industry. In what is ultimately a consumer driven business we felt brand definition and identity would play an increasingly important role. It was a major change as the industry leading Jackpot Madness and Prima Network were brought under the single Microgaming brand. It meant that the new brands Microgaming Poker Network and Microgaming Progressive Network replaced the old names and that the ’Powered by Microgaming’ seal would be rolled out on all the sites which use the company’s software. We went live with the announcement in May and since then, a great deal has changed. In raising our profile in this way, we have attracted huge interest, resulting in a substantial fillip for our business. In what will be a record breaking year for us, Microgaming has added 18 new poker and casino operations to its portfolio during the first nine months of 2006, the details of only 12 have been released to date, so watch this space. It is very pleasing that these new additions are indicative of significant growth across both the casino and poker sides of the business. It is our commitment to games development - a cornerstone of our offer, as playing a significant part in the growth within casino. After announcing our intention to release four new games per month at the start of the year, the company is on course to reach 60 by December. Our growth in poker stems from Microgaming Poker Network’s ability to deliver instant liquidity, by offering guaranteed 24 hour action and one of the most aggressive tournament schedules on the web. In the current period of consolidation, Microgaming Poker Network’s independent status is valued and trusted by the whole online gambling fraternity, further adding to the allure of our name. Continued software developments of our mobile solution GameWire, distributed by Spin3, and market leading licensing deals for newer games such as Mahjong have also played a significant part in this year’s growth, allowing our operators to tap into emerging markets through offering localised games and new technologies. We have one of the most talented and innovative development teams in the business and month after month they continue to deliver outstanding entertainment for our operators’ customers. This snowball effect seems, if anything, to be gathering momentum. The single ‘Powered by Microgaming’ logo has become a badge that operators covet and that players are gravitating toward, making it a win, win for all. As we move forward this logo will become an even more instantly recognisable badge of quality, assurance and, most of all, excitement and thrilling gameplay. Our industry is talked of in terms of superlatives of exponentially increasing revenues and player numbers hitherto, but the real story is in superlatives of game development achievement and speed to a rapidly changing market.

GLOBAL ONLINE REGULATION

TIME IS RIGHT FOR INTERNATIONAL SAFEGUARDS BY BRIAN CULLINGWORTH

Common values and standards backed by a practical monitoring system is the best way to protect online gambling players and improve operational efficiency. In the meantime, the rest of the world and technology is likely to move on, opening up new markets that have a realistic and more progressive approach to regulation and giving the taxpayer what he or she wants - fair, honest and controlled online gambling from the comfort of home.

“For the betting industry, the need has never been greater for clear and coherent codes of practice and regulated legal frameworks in every territory around the world,” Mark Blandford, a top executive at London listed Sportingbet plc at an industry function recently. His words have considerable resonance in a global industry like online gambling, where there are wide disparities in the gambling policies and requirements of national governments that can leave the most important person in the business - the online player - unnecessarily vulnerable and frustrated. The fragmented and confusing regulatory status quo of the online gambling world was a raison d’etre for the formation of eCommerce and Online Gaming Regulation and Assurance (eCOGRA) in 2003, with a principal mission to protect players through formalised standards of customer service, gaming fairness and operational efficiency that could be successfully applied across international borders by major Internet gambling groups.

>> Totally unsubstantiated allegations by badly informed politicians that (selected types of) online gambling carry the potential to aid terrorists, organised crime or money laundering, or damage the lives and morals of Americans, blithely ignore the facts that online gambling is probably the most trackable, technologically audit-intensive and FATF compliant industry around >>

Casino & Gaming International ■ 31

GLOBAL ONLINE REGULATION

This ‘privatised’ approach to self-regulation is funded by competing software providers in a unique development for the industry that has the player front-of-mind, and is open to all. Obtaining consensus on what the most practical and effective standards and safeguards should be in a dynamic environment remains an important goal for eCOGRA and one which is pursued with some vigour. Senior directors of the body regularly visit national jurisdictions with similar player protective priorities and genuine regulations, seeking commonality across geographic borders. It has worked well, and eCOGRA has shown that it is generous in sharing the information and systems that it has built up with the help of expert international consultation and experience with jurisdictions that are serious about the obligations attached to regulating online gaming operations. Obligations such as sensitivity to player disputes and real and effective monitoring and enforcement techniques. Late last year this outreach programme produced its first fruit with an agreement with the Kahnawake Gaming Commission that accepted the validity of the eCOGRA procedures in relation to software fairness and exempted license applicants from additional inspection in this regard. Kahnawake, with over 300 sites on its books is one of the largest of the licensing jurisdictions and has a large modern complex situated in the Quebec province of Canada. This initiative has subsequently been followed by similar arrangements with the Maltese LGA and First Cagayan in the Philippines. With 21 online poker rooms and 90 tier one online casinos using three major software platforms, eCOGRA is tangible proof that successful, widely disparate systems and competing corporate interests can be successfully brought together under one practical code of standards and conduct for the benefit of both the industry and the players on which it depends. The industry has now matured sufficiently for managements to understand and support the need for common values and practical standards and procedures for operational conduct, remembering always that the player should be the main focus if his or her interest and support is to be maintained. By going the extra mile in terms of genuinely enforced standards, online gaming companies can not only do a better job of looking after and retaining the customer, but can distinguish themselves from operators with lesser ambitions, thus attracting more business. With maturity, the industry has become a different and substantially more competitive environment. The much anticipated consolidation is increasingly in evidence with merger and acquisition activity growing and the evolution of billion dollar companies. Players are more knowledgeable and communicate widely with each other, portals are more proactive and educational and yesterday’s start-ups are today’s well established and reputable businesses with a firm grasp of the critical synergy that associates sound customer relationships with continued prosperity. Truly committed companies strive to distinguish themselves from the bottom feeders that are shortsighted enough to believe that cheating players is the way to fast profits. Reinforcing the difference is partly achieved through credible regulation that is enforced, giving the player a true 32 ■ Casino & Gaming International

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assurance of safe, fair and honest gambling and reliable payouts, supported by working dispute resolution channels. Increasing numbers of top end casinos and poker rooms have recognised this reality and taken licenses in jurisdictions with gravitas – many of them in Europe. The need for consistent and credible regulation is very real and essential to business success, and the scene is set for productive dialogue between genuine jurisdictions with player protection as a core objective. eCOGRA has recently launched the largest independent global player survey ever attempted in online gambling to refine its understanding of player requirements and attitudes, but areas where standards and monitored procedures are critical include: ■ Games fairness ■ Accounting and payout efficiencies ■ Customer service, 24/7 support and respect ■ Ethical and professional marketing and promotional activity ■ Responsible gambling advisory measures ■ Systems efficiency ■ Dispute resolution channels Fortunately, the industry has made some regulatory progress in its short life of just over a decade. Blandford rightly saluted the outstanding progress of the British government in reforming UK gambling and bringing its latest variation - online or remote gambling - into the legal and taxation fold. This is being achieved through a process that has featured an impeccably organised and consultative approach to stakeholders at every level in the business. The Gambling Commission will control UK domiciled operators through a well-researched and practical set of regulations and standards not dissimilar to those applied at eCOGRA “Play It Safe” seal operations. The British are not alone in taking a realistic line on Internet gambling; the Irish government Minister for Justice, Equality and Law Reform, Michael McDowell TD, announced recently that the Irish government has agreed his proposals for the establishment of a committee (the Casino Regulation Committee) to report on the possibilities for the strict regulation of casino-style operations in the State. Internet gaming is included in the brief. The Minister said: “The unregulated nature of casinostyle activities is a major concern of the Government. The establishment of this Committee is a major step towards addressing this situation and I look forward to the report of the Committee in the coming months. I expect that the legislative proposals will bring about strict regulation over the establishment of and operation of casinos while ensuring that public and local interests are served.” Headed by Michael McGrath, the Casino Regulation Committee will submit its report to the Government by the end of October, hopefully leading to a process not dissimilar to that followed by the country’s neighbour across the Irish Sea. Clearly Europe has a more progressive approach to the question of online gambling, an extremely popular and growing form of entertainment that technology has made available across traditional geographic barriers. Some of the most serious online licensing and regulatory national bodies in the region, such as Gibraltar, Alderney, the Isle of Man and Malta have made good progress in recent years in Casino & Gaming International ■ 33

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introducing real, practical requirements and efficient infrastructures. By contrast, with exceptions like Antigua, Kahnawake in Canada and First Cagayan in the Philippines, the Americas have been the disappointing money-making epicentre for many small “flag of convenience” jurisdictions. These offer the player little if any practical protection and display a curiously insensitive and disinterested attitude to player attempts to complain about bad treatment meted out by licensees. There are over 76 different jurisdictions offering online gambling licenses, an indication of how confusing this aspect can be for the average online player. One of the biggest hosts for online gambling operators, Costa Rica has still not developed a real and effective online gambling licensing infrastructure at all! The legalisation of cross-border online gambling takes on even more complexity when it comes to the monopolistic interests of national governments within the European Union. With many billions at stake in state-dominated casino, sports and lottery monopolies many of the major nations in the EU seem to have turned their backs on the founding free-trade principles of the EU - that member states have the crossborder freedom to offer goods and services without hindrance. Excuses that these nations seek to protect the moral welfare of their citizenry ring deeply hollow when the governments themselves are offering gambling facilities! Countries such as France, Holland and Germany could soon find themselves on the sharp end of a European Commission legal action following numerous complaints by major EU gambling groups frustrated by the refusal of these states to share some of the pie in a fair and competitive manner. Even more recently, the Italians have apparently made an astonishing volte face. Having previously defended state monopolies by keeping other EU suppliers out, even to the extent of forcing ISPs to blockade sites the Amministrazione Autonoma dei Monopoli di Stato (AAMS) has now opened

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tenders to would-be gambling operators with a view to legalising this form of online entertainment as early as January 2007. The biggest surprise to most industry observers, however has been the obtuse political stand against online gambling taken by legislators in the most technologically advanced and player-rich market segment of all - the United States of America. The insistence that online gambling is undesirable and perhaps even illegal has meant that the industry has largely structured itself off the shores of the USA whilst still achieving record revenues from the millions of American online players. A complex legal system which has both federal and individual state legislative and enforcement authority serves to complicate matters. The Internet and its supporting payment and other delivery technologies has made this 21st century entertainment form possible and accessible without international companies having to have a presence on US soil at all. That means that these companies have hitherto been effectively beyond the reach of US jurisdiction. For the past decade a succession of conservative American politicians has laboured mightily to prohibit rather than regulate and tax online gambling, eschewing billions in revenues by doing so, and certainly doing little to protect American players. Totally unsubstantiated allegations by badly informed politicians that (selected types of) online gambling carry the potential to aid terrorists, organised crime or money laundering, or damage the lives and morals of Americans, blithely ignore the facts that online gambling is probably the most trackable, technologically audit-intensive and FATF compliant industry around. Much of the proposed US legislation over the years has smacked of commercial protectionism and hypocrisy, with glaring online exceptions (called “carve-outs”) for everything from horse racing and tribal casinos to fantasy sports and state lotteries. When it comes to land gambling establishments, the USA has more than most countries in terms of riverboat, tribal and big business casinos, and many state lottery monopolies, giving the lie to politicians who claim the right to tell Americans where they can, or cannot, gamble. The unique American political system of wheeling and dealing, lobbying and associating completely unrelated issues to one another in procedural manouevreing confuses many outsiders who do not realise that the industry has at times become a political football for legislators pandering to hard right religious and conservative bodies in election races. With an antiquated Wire Act of 1961 contributing to the confusion, enforcement bodies at both federal and state levels have indulged in some high profile actions recently that seemed to turn more on the scare factor than the letter of the law. A good example was the Department of Justice action a year or more ago when the authorities ruined millions of dollars worth of online gambling advertising contracts by “advising” US-based media that it might be committing an offence by carrying advertisements for online gambling companies. When federal authorities send that sort of message it’s a brave publisher that ignores the implied warning despite the tenuous legal nature of the “advice.” And the issue was never

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tested in a court of law – media owners simply backed off. More recently respectable British businessmen involved with publicly traded and reputable online gambling groups have been waylaid when in the USA and deprived of their liberty. This was done on US charges emanating from covert entrapment investigations leading to grand jury or state proceedings and sealed warrants lying in wait for unsuspecting visitors to the country. The “unofficial” impact of these tactical enforcement moves has been costly and immediate, with billions wiped off the stock value of the companies concerned and others in the sector. It has intimidated international businessmen from frequenting the United States on legitimate business....and all (so far) without a democratic process testing the allegations made by authorities in a court of law. This new approach by US law enforcement has been adopted by French authorities too, who recently arrested two top executives from the Austrian public company Bwin who were introducing a sponsorship for a Monaco football team. American legislators have largely approached this $12 billion international business with prohibition rather than regulation uppermost in their minds. Prohibition is rarely effective, and this is especially so when it concerns a very popular and accessible entertainment like online gambling that knows no physical boundaries. Numerous tier one online gambling companies have actively lobbied the Americans to legalise, regulate and tax online gambling, and one has to at least suspect that an element of commercial protectionism lies behind the refusal to even consider the possibility of a course that could not only protect players more effectively, but make significant contributions to state coffers in the process. The argument that the moral well-being of Americans motivates political attempts to ban online gambling is simply not credible in a country of diverse states where almost every other form of gambling known to man is available to one extent or another. Setting the regulatory headlines afire recently has been the intense political manouevreing surrounding the latest banning attempt in the USA. Conservative politicians used every political pressure point and trick in the book to push a combined Leach and Goodlatte Bill through the House of Representatives, ignoring pleas that a bi-partisan congressional investigating committee (a concept supported even by the US land gambling interests) might be a good idea first. The resultant legislation targeted the financial channels used in online gambling and tried to update the Wire Act and went to the Senate, where it languished due to opposition from various interest groups. With the end of the 109th Congressional sessions on the horizon and no sign of progress through the Senate, senior conservative politicians resorted to the procedural channels within the US legislative system that allow totally unrelated bills to be passed by being attached to “must pass” bills. Having been rebuffed by the sponsors of a defence spending bill, the anti-online gambling legislators finally managed to attach a compromise proposal to a Port Security bill, and for the first time in a decade managed to get this questionable legislation, carve-outs intact, approved and on to the President’s desk for signing into law. The implications are likely to be costly in

implementation, if indeed the US banks on whom the burden of enforcement falls can meet the politicians’ expectations. Department of Justice and Federal Bank officials now have 270 days to study how the new law can be implemented something one would have thought was essential homework prior to introducing the measure in the first place. American attempts to hamstring online gambling financial channels have the potential to be damaging for the industry but are unlikely to do no more than slow its growth, presently at annual revenue levels of around $12 billion. European and Asian markets are being addressed, and South America and Africa are the subject of study too. There is a distinct possibility that the USA will arrive at the intriguing situation of being home to the greatest number of enthusiastic Internet gamblers in the world, but one of the few countries to prohibit this borderless activity. Will American gamblers be well served by these attempts to cut them off from the rest of the world? Probably not…as many experts have pointed out prohibitions tend to drive the target underground where unregulated and unscrupulous operators could take advantage of Americans determined to continue gambling online. This vast and lucrative US market that is demanding the freedom to gamble online will undoubtedly already have the close attention of the well established and strictly regulated American land casinos and poker rooms. But if the authorities remain obdurate in their attempts to outlaw online gambling, their participation (and the safety it brings to the American player) will be frustrated, leaving the field to others. Already rigidly regulated and controlled, it should not come as a surprise when this Las Vegas and Atlantic City powerhouse starts pushing for regulated online gambling for US online players and the abandonment of the totally unproductive prohibition approach. But that will lie in the future. In the meantime, the rest of the world and technology is likely to move on, opening up new markets that have a realistic and more progressive approach to regulation and giving the taxpayer what he or she wants - fair, honest and controlled online gambling from the comfort of home.

BRIAN CULLINGWORTH Brian Cullingworth is Senior Partner at InfoPowa News, a popular online gambling industry executive news service. A marketing and communications graduate he has been involved in the industry since 1996 in senior management positions as an operator of online casinos, a consultant on setting up online casinos and marketing same and latterly as a provider of industry news and business intelligence. He has wide mediating experience in player-casino disputes. Prior to entering the industry he enjoyed a distinguished career as marketing director for a major international diamond company. He is a former president of both Rhodesian and South African professional management bodies.

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WHAT CAN LOOKING AT THE PAST TELL US ABOUT THE FUTURE? BY MARK GRIFFITHS

“The best way to keep something from happening is to see it ahead of time…you can’t see it if you refuse to face the possibility” (William Burroughs, 1990; Foreword to J.G. Ballard’s Atrocity Exhibition, 1990). For many years, I have been speculating about the future of gambling in my various writings. The opening quote has guided my philosophy in the art of speculation in the field of

ack in 1998, I gave a paper at the annual GamCare Conference where I speculated what the major world gambling trends would be over the next decade1. This section briefly overviews these global trends. I noted these trends included (i) gambling coming out of gambling environments, (ii) the increased use of technology in gambling activities, (iii) gambling becoming a more asocial activity and (iv) widespread deregulation and increased opportunities to gamble2.

Gambling coming out of gambling environments: The UK National Lottery was introduced in November 1994. One of the hidden impacts since the introduction of the UK National Lottery was that this was a widespread act of gambling that had been taken out of the gambling environment on a national scale. Pre-National Lottery, legal gambling mainly took place in betting shops, casinos,

gambling studies. Many academics shun this type of activity because it does not involve the direct use of empirical evidence on which to base their assertions. However, I believe that this form of ‘crystal ball gazing’ is a useful activity and should be encouraged. In this article I aim to look back at some of the speculations that I have made and examine to what extent they have come to fruition.

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amusement arcades and bingo halls. Admittedly, there were exceptions including the football pools and fruit machines on single site premises. However, gambling can now be done in a wide variety of retail outlets. It is also clear that the newer forms of gambling (such as Internet gambling) are activities that are done almost exclusively from non-gambling environments - usually the home or the workplace. The increased use of technology in gambling activities: Technology has always played a role in the development of gambling practices. I have argued that gaming is driven by technological advance and these new technologies may provide many people with their first exposure to the world of gambling. Furthermore, to some people they may be more enticing than previous non-technological incarnations3. Technology is continuing to provide new market opportunities not only in the shape of Internet gambling but also in the shape of more technologically advanced slot machines and video lottery terminals, interactive television gambling, and mobile phone gambling. In addition, other established gambling forms are becoming more technologically driven (e.g. bingo, keno). Gambling becoming a more asocial activity: I have argued that one of the consequences of increased use of technology has been to reduce the fundamentally social nature of gambling to an activity that is essentially asocial (e.g. slot machine gambling, video poker, etc.). My research has shown that there are many different types of player based on their primary motivation for playing (e.g. to escape, to beat the machine, for social rewards, for excitement etc.)4. Those who experience problems are more likely to be those playing on their own (e.g. those playing to escape). A study by the UK Home Office5 also made the point that those people who played in groups often exerted social influence on problem gamblers in an effort to reduce the problems faced. Retrospectively, most problem gamblers report that at the height of their problem gambling, it is a solitary activity4. Gambling in a social setting could potentially provide some kind of “safety net” for over-spenders, i.e., a form of gambling where the primary orientation of gambling is for social reasons with the possibility of some fun and chance to win some money (e.g. bingo). However, I have speculated that those individuals whose prime motivation is to constantly play just to win money would possibly experience more problems. The shift from social to asocial forms of gambling shows no sign of abating. It could therefore be speculated that as gambling becomes more technological, gambling problems may increase due to its asocial nature. Widespread deregulation and increased opportunities to gamble: Gambling deregulation is now firmly entrenched within Government policy not only in the UK but worldwide. The present situation of stimulating gambling in the UK appears to mirror the previous initiations of other socially condoned but potentially addictive behaviours like drinking (alcohol) and smoking (nicotine). As gambling laws become more relaxed and gambling becomes another product that can be more readily advertised (i.e. “stimulated”) it will lead to a natural increase in uptake of those services. This in itself will lead to more people who experience gambling problems (although this may not be directly proportional) because of the proliferation of gaming establishments and relaxation of 38 ■ Casino & Gaming International

legislation3. What has been clearly demonstrated from research evidence in other countries is that where accessibility of gambling is increased there is an increase not only in the number of regular gamblers but also an increase in the number of problem gamblers6. In summary, all of the global trends that I first outlined in 1998 have continued worldwide. If anything, the gaming industry is becoming “technologised” in a way that goes way beyond what I first predicted. This has led to an increase in gambling coming out of gambling environments, increased asociability in gambling, and increased access and opportunity to gamble.

SPECULATIONS ABOUT INTERNET GAMBLING In my early writings on Internet gambling, my colleagues and I predicted Internet gambling would take off for several reasons3,7,8. At a very basic level, we argued that gambling in these situations was easy to access as it comes into the home via computer and/or television. I also made the point that Internet gambling had the potential to offer visually exciting effects similar to a variety of electronic machines. Furthermore, virtual environments have the potential to provide short-term comfort, excitement and/or distraction for its users. However, I also argued that there were a number of other more important factors that make online activities like Internet gambling potentially attractive, seductive and/or addictive. Such factors include anonymity, convenience, escape, dissociation / immersion, accessibility, event frequency, interactivity, disinhibition, simulation, and asociability9. Outlined below are some of the main variables that I believed accounted for acquisition and maintenance of some online behaviours. Accessibility - Access to the Internet is now commonplace and widespread, and can be done easily from the home and/or the workplace. Given that prevalence of behaviours is strongly correlated with increased access to the activity, it is not surprising that the development of regular online use is increasing across the population. Increased accessibility may also lead to increased problems. Fundamentally, increased accessibility of gambling activities enables the individual to rationalise involvement in the ‘risk-behaviour’, by removing previously restrictive barriers such as time constraints emanating from occupational and social commitments. With reductions in time required to select, place wagers and collect winnings, gambling as a habitual activity appears more viable, as social and occupational commitments are not necessarily compromised. Affordability - Given the wide accessibility of the Internet, it is now becoming cheaper and cheaper to use the online services on offer. Although very excessive use will still lead to large monthly bills for those who pay by the minute, for most people the cost compared to either a telephone call and/or postage will be cheap to moderate. Furthermore, as access to the Internet increasingly becomes an integral part of our occupational, educational and social lives, free access to Internet outside the home is becoming more and more prevalent (e.g. workplace, higher education institutions and public libraries), and therefore, to an extent, removing affordability as a primary barrier to engaging in online gambling. The overall cost of gambling has been reduced

ONLINE GAMING significantly through technological developments, again, effectively rendering affordability less of a restrictive force when it comes to rationalising involvement in the behaviour. For example, the saturation of online gambling industry has lead to increased competition, and the consumer is benefiting from the ensuing promotional offers and discounts available on gambling outlay. Regarding interactive wagering, the emergence of peer-to-peer gambling through the introduction of betting exchanges has provided the customer with commission free sporting gambling odds, which in effect means the customer needs to risk less money to obtain potential revenue. Finally, ancillary costs of face-to-face gambling, such as parking, tipping and purchasing refreshments, is removed when gambling within the home and therefore the overall cost of gambling is reduced making it more affordable.

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Escape - For some, the primary reinforcement to engage in Internet gambling will be the gratification they experience online. However, the experience of Internet gambling itself, may be reinforced through a subjectively and/or objectively experienced “high.” The pursuit of mood-modificating experiences is characteristic of addictions. The moodmodificating experience has the potential to provide an emotional or mental escape and further serves to reinforce the behaviour. Excessive involvement in this escapist activity may lead to addiction. A recent study identified that gambling to escape was the primary motivator for problem gamblers’ continued excessive gambling11. Online behaviour can provide a potent escape from the stresses and strains of real life.

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Immersion/Dissociation - The medium of the Internet can provide feelings of dissociation and immersion and may

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Convenience - Interactive online applications such as e-mail, chat rooms, newsgroups, or role-playing games provide convenient mediums to engage in online behaviours. Online behaviours will usually occur in the familiar and comfortable environment of home or workplace thus reducing the feeling of risk and allowing even more adventurous behaviours that may or may not be potentially addictive. For the gambler, not having to move from their home or their workplace may be of great positive benefit.

Anonymity - The anonymity of the Internet allows users to privately engage in gambling without the fear of stigma. This anonymity may also provide the user with a greater sense of perceived control over the content, tone, and nature of the online experience. Anonymity may also increase feelings of comfort since there is a decreased ability to look for, and thus detect, signs of insincerity, disapproval, or judgment in facial expression, as would be typical in face-to-face interactions. For activities such as gambling, this may be a positive benefit particularly when losing as no-one will actually see the face of the loser10. Anonymity, like increased accessibility, may reduce social barriers to engaging in gambling, particular skillbased gambling activities such as poker that are relatively complex and often possess tacit social etiquette. The potential discomfort of committing a structural or social fauxpas in the gambling environment because of inexperience is minimised because the individual’s identity remains concealed.

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facilitate feelings of escape (see above). Dissociation and immersion can involve lots of different types of feelings. This can include losing track of time, feeling like you’re someone else, blacking out, not recalling how you got somewhere or what you did, and being in a trance like state. In extreme forms it may include multi-personality disorders. All of these feelings when gambling on the Internet may lead to longer play either because “time flies when you are having fun” or because the psychological feelings of being in an immersive or dissociative state are reinforcing. Disinhibition - This is clearly one of the Internet’s key appeals as there is little doubt that the Internet makes people less inhibited. Online users appear to open up more quickly online and reveal themselves emotionally much faster than in the offline world. For the gambler, being in a disinhibited state may lead to more money being gambled, particularly if they are motivated to maintain their initial persona (e.g., as a skilful online poker player). Event frequency - The event frequency of any gambling activity (i.e. the number of opportunities to gamble in a given time period) is a structural characteristic designed and implemented by the gaming operator. The length of time between each gambling event may indeed be critical as to whether some people might develop problems with a particular type of gambling. Obviously gambling activities that offer outcomes every few seconds or minutes (e.g., slot machines) will probably cause greater problems than activities with outcomes less often (e.g., weekly lotteries). Rapid event frequency also means that the loss period is brief

with little time given over to financial considerations and, more importantly, winnings can be re-gambled almost immediately. Furthermore, the event frequency can be very rapid, particularly if the gambler is subscribed or visits several sites. Interactivity - The interactivity component of the Internet may also be psychologically rewarding and different from other more passive forms of entertainment (e.g., television). It has been shown the increased personal involvement on a gambling activity can increase the illusion of control that in turn may facilitate increased gambling. The interactive nature of the Internet may therefore provide a convenient way of increasing such personal involvement. Simulation - Simulations provide an ideal way in which to learn about something and which tends not to have any of the possible negative consequences. However, Internet gambling simulations may have unthought of effects. Many online gambling sites have a practice mode format, where a potential customer can place a pretend bet in order to see and practice the procedure of gambling on that site. Although this activity can not be regarded as actual gambling as there is no ‘real’ money involved, it can be accessed by minors and possibly attract an underage player into gambling. Also, gambling in practice modes available within the gambling website, may build self-efficacy and potentially increase perceptions of control in determining gambling outcomes motivating participation in their ‘real cash’ counterparts within the site. Asociability - As mentioned above, one of the major influences of technology appears to be the shift from social to asocial forms of gambling. From this it could be speculated that as gambling becomes more technological, gambling problems will increase due to its asocial nature. However, it could also be argued that for some people, the Internet (including online gambling) provides a social outlet that they would not otherwise have. This is particularly true for women who may feel uncomfortable going out on their own, unemployed people, and retired people. Furthermore, because of the apparent vacuous social component within remote gambling, work carried out by our research unit10 has emphasised that alternative methods of peer interaction are available within interactive gambling activities that retain the socially reinforcing aspects of the behaviour. Individuals can communicate via computer-mediated communication (CMC) within the game itself and even post-gambling through involvement in online gambling web-communities. An increasing trend is for online gambling websites to provide a customer forum to facilitate peer interaction and therefore increase the social element of the game. Some firms even have introduced an Internet radio facility that entertains their customers as they gamble, while simultaneously drawing attention to significant winners within the site. Effectively, the structural design of remote gambling removes the social safety net that is integral to maintaining responsible gambling practice without reducing the socially rewarding aspects inherent in traditional gambling environments. Specific facilitating factors: Finally in this section it is worth noting that there are many other specific developments that look likely to facilitate uptake of remote

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MOBILE GAMING gambling services including (i) sophisticated gaming software, (ii) integrated e-cash systems (including multicurrency), (iii) multi-lingual sites, (iv) increased realism (e.g., “real” gambling via webcams, player and dealer avatars), (v) live remote wagering (for both gambling alone and gambling with others), (vi) improving customer care systems, and (vii) inter-gambler competition. All of these specific and generic factors appear to be important in the attraction of Internet gambling and current research appears to be supporting many of these previously speculated factors as being important to gamblers.

SPECULATIONS ABOUT CHANGING NATURE OF FAMILY ENTERTAINMENT Back in 2000 I made some speculations about the increase in and development of home entertainment systems and how they would change the pattern of families’ leisure activities8. I claimed the increase in and development of home entertainment systems would change the pattern of many families’ leisure activities. I said that the need to seek entertainment leisure outside the home would be greatly reduced as digital television and home cinema systems offer a multitude of interactive entertainment services and information. I claimed many families would adopt a leisure pattern known as “cocooning” where the family or individual concentrates their leisure time around in-house entertainment systems. Rather than going out, the entertainment comes to them direct via digital television and Internet services. Part of this entertainment for many families could be Internet gambling. So what evidence is there that this is happening? To date there has been very little research on Internet gambling in young people. Only one UK study carried out by MORI and my own International Gaming Research Unit12 has examined this issue and this only related to use of National Lottery products online. In order to ascertain their experience of gambling on the Internet, young people (over 8000 12-15 year olds) were asked ‘Have you ever played any National Lottery game on the Internet?’ Eight percent of young people aged 12 to 15 years said they had played a National Lottery game on the Internet. Boys were more likely than girls to say they had played National Lottery games on the Internet (10% and 6%, respectively). Not surprisingly, young people classified as ‘problem gamblers’ were more likely than ‘social gamblers’ to have played a National Lottery game on the Internet (37% compared with 9%). When asked which of a series of statements best describes how they played National Lottery games on the Internet, nearly three in ten of these young people reported playing free games (29%), one in six reported that the system let them register (18%), slightly fewer played along with their parents (16%), and one in ten used their parent’s online National Lottery account either with their permission (10%), while (7%) played without their parents’ permission. However, it should be noted that a third of online players said they ‘couldn’t remember’ (35%). As noted above, problem gamblers are more likely than social gamblers to have played games online in the past week. This is an interesting finding. Problem gamblers may be more susceptible and/or vulnerable to gambling online and the fact that it provides convenience gambling is a cause for concern in this particular subgroup of gamblers. This is also an issue for adult problem gamblers, although their adolescence makes this group even more vulnerable. These

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more “hidden” methods of gambling may be more attractive to problem gamblers, particularly if gambling is an activity they prefer to do asocially rather than with friends. In addition, once an adolescent has managed to get through age verification systems and register, they can gamble again repeatedly; this differs from offline facilities, where adolescents will have to deceive the ‘gatekeepers’ on each separate visit. In the present survey, 17% of those who had played the lottery on the Internet had accessed their parents’ accounts (either with or without their permission). My claim that some adolescents will gamble along with their parents on the Internet has some empirical backing although it seems to be occurring as a minority activity among adolescents. I should perhaps say that I have also made speculations about technological addictions and the psychosocial impacts of Internet gambling. However, I discussed these issues at length in a previous issue of Casino and Gaming International 13 and will not repeat them here. In summary, most of the speculations that I have made over the last 10 years in relation to issues such as impact on vulnerable groups, unscrupulous operators, behavioural tracking, etc., are still high on the social responsibility agenda. If anything, these issues have increased in importance over the last few years.

AREA OF GROWING INTEREST IN INTERNET GAMBLING In addition to the many speculations that I have made over the last decade in relation to Internet gambling, there are many things that I have not predicted would be areas of growing interest. These include (i) the rise of online poker and betting exchanges, (ii) gender swapping online and the rise of female Internet gambling, (iii) Internet gambling in a multi-media world, and (iv) technological help for problem gamblers. One of these areas (Internet gambling in a multi-media world) was discussed at length in a previous article in Casino and Gaming International 14 and will not be discussed here. I will briefly examine the three remaining areas. Online poker and betting exchanges: Two of the fastest growing forms of online gambling are in the areas of online poker and online betting exchanges. I have speculated there are three main reasons for the growth in these two particular sectors15. Firstly, they provide excellent financial value for the gambler. There is no casino house edge or bookmakers’ markup on odds. Secondly, gamblers have the potential to win because there is an element of skill in making their bets. Thirdly, gamblers are able to compete directly with and against other gamblers instead of gambling on a preprogrammed slot machine or making a bet on a roulette wheel with fixed odds. However, one of the potential downsides to increased competition is recent research highlighting that problem gamblers are significantly more likely to be competitive when compared to non-problem gamblers16. Our research unit has also speculated other factors that have aided the popularity of online poker17. These include (i) social acceptability of this type of gambling, (ii) promotion through televised tournaments often with celebrity players, (iii) 24/7 availability, (iv) the relative inexpensiveness of playing, and (v) the belief that this is predominantly a game of skill that can be mastered. Gender swapping and the rise in female Internet gambling: A recent study by our research unit17 reported the 42 ■ Casino & Gaming International

phenomenon of gender swapping in 422 online poker players (sixty of which were female players). More female players (20%) in our study reported swapping gender when playing compared to males (12%). Typical reasons that female participants gave as to why they did this were that they believed other males would not take them so seriously if they knew they were playing against a woman. It also gave them a greater sense of security as a lone woman in a predominantly male arena. Males and females clearly had different motivations for gender swapping. For males it was a tactical move to give them a strategic advantage. For females it was more about acceptance or privacy in what they perceived to be a male dominated environment. Similar findings have been reported in relation to online computer game playing. In more general terms, the apparent rise in female Internet gambling is most likely because the Internet is a genderneutral environment. The Internet is seen as less alienating and stigmatising medium when compared to male-dominated environments such as casinos and betting shops18. Technological help for problem gamblers: Much of this article has discussed the potential downside of technological innovation. However, one area that was not predicted a decade ago is the use of technology in the prevention, intervention, and treatment of problem gambling. For instance, technology is now being used for health promotion using the Web, video games, and/or CD-ROMs. Internet gambling sites are beginning to feature links to relevant gambling awareness sites. For those sites that analyze their online behavioural tracking data, it may be the case that such data could be used to identify problem gamblers and help them rather than exploit them. Finally, help in the form of online therapy (such as online counseling) may be an option for some problem gamblers19. For instance, a recent evaluation of GamAid (an online advice service) showed that clients were very positive about the service and that Internet gamblers were more likely to access the service than nonInternet gamblers20.

CONCLUSION Many (if not most) of the speculations and predictions that I have made over the last decade appear to have proved broadly correct. The omissions or non-predictions appear to be more to do with developments in a fast-changing media that few would have been able to predict. I would argue that academics (and other interested parties) should continue to speculate in the absence of empirical data as it may have implications for policy, research, intervention and treatment. As can be seen from this short article, many of the things I have speculated about have grown in importance over the last decade, and that examining potential impacts in this area has helped interested stakeholders in planning for the future.

REFERENCES 1

3 4

Griffiths, M.D. (1998, May). Gambling into the new Millennium: Issues of potential concern. Invited paper presented to GamCare National Conference, London. Griffiths, M.D. (2001). Gambling market and supporting services for pathological gamblers in Great Britain. In I. Fuchtenschneider & K. Hurrelmann (Eds.), Glucksspeil in Europa (Gambling in Europe). pp.84102. Geesthacht: Neuland. Griffiths, M.D. (1999). Gambling technologies: Prospects for problem gambling. Journal of Gambling Studies, 15, 265-283. Griffiths, M.D. (1995). Adolescent Gambling. London: Routledge.

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Graham, J. (1988). Amusement machines: Dependency and delinquency. (Home Office Research Study No. 101). London: HMSO. Griffiths, M.D. (2003). Problem gambling. The Psychologist: Bulletin of the British Psychological Society, 16, 582-584. Griffiths, M.D. (1996). Gambling on the Internet: A brief note. Journal of Gambling Studies, 12, 471-474. Griffiths, M.D. & Wood, R.T.A. (2000). Risk factors in adolescence: The case of gambling, video-game playing and the internet. Journal of Gambling Studies, 16, 199-225. Griffiths, M.D. (2000). Does Internet and computer â&#x20AC;&#x153;addictionâ&#x20AC;? exist? Some case study evidence. CyberPsychology and Behavior, 3, 211-218. Griffiths, M.D., Parke, A., Wood R.T.A. & Parke, J. (2006). Internet gambling: An overview of psychosocial impacts. Gaming Research and Review Journal, 27(1), 27-39. Wood, R.T.A. & Griffiths, M.D. (2006). A qualitative investigation of problem gambling as an escape-based coping strategy. Psychology and Psychotherapy: Theory, Research and Practice, in press. MORI/International Gaming Research Unit (2006). Under 16s and the National Lottery. London: National Lottery Commission. Griffiths, M.D. (2006). Is Internet gambling more addictive than casino gambling? Casino and Gaming International, 2 (January), 85-91. Griffiths, M.D. (2006). Impact of gambling technologies in a multi-media world. Casino and Gaming International, 2 (July), 15-18. Griffiths, M.D. (2005a). Online betting exchanges: A brief overview. Youth Gambling International, 5(2), 1-2. Parke, A., Griffiths, M.D. & Irwing, P. (2004). Personality traits in pathological gambling: Sensation seeking, deferment of gratification and competitiveness as risk factors, Addiction Research and Theory, 12, 201212. Wood, R.T.A., Griffiths, M.D. & Parke, J. (2006). The acquisition, development, and maintenance of online poker playing in a student sample. CyberPsychology and Behavior, in press. Griffiths, M.D. (2001a). Internet gambling: Preliminary results of the first UK prevalence study, Journal of Gambling Issues, 5. Retrieved 13 November 2005 from: http://www.camh.net/egambling/issue5/research/griffiths_article.html Griffiths, M.D. & Cooper, G. (2003). Online therapy: Implications for problem gamblers and clinicians, British Journal of Guidance and Counselling, 13, 113-135. Wood, R.T.A. & Griffiths, M.D. (2006). Helping problem gamblers online: An evaluation of Gam-Aid. Report prepared for the Responsibility in Gambling Trust.

MARK GRIFFITHS Dr. Mark Griffiths is Professor of Gambling Studies at the Nottingham Trent University. He is internationally known for his work into gambling and gaming and was the first recipient of the John Rosecrance Research Prize for Outstanding scholarly contributions to the field of gambling research in 1994, winner if the 1998 CELEJ Prize for best paper on gambling and the 2003 winner of the International Excellence Award for outstanding contributions to the prevention of problem gambling and the practice of responsible gambling. He has published over 150 refereed research papers, two books, numerous book chapters and over 350 other articles. In 2004 he was awarded the Joseph Lister Award for Social Sciences by the British Association for the Advancement of Science for being one of the UKs outstanding scientific communicators.

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REGIONAL FOCUS: AFRICA

MILESTONES IN A REMARKABLE DECADE OF SOUTH AFRICA’S CASINO REGULATION BY DEREK AURET

Over this first decade of South Africa’s new gambling dispensation, we have been fortunate to have escaped the adversarial relationship between regulators and industry which exists in certain other jurisdictions. This is not a mere accident of history, but the outcome of a constructive engagement between government and industry which recognises the salient importance of our industry’s proven ability to contribute positively to socio-economic development through new investment, employment creation, and the provision of new non-gambling tourism infrastructure.

his year is the tenth since South Africa introduced its ground-breaking new gambling dispensation, which happened with the passage of the 1996 National Gambling Act, and it is appropriate to review the progress of the industry, and the jurisdiction, over that time. Those familiar with South Africa will attest that its casino industry has been remarkably successful. It has been responsible for more than $2.5 billion in new investment in all nine provinces, adding more than $6 billion to GDP in terms of economic multipliers. The industry has created almost 100,000 direct and indirect jobs, and in 2005 alone accounted for over $300 million in provincial gaming taxes and VAT which, together with company tax, contributed to $450 million to overall government revenue. Casinos account for more than 83% of all gambling taxes paid to government, according to the National Gambling Board. It is thus a significant industry by any yardstick, and in particular, it is a key component of South Africa’s tourism and leisure industry. In recent years, our members have invested heavily in infrastructure and tourism plant, including two new international convention centres, and over 5,000 new hotel rooms, for example, and a wide range of other public interest projects and spending, as various as internationally-known golf courses, new roads, eco-tourism facilities, airport redevelopment, museums, and wellness centres, to mention but a few. And our 33 casinos have also generated substantial returns for our shareholders. Particularly in the last five years, casinos in South Africa have performed extremely well on the back of a buoyant local economy, with gross gaming revenue growing from $843 million in 2003 to $1.68 billion in 2006. Just in the past 12 months, turnovers have increased by up to

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>> Although there have been many milestones over the past decade, perhaps the one that stands out the most is the degree to which Government and the industry have succeeded in forging a collaborative partnership that has led to South Africa’s ability to boast one of the world’s most ethical and socially-responsible gambling regimes >> 20%, in some cases, with EBITDA up by more than 25% in many instances.

to South Africa’s ability to boast one of the world’s most ethical and socially-responsible gambling regimes.

A VERY DIFFERENT INDUSTRY POST 1996

THE NEED FOR SENSIBLE PUBLIC POLICY

The gambling industry in our country today bears little resemblance to that which existed prior to the introduction of that legislation in 1996. Before 1996, the industry was primarily resort-based and located in rural areas, the most notable example of which was Sun City, of course. Additionally, in our cities and towns there was a flourishing illegal industry of up to 150,000 machines, in contrast to the 8,000 in our self-regulated rural resorts at that time. But with the re-incorporation of the homelands into South Africa, and given the huge illegal industry in urban areas, there was clearly a need after the advent of our new democracy for a rationalisation of the industry and for appropriate regulation. The result was the 1996 National Gambling Act, subsequently replaced by the Act of 2004. Although there have been many milestones over the past decade, perhaps the one that stands out the most is the degree to which Government and the industry have succeeded in forging a collaborative partnership that has led

One cannot speak of the success of our casino industry generally without placing that success story within the context of the development of public policy and hence the evolution of the South Africa state over the past decade. I believe this because the global experience of the gambling industry is that it flourishes and delivers a public good only where it constitutes a constructive partnership with government based on a mutually-beneficial policy framework. It is a universal habit of governments everywhere to justify their existence by an incessant process of regulation, law-making, policy reform and the identification of vacuums where their writ does not yet run. Fortunately, we have largely been spared this tendency in South Africa and the casino industry has been allowed to grow in a spirit of collaboration with government rather than in a climate of confrontation, mutual suspicion and antagonistic overregulation.

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Sol Kerzner’s Atlantis, Bahamas. The Kerzner’s - including Sol’s son Butch Kerzner until his recent untimely death - have long maintained a major economic contribution to South Africa

Internationally, the historic divide in the debate about gambling has been between an industry demanding the freedom to cater for humankind’s propensity to gamble and governments seeking to exercise maximum control over the activity in order to both share in its profits and appease public concerns. It is a debate which seeks to strike a balance between a complex array of vested interests, social values and economic priorities, and it occurs in an environment where ethical passions run particularly high and definitions of the public interest vary widely. The challenge that presently confronts policy makers in jurisdictions as diverse as Singapore and the United Kingdom, Russia and Canada, is to find the point of equilibrium between these oftenirreconcilable demands and to strike a balance between maximising the benefits to be derived from the gambling

industry and simultaneously limiting the social costs of gambling. However, the emerging global consensus is that because humankind’s urge to gamble is a reality and particularly prone to criminal or anti-social behaviour if forced underground, public policy must accept its inevitability and find ways of constraining rather than suppressing society’s instinctive desire to take risks and lay wagers. A consequence of this consensus is that - where it has gained public acceptance - commercial gambling is always a public-private sector partnership in which each party has a common interest in ensuring both that the industry is profitable over the long term and that it enjoys broad public approval, contributes to the economic well-being of nongamblers as well as of gamblers, and is not perceived as

>> The challenge that presently confronts policy makers in jurisdictions as diverse as Singapore and the United Kingdom, Russia and Canada, is to find the point of equilibrium between these often-irreconcilable demands and to strike a balance between maximising the benefits to be derived from the gambling industry and simultaneously limiting the social costs of gambling >> Casino & Gaming International ■ 47

REGIONAL FOCUS: AFRICA

exploitative and indifferent to negative social impacts. Before 1996, South Africa had no such constraints and the consequences were there for all to see, as they are today in much of Eastern Europe, where rampant criminality, money-laundering and corruption characterise the gambling industry in that part of the world. In South Africa, we have achieved this felicitous equilibrium because the tripartite alliance of government, industry and regulators has recognised – in both legislation and practice – that the public interest is best advanced through the co-operative governance of an industry that, if allowed to operate without restraint, has a considerable potential to cause social harm.

STATE INTERVENTION It is precisely because of gambling’s potential to do harm, that the gambling industry in South Africa is arguably subject to a higher degree of state intervention than any other business sector in the economy. At the same time, government’s effective 35% share of value-added in the casino sector means it is effectively the industry’s largest de facto shareholder. Equally, by virtue of its prescribed definition of the industry’s operating parameters, government is an important participant in the sector and is thus locked into a practical partnership with the private sector in this multibillion rand business. Where many jurisdictions still struggle to strike the necessary equilibrium, we have succeeded in forging an alliance that imposes on government and the industry alike the need to manage and advance a relationship in which we work constructively and transparently to deal with issues of mutual concern and interest. Out of this has emerged a matrix of mutual obligations and legitimate expectations which has delivered a regime that mixes state-imposed control and a good measure of self-control. But because it is a truism of any political order that policy changes over time and lawmakers come and go, there is always the danger that policy directions will shift and the rules of the game changed. And because international experience, notably in North America, teaches us that even the most enlightened and progressive governments are

eternally tempted to extend control, we in the industry must not only take care to meet our own commitments to successful partnership, but be vigilant if we are to hold Government to its side of the bargain. It is therefore in the interest of all of us that we should from time to time remind ourselves of the State’s optimum role in the management of a gambling industry. Of course nobody today questions whether the public interest demands a degree of regulation by government, but it seems to be indisputable that, if public benefits are to be secured, governments need to create a stable and consistent operating environment through an explicit planning and taxation framework which encourages investment and results in a sustainable industry. For that reason, there are several conditions which the casino industry should reasonably be able to expect from government if it is to be profitable and if it is to meet its obligations as a contributor to public benefit.

CONSISTENCY AND CERTAINTY ESSENTIAL The greatest enemy of any business – particularly one as capital-intensive and as prone to populist politics as the casino sector – is uncertainty. In this regard, it is important to bear in mind that the casino business is abnormally risky because markets are difficult to predict and the regulatory environment upon which profitability depends is subject to various types of political change. Consequently, because casino operators are as interested as any business undertaking in the ratio of return to risk on their investment, investors in casino projects require a higher than average return on their investment. For that reason, government may be reasonably expected to, at least ■ Provide operators with a degree of exclusivity in specific areas, so as to reduce the detrimental effects of unbridled competition; ■ Ensure the lowest possible costs of doing business, including realistic taxation rates, low licence fees and minimal regulatory costs; and ■ Guarantee security against unexpected and harmful changes of the rules. Government must be clear about policy objectives and offer consistent, predictable and well-defined criteria. Historically, governments have often regarded casinos as enticing and easily accessed sources of income and imposed abnormally large taxes on gambling revenues well in excess of normal consumption taxes such as VAT. While this clearly yields short-term economic benefit, it is essentially a political decision since it simply switches tax burdens from one section of the population to another and because gambling taxes are relatively unresented. Gamblers typically don’t notice that they are paying them since, for example, an additional 40% of taxation is the difference between a machine which pays out 95% and one which pays out 93%. Non-gamblers, on the other hand, are quite content that their taxes should be lower because those paid by gamblers are higher. In implementing such a fiscal strategy, however, there is a danger that governments will implement them in a shortsighted and self-defeating way - the main danger being that governments become unhealthily greedy. Such ravenousness leads them to ignore the fact that high taxes mean lower capital investment in non-gambling facilities which will attract increased tourism spend and produce much-needed public

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infrastructure. The levying of ever-higher taxes on more and more forms of gambling, as high as 70% as is happening presently in some US states, may well boost revenues in the short term. But it simultaneously raises the risk that people may seek cheaper gambling opportunity elsewhere, especially via the Internet. Given the growing variety of gambling types and an expanding range of public choice in the availability of gambling, it is arguable that government has a duty to guard against the over-provision of venues and machines that undermine a tightly-regulated legitimate casino sector. A recent example of the introduction of a degree of uncertainty into our sector has been the authorisation of realtouch bingo machines in the face of the declining financial fortunes of the bingo industry. In reality, these are no more than slot machines and their proliferation threatens to undercut the carefully-controlled slots sector of the casino industry. In the US, similar issues have arisen over “racinos”, where the horse racing industry has sought to buttress its declining fortunes by adding slot machines to its product offering. Developments such as these may undermine the democratic consensus that we should not have too much gambling and may lead to a backlash – as has happened in Canada with video lottery terminals – with the public demanding the reintroduction of various forms of prohibition. And this would be an unjust outcome for an industry which has demonstrably fulfilled in every respect the social and legal obligations that to which we are subject in terms of our licence conditions.

KNOWING AND SHARING THE FACTS

obvious than in the area of problem gambling. Recent experience has demonstrated how important it is that the industry should take a proactive rather than a reactive stance when it comes to problem gambling. When lawmakers in South Africa, for example, three years ago sought to introduce a range of new measures to deal with problem gambling, industry representations succeeded in removing from the new legislation many of its most undesirable features largely because we were able to demonstrate our determination to ensure that the integrity of the industry is maintained and that adequate systems are in place for addressing problem gambling effectively.

CONCLUSION Over this first decade of South Africa’s new gambling dispensation, we have been fortunate to have escaped the adversarial relationship between regulators and industry which exists in certain other jurisdictions. This is not a mere accident of history, but the outcome of a constructive engagement between government and industry which recognises the salient importance of our industry’s proven ability to contribute positively to socio-economic development through new investment, employment creation, and the provision of new non-gambling tourism infrastructure. Our task now is to develop the strengths of that partnership, to consolidate and cement its benefits and to add institutional weight to the structures and organisations through which we seek to obtain consensus about what is needed to ensure the sustainable health of the industry, which is in the interest of all its stakeholders, not least of which is government.

It is important at this point to re-emphasise the importance of research and empirical evidence in policy-formulation. The South African gambling industry has been meticulous in its monitoring of international best practice and is in constant interaction with the world’s leading academic and industry experts. It is, however, not always apparent that legislators or policy makers are as rigorous in their attempts to understand either the lessons of international research or the consequences of their threatened interventions in the business of the industry. All too often, anecdotal hearsay or unscientific prejudice are allowed to influence what should be a rational debate and create a climate which is not conducive to the establishment of a stable, predictable and coherent regulatory environment.

BEING RESPONSIBLE We in the South Africa casino industry recognise we are under an obligation to acknowledge Government’s facilitating role and honour the confidence it has place in us by demonstrating beyond question that we are responsible corporate citizens, and that we are reliable, accountable and reputable partners in the implementation of Government’s policy objectives, in our expenditure on social investment, and in the promotion of ethical, scrupulous and crime-free gaming conduct. In other words, we need to be seen to be serving the public interest, insistent in our conviction that we are accountable, not only to our shareholders, but to the broader South African society in which we operate. If we are to insist on our rightful place in the formulation of gambling policy, our reciprocal duties are nowhere more

DEREK AURET Derek Auret is CEO of the Casino Association of South Africa (CASA). He was formerly Chairman of the Western Cape Gambling and Racing Board and is a trustee of the South Africa Responsible Gambling Trust (SARGT).

Casino & Gaming International ■ 49

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CASINO DESIGN

EVERY BUILDING SHOULD TELL A UNIQUE STORY INTERVIEW WITH THOMAS HOSKENS

Architects and designers applying their vision to casino projects and casino resort complexes increasingly have to recognise how to fully exploit the balance of three central elements determining the final built object: site, owner and guests. As fundamental as that is, the scope for interpretation is seemingly limitless. A major tendency in current thinking gathers particular strength from two considerations: regionalism and cultural identity. The international expansion of large, integrated casino projects serves to reinforce the persistent significance of keeping in mind the need to maintain and stretch appreciation for distinctive sophistication that actually enhances its primary purpose.

CGI: What is your philosophy of design and architecture and how has that general outlook evolved over the years you have been working on casino projects? TH: We take a unique approach in casino design. I put it like this: every building tells a story, metaphorically, let the building tell your story. Let it be about you and your site and if you do that it will be a very unique building that can only be built in one place for one owner. Years ago, some of the earliest casino resorts lacked any design consideration for their location and occasionally, they were reminiscent of something that had to do with the client, but rarely did it have much to do with the location. Also on the rise at the time was the desire to build themed environments as a way of creating an experience to drive customer traffic. Today, it is more a question of metaphorically interpreting the impacts on a building in a more modernistic way. So it comes back to my point: telling a story that is about the site and the owner and of course that means understanding the type of guests the resort wants to attract and build the guest experience along those requirements. CGI: Given this approach, there are projects you are working on exemplifying that? TH: Right now we have several projects on the boards that exemplify these concepts. One of them is in New Mexico and has the adobe feel of the Southwest desert and it has certain Casino & Gaming International â&#x2013; 53

CASINO DESIGN

influences from Native American culture that is extremely apparent in the design. This project is a hotel-convention centre in addition to the existing casino complex. Then there is the project we did as part of a design competition in California where we applied a particularly modernistic interpretation of southern California Mountains and the use of water because the valley is known for its springs. These two concepts were very strong in this regard and both are quite unique: one in a desert with native symbolism; the other in the California foothills. Each building grew out of its site and only feels authentice because of its strong relationship to its locale and environment. This is where our architecture and design approach is rooted. CGI: When you decide on the form, type and style you have in mind, does that then involve a great deal of consultation given the need to reflect cultural concerns? TH: Typically, yes. When we were doing a project in Monticello, upstate New York, for the Mohawk Tribe, there was extensive research, culture consultants and interpretation of cultural elements that the Native American Tribe felt should and could be used throughout the resort and there were things that were more sacred that they did not want utilised or shown. So, in that respect, it takes a certain degree of sensitivity and a level of trust to get to the essence of what you can work with. Sometimes, there are other tribes that don’t want you to reveal too much of their culture. Remember, of course, some tribes have decided not to go for anything Native American – they want the best moneyCatskills Mountain Resort

54 ■ Casino & Gaming International

generating machine they can have. Others prefer a little influence to begin to educate people, but then they also say that if people really want to know what they are all about they can go to a museum. And yet other tribes want to totally engulf the guests in elements of their culture and then it’s a question of whether that is presented in a subtle or in an overt way. CGI: When you talk about the incorporation of cultural aspects in casino design, do you see that has an advantage over perhaps the more generally understood designs associated with Las Vegas, for instance? TH: Native American culture is one way to influence casinos but there are cultures throughout the world that can be influential in the design. Why do we think that way? Why should we really strongly look at that aspect of design? The reality of it is casinos are the new entertainment centres this Millennium, not just vacation getaways. Many of these, even in Las Vegas, are neighbourhood casinos, neighbourhood entertainment centres, and those casinos are very cognisant of their demographics. You have to get a feel for your guests and create an environment that entices and excites; it’s not always escapism, many times it is the comfort of a unique place that attracts a guest aside from the amenities. Cultures, not only Native American but cultures outside one’s borders, give us tremendous design opportunities. What should influence design? What should the gaming resorts look like in Macau, Singapore, London, Madrid, etc.? Should it really be our favourite place or be invented? We can get into that another time!

CASINO DESIGN

>> Cultures from across the world have very unique elements to them and a designer of any casino resort, whether in Europe (England, Spain or Switzerland) or Asia should be distinct and unique to that region. Casino resorts can be as modern as you like and still evoke the cultural influence and make guests feel comfortable, excited, elated, inspired – all the emotions we try to create in these resorts. It is paramount that we as a profession of architects and designers look at each region and take inspiration from it to make our guests feel comfortable and they will want to keep coming back >> CGI: Native American casinos are widely understood to have a strong social and economic commitment to communities. Is that your experience and how do you see design assists that? TH: Design does lend an educational aspect to a culture that is thousands of years old. I think we have a duty to educate the rest of the world as to the cultural aspects in what we do. It is in fact every culture’s duty to educate other cultures about what they are about. Unless we understand, we will tend not to tolerate or to have a feeling for another culture’s life and that is especially critical when working internationally. The education of our society is important and it is an aspect that we shouldn’t overlook; we should take full advantage of these opportunities. CGI: Does attention to Native American casinos aid creativity when you look at more diverse forms of casino design outside that specific area? TH: Growing up with the Native American casino market probably led us to be more sensitive to design opportunities. Mind you, we also do a lot of work for Disney, Universal Studios and Paramount’s parks, which are among many big name entertainment companies. And what is it that they do so well? They tell a great story. What we have learned to do is to re-fashion that story based on the Native American culture, giving us an opportunity to take it further, to develop these stories and create something that we can interpret and use in our design thinking. Doing this type of design work has nurtured the ability to

identify a wide range of design possibilities, and now that we have exposure to more cultures we have a process we apply when we start a project. The research and analysis that goes into what we produce derives from cultural premises, and this helps us to develop building’s forms and shapes. So yes I think we support a a strong cultural basis in our creative process. CGI: It is interesting that the Native American influence is quite distinctive. Do you see that as something the Indian Casino sector needs to evolve in a design sense in order to move beyond its boundaries? TH: Native American Casinos can far exceed what the generic themed casinos can do. They have a rich history and some are willing to use that rich past to evolve the design. I look at it as a richer pallet to work with and it is up to the designer to take it, ultimately, to that greater level. That is the challenge. Other designs have a tendency not to look at where the building is sited, where the people are from, or take on board indigenous influences – those designs pick a place in one part of the world and then re-create it somewhere else. That’s not nearly as rich an experience. CGI: So can we say the American experience is one where Indian Casinos per se are gradually influencing the ‘mainstream’, the Strip, the Atlantic City’s of this world? TH: I think they do and they will because there is an authenticity involved here with many of these projects. I think

New Hotel Desert Southwest

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CASINO DESIGN

basing a project on authenticity makes it real and guests sense that. People are just beginning to understand those influences in resort buildings. CGI: There is a sense then that the design input to Indian Casinos reflecting cultural interests is more widely appreciated now, even though there is always the risk that over time such portrayals may be trivialised? TH: Native American design gives architects and designers a chance at that new pallet and that the regional guests that visit these casinos do appreciate the regionalism that these casino environments evoke. I think that presents some great opportunities. I am surprised that we don’t find more of this in the mainstream markets, but then again I‘m surprised at many things in mainstream architecture…! Escapism is one thing, but what happened to regionalism and the notion of a comfortable environment for the guests? CGI: You mention the importance of the site, a casino’s location. What challenges does that pose for Native Indian casinos, is it much different to other cultures? TH: I look at location as a unique way to draw influences into the building’s design that we’re working on whether that be the Catskill Mountains, where we designed a mountain resort for the Mohawk Tribe, or the deserts of the southwest, or the California foothills. From locations like that we can draw such vivid design ideas. The potential in other cultures is equally vivid, equally exciting. CGI: Well, those locations naturally provide you with ready-made inspiration… TH: It does. Regionalism is the key. CGI: With the rapid international growth of casinos there is a need to keep it rooted as it were and perhaps Native American culture is an example of this anchoring of design. TH: That’s how I see it. With this particular building type we are able with many clients to root them in the region that they are from. This creates a familiarity, a comfort to the resort environment and from there we can create the immersive experiential environment. CGI: These things are also influenced by generation changes particularly in the gaming industry, which is quickly pushing the boundaries. Are there adverse or positive effects from technological and social changes in industry on Indian Casino design? TH: Remember that casinos and casino resorts are entertainment centres. But they are entertainment centres for society as a whole. Therefore, a resort needs a broad spectrum of entertainment activities. So whether the demographic is the 60 to 80 year-olds, or the 20 to 30 yearolds, there are very different things that intrigue them, pursuits in which they excel, and varied situations that make them feel comfortable. So, each gaming resort – especially 56 ■ Casino & Gaming International

the regional resorts – needs to entice a wider spectrum of guests. That alone will get the gaming companies to create a diverse environment in the casino in order to be able to attract a broader range of guests. Cultures from across the world have very unique elements to them and a designer of any casino resort, whether in Europe (England, Spain or Switzerland) or Asia should be distinct and unique to that region. Casino resorts can be as modern as you like and still evoke the cultural influence and make guests feel comfortable, excited, elated, inspired – all the emotions we try to create in these resorts. It is paramount that we as a profession of architects and designers look at each region and take inspiration from it to make our guests feel comfortable and therefore want to keep coming back. CGI: Looking a little ahead, with the large numbers of casino projects under consideration or construction, is there a chance of ‘design saturation’ or is there much more that can be explored? TH: It’s absolutely endless. I’m very excited about the future because I think what we’ve talked about is really still embryonic as far as the possibilities of where design can be taken. When you look at the influences of cultures and locations and you pull that together in unique ways, the opportunities are endless. The ability to create a design that is unique and special and one that is inspiring – that’s the frontier and it is vast. THOMAS L HOSKENS Thomas L Hoskens, AIA, NCARB, LEED® A.P, gained his Bachelor of Architecture at the University of Minnesota, 1975 and Bachelor of Construction Technology at the University of Wisconsin, 1972.Thomas has over 25 years of experience in architecture with major emphasis in the past 15 years in resort design, including casinos, hotels, restaurants and bars, food court shops, offices, housing, convention centres, and entertainment attractions. He is Principal architect at the Cuningham Group and has been the principal in charge for over $3 billion worth of destination resort design in the last four years alone and has overseen the design of casinos in sixteen States and two Canadian Provinces. Tom’s commitment to client satisfaction has led to the development of highly responsive architectural and engineering teams focused on the goals of each client. “We extend the team approach to include the client and other consultants the client may have,” he says. “We try to interpret the client’s vision and make the statement the client wants to make.” Each team responds directly to the client to ensure clarity of communication and accurate information. This responsive structure allows large-scale, complex projects such as destination resorts to be completed within tight time and budget constraints. Given his expertise in the area of casino and resort design, Tom has been called upon to be a guest speaker at several international conferences, most recently at Casino Design 2005.

REGIONAL FOCUS: ASIA

THE PUZZLES BEHIND THE MANIA: MACAU’S UNFINISHED PROJECTS BY RICARDO SIU

The immense developments that are unfolding in Macau at such breakneck speed are breathtaking beyond any comparison – even, it seems, to Las Vegas. The dynamics of the process, the scale of casino plans, the corporate frictions and Government demands, are fast turning this focal hub of the Asia-Pacific into a world centrifuge of gambling.

acau, a Special Administrative Region (SAR) of China since its handover by Portugal on December 20th 1999, is around 2.5 percent and 3.9 percent of the geographical area of Hong Kong and Singapore, respectively. In terms of purchasing power parity in 2004, Macau’s GDP was around 4.75 percent of Hong Kong, and 8.46 percent of Singapore. Despite the slim absolute volume of the Macau economy, the mania presented in its casino industry since the Macau SAR Government formally replaced the industry’s monopolistic structure with an oligopolistic structure by issuing three new casino licenses (called “concession of exclusiveness of gaming”) at the beginning of 2002, impressed global investors (Lesile and Farrell, July 15 2004; Wong, Ko and Lam, March 30 2005; Tang, Karen and Ye, Jane, 19th April 2006; etc.). The winners of the three new licenses were SJM – a wholly-owned subsidiary of the former local gaming monopoly STDM, Wynn Resort Macau, and a joint venture between a Hong Kong firm – Galaxy - and the Las Vegas Sands. (Galaxy was re-classified later in the legal document as the concession holder and the Las Vegas Sands was reclassified as a sub-concession holder).

THE MANIA After the opening of the casino industry, gross gaming revenue derived from the casino industry in 2005 (USD 5.59 billion) was 2.47 times that of 2001 (USD 2.26 billion), which represented a compound annual growth rate (CAGR) of 25.4 percent in those four years. It is reported that Sands Casino’s USD 240 million (opened in May 2004) investment was paid back in the first 12 months of its operation. This achievement Casino & Gaming International ■ 59

REGIONAL FOCUS: ASIA

visitors to Macau. Arrivals in 2005 hit a record high of 18.7 million, which was above 38 times of the population size of this tiny city. This accelerated growth pattern is expected to continue in the coming decade. Given the substantial casino business potential and the sub-concessionary opportunity (i.e., subject to the approval of the Macau SAR Government, a casino licensee may be able to sell the rights to a third party to operate the casino business) that exist in Macau, top global investors in the casino business aggressively sought the opportunity to share the casino operation rights from one of these three licensees. Following SJM’s formal announcement to sell a subconcession to a joint-venture between Pansy Ho (daughter of Dr. Stanley Ho, the tycoon of Macau casino business and the president of SJM) and MGM Mirage from Las Vegas in April 2005, Wynn Resort Macau astounded the market in March 2006 by selling a sub-concession to the Publishing and Broadcasting Limited (PBL) from Australia for USD900 million. Although the Macau SAR Government has stated that it may not approve any more sub-concession, at least in the next few years, overseas investors are still searching for any hole in the existing structure that may allow them to enter into this market, which is associated with incredible growth potential in the coming decade. The excitement associated with the casino industry also produces significant wealth and income effects in other sectors of the local economy. First, property prices of both

has never before been seen in any jurisdiction in the world market. In addition, the full opening of Wynn’s comprehensive Vegas-style casino resort in September 2006 further increased the market’s expectation of the prosperous performance of Macau’s casino industry. Moreover, support from the Chinese Government, particularly in terms of the Individual Visit Scheme (IVS) policy under which residents from Mainland China are allowed to visit Hong Kong SAR and Macao SAR with an easier visa application/approval procedure, resulted in more

Table 1: Business performance of the 3 casino operators in 2005

SJM Sands Casino Galaxy Waldo Total

GCR (billion USD)

/ Total of

Gross profit after tax (billion USD)

/ Total of

4.3011 0.9633 0.4985 5.7629

74.63% 16.72% 8.65% 100.00%

0.6950 0.2965 0.0008 0.9923

70.04% 29.88% 0.08% 100.00%

*Data presented in the columns “GCR” and “Gross profit after tax” are derived from Macao Daily News, April 27 2006, p. A1. USD1 = MOP8

Table 2: Profitability of the 3 casino operators in 2005 Gross profit after tax as a percentage of GCR SJM Sands Casino Galaxy Waldo

0.1616 0.3078 0.0016

Table 3: Educational level of employed and unemployed population, 2005

No schooling/pre-primary Primary (Grade 1-6) Junior Secondary (Grade 7-9) Senior Secondary (Grade 10-12) Non-degree higher education (Diploma) University degree Source: Statistics and Census Service, Government of Macao Special Administration Region

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Employed Population

Unemployed Population

8.0 22.6 31.6 22.2 2.8 12.8

12.0 32.1 30.8 16.0 1.2 7.9

REGIONAL FOCUS: ASIA

residential and commercial buildings rebounded impressively from their slump in the second half of the 1990s. Between the first quarter of 2002 and the last quarter of 2004, property prices on average increased by more than 40 percent. In some areas which are close to the new casino properties, the average growth rate of the property price was almost 70 percent. As the interest rate rise cycle in the United States is anticipated to end by the 2nd quarter of 2006, and the start of operation of the Cotai Strip in the summer of 2007, the local property market is heating up. Second, excess demand for labor in the casino industry has pushed up the wage rate remarkably. On average, monthly wage rate of a dealer is increasing from around USD1,500 in 2002 to USD2,250 in 2006 – a 50 percent jump in the scale. Indeed, a significant portion of the local workforce, especially the young generations with appropriate qualifications, has been enticed by the better job opportunities offered by the casinos. In spite of the existing thrills and optimistic outlook as presented in the market, sustainable growth of Macau’s casino industry and its local economy is puzzled by a number of curbs. Generally speaking, friction arising from the transition of the old system to the new system and increasing conflicts between the casino sector and the non-casino local sectors are most notable.

FRICTIONS IN THE INDUSTRY As a wholly-owned subsidiary of the former gaming

monopoly, the SJM possessed the required properties and business practice to commence its operation immediately after the restructuring of the rights in the casino industry, while the new entrants still needed time to construct their warships to battle for the market shares. Indeed, before the Sands Casino formally opened its property in May 2004 and the Galaxy Waldo in July 2004, the SJM still enjoyed the entire market in Macau. Nevertheless, business performance of the SJM was hard hit shortly after two of its rivals entered into the battle. In terms of gross casino revenue (GCR), a quarter of the SJM’s casino kingdom was being affected (as revealed in Table 1) in 2005 – the first complete calendar year when these three firms were operating alongside in the market. In addition, an interesting phenomenon further disclosed in the last column of Table 1 is the difference in business performance of these three firms in terms of gross profit after tax. After taking into consideration business expenses, the American operator (i.e., Sands Casino) grabbed almost 30 percent of the profit derived from this industry, while the Galaxy Waldo’s share dropped significantly to 0.08 percent. According to the above evidence, it is obvious that the business efficiency of the American operator out performed the local operator, or the new entrant who adopts a similar business model of the local operator (that is, emphasis on individual VIP rooms which are operated by a group of independent junket operators who are entitled to share a certain percentage of the total win as derived from the Casino & Gaming International ■ 61

REGIONAL FOCUS: ASIA

operation of these VIP rooms). To the Sands Casino, every dollar of win derived from its casino business provided a gross profit after tax of 30.78 cents to the company. However, the SJM and Galaxy Waldo could only earn 16.16 cents and 0.16 cents respectively (as presented in Table 2). Indeed, the unfavourable performance of SJM and Galaxy Waldo as compared to Sands could be attributed to the extra expenditure that the former companies have to pay to the independent junket operators in terms of their share of the GCR as reported in the VIP rooms (e.g., around 70 percent of the GCR as reported by SJM in 2005 was derived from the operations of the VIP rooms). Facing the fact and threat of rapid contraction in market share, Macau gaming tycoon Dr. Stanley Ho has openly blamed the challenges (“cutthroat competition” ) being posted by the Sands Casino. As reported in a Hong Kong English newspaper on August 12, 2006, Ho mentioned that around one-third of SJM’s VIP rooms “might be forced to close”. Although Ho complained that Sands was snatching his market share by “drastically raising agent commissions and chip discounts to attract high rollers”, evidence presented in Table 1 and 2 may not support his arguments. Nevertheless, Ho has urged the formation of certain forms of “industry chamber” and “intra-industry rules” to regulate the activities and relationship of all casinos in Macau. In addition, Ho has also requested the involvement of the government to check the “cutthroat competition” as posted by the American operator. With the internal expansion of the Sands Casino to a total of 740 tables in the summer of 2006 (in terms of the number of tables, it has surpassed Malaysia’s Genting Highland with a total of 426 tables) to become the world’s largest single casino, as well as the opening of the first comprehensive Las Vegas-style casino resort by Wynn in September, Ho’s casino kingdom is obviously under severe threat. The SJM is now undertaking a series of measures to enhance its competitiveness in the market. The ongoing puzzles associated with its transition to a modernised corporation, comparable to its American rivals, are i) the company’s conventional business and individual relationship with the junket operators of its VIP rooms and, ii) low transparency and high bureaucracy in the management. As a Macau-based enterprise which contributes significantly to the growth and development of the local economy, unfavorable performance and straits faced by the SJM are very likely to affect the prospect of sustainable growth of the Macau economy.

DILEMMA IN THE LABOUR MARKET Rapid growth of the casino industry in the past two years has brought both positive and negative impacts to the local labour market. Its further expansion in the next few years is very likely to widen the gap of excess demand in both the casino and non-casino sectors. For example, as announced by the Venetian of Las Vegas Sands at the end of August 2006, the company needs to recruit a total of 60,000 employees when its properties in Cotai Strip are completely opened in 2008. This number represents a quarter of Macau’s 237,814 employed population, and a quarter of the 248,006 labour force in 2005. If the size of demand for labour from other new casinos and their connecting facilities is also included, the existing labour force in Macau could hardly sustain the growth of this industry. In practice, two measures are employed by the casino 62 ■ Casino & Gaming International

operators to fill the gap in their demand for manpower. First, drawing the existing labour from other local sectors by offering a better working environment and higher wages; second, seeking approval from the government to import labour. However, owing to the unique situation in Macau, both measures produce a dilemma to the non-casino sectors. In the past two years, it has been widely reported that the continuous increase in average wage rates offered by the casinos has imposed substantial cost pressure to the lowvalue-added local small and medium enterprises (SMEs), as well as the relatively modernised banking sector. Although some individual firms are able to raise their wage level to stay in business, increments are hardly comparable to those offered by the casinos. By the end of 2005, for example, the average wage earned by such casino employees as casino floor persons, dealers, cage cashiers, etc. was MOP11,603 (1USD = MOP8), while average earnings of employees in the sectors of wholesale and retail trade was MOP6,439, and in the manufacturing sector, around MOP4,400. On top of cost pressure and shortage of labor in the local non-casino sectors, rapid expansion of the casino industry has clearly worsened the income disparity problem in the Macau society. It is reasonable to infer that imported labour is an inevitable measure to narrow the gap of excess demand for labour in both the casino and non-casino sectors. In the next few years, however, public policy will be quite cautious due to social pressure. Although the unemployed work force in 2005 was 10,192, which was 4.1 percent of Macau’s labour force, the low-income group has formed a major force in resisting the government’s approval for imported labour (e.g., the demonstration by the local unemployed and lowincome group in May 1, 2006). In principle, this puzzle is largely attributed to the issue of structural unemployment and the low-quality of the existing labour force. As disclosed in the Table 3, over 60 percent of the existing employed population in Macau haven’t completed senior secondary education (i.e., high school education), and this percentage is much higher (74.9 percent) in the unemployed group. Owing to this unique situation, which is largely inherited from the evolution of the Macau society in the last quarter of the 20th century, it seems that only time can resolve this dilemma.

SOME OTHER ONGOING ISSUES Frictions associated with the transition of the casino industry and the dilemma of human resources are two direct issues which may hinder the sustainable growth of the casino industry and the Macao economy. Besides these two issues, drawbacks from Macau’s existing regulatory system and the in-town infrastructure form more two major blocks. Because of the extremely low transparency of the legal system and the poor implementation of laws and regulations during the era of the Macau-Portuguese Government’s administration, there are numerous holes which need to be patched up by the Macao SAR Government. For example, although the aforementioned junket operators of Macau’s VIP rooms started to conduct their business in the middle of the 1980s, the first piece of regulation attempting to formally monitor their activities was only promulgated in 2002. Despite the legally acceptable logic of this piece of regulation, its practice is still far behind international standards, especially from the stand point of the

REGIONAL FOCUS: ASIA

gaming control authorities from North America and Australia (e.g., background investigation of the junket operators and their associates is unclearly stated in the regulation). The existing regulatory system may not be able to provide the effective and efficient incentives to the market participants that are needed to sustain the growth and competitiveness of this industry. Last but not least, as the total number of visitor arrivals will exceed 20 million in 2006, in-town infrastructure on the tiny Macau peninsula is facing huge pressure. Recently, capacities of terminals in major ports were extended and more new terminals are under construction. However, one crucial question is: after visitors arrive in Macau, will the internal transportation system be able to provide efficient and quality services to them? Or, will most of them simply arrive in the ports of Macau and take shuttles to check in to those world-class casino resorts, enjoying the services inside those properties and then say goodbye to Macau? If this is the case, one may foresee that the casino areas and the non-casino areas in Macau in the future may be analogous to the relationship between the Las Vegas Strip and downtown Las Vegas today – the latter hopeless and gloomy even though the aggregate income to “Las Vegas” is still expanding. In short, existing in-town infrastructure in Macau may not be able to link the local economy, especially the local SMEs in the service sectors, to the rapidly growing casino sector, which is a necessary condition to ensure the sustainable growth of an economy and its individual industries.

CAN MACAO MAKE IT? In sum, no one would deny the recent achievements of Macau’s casino industry. Nevertheless, real competitiveness and sustainable growth of the industry, and its interrelationship with the Macau economy in the future are still subject to remarkable structural risks and uncertainties. Can Macau make it ultimately? At this stage, a “yes” answer has a likelihood of over 50 percent. As a Special Administrative Region of China under the “One Country, Two System” policy, Macau gains from the total support of the Chinese Government. In addition, effective and efficient corporate culture and management skills are in the process of diffusing through the economic society – the problem-solving ability of the economic society is on average improving. However, the existing puzzles may not be resolved easily in a short period of time. The long term and comprehensive planning as well as proactive public policies that are needed to ensure the ultimate success of Macau’s casino industry and its economy, are still the missing parts.

REFERENCES Coleman, Z. (September 2006). Macau’s hand flush with discord. In Far Eastern Economic Review, 169 (7), 45-47. Eadington William R. and Siu, Ricardo C.S. Between law and custom — Examining the interaction between legislative change and the evolution of Macao’s casino industry (forthcoming in the June 2007 issue of the International Gambling Studies). Lesile, D. and Farrell, D. (July 15 2004). Macau: threat or opportunity? Deutsche Bank, Asia-Pacific: Equity Research. Siu, Ricardo C.S.. Evolution of Macao’s casino industry from monopoly to oligopoly – Social and economic reconsideration (forthcoming in the December 2006 issue of the Journal of Economic Issues).

Siu, Ricardo C. S. (February 2004). A matter of urgency: Providing a levelplaying competitive environment for Macao’s casino industry. In Journal of Macao Studies, vol. 20 (20*2004.2), 191-205. Macao, China: Macau Foundation. (Co-author) Tang, K. and Ye, J. (April 19 2006). Macau Gaming: 1Q06 – impressive mass market growth. Deutsche Bank, Industry Bulletin: Company Research. Wong, E. and Ko, L. and Lam, F. (March 30 2005). Macau gaming: Let the games begin. UBS Investment Research. Yi, H. (August 12 2006). “Competition in Macao gets too tough for Stanley Ho,” South China Morning Post, A3. SELECTED PUBLICATIONS – JOURNAL PAPERS: Siu, Ricardo C.S.. Evolution of Macao’s casino industry from monopoly to oligopoly – Social and economic reconsideration. (forthcoming in the December 2006 issue of the Journal of Economic Issues). Eadington William R. and Siu, Ricardo C.S. “Between law and custom — Examining the interaction between legislative change and the evolution of Macao’s casino industry,” (forthcoming in the June 2007 issue of the International Gambling Studies). Siu, Ricardo C.S. (2005, February). A new epoch in the Macau economy and its gaming industry. In Journal of Macao Studies, vol. 26, 54-61. Macao S.A.R., China: Macau Foundation. Siu, Ricardo C. S. (2004, February). A matter of urgency: Providing a levelplaying competitive environment for Macao’s casino industry. In Journal of Macao Studies, vol. 20 (20*2004.2), 191-205. Macao, China: Macau Foundation. (Co-author) SELECTED PUBLICATIONS - BOOK CHAPTERS: Siu, Ricardo C.S. (2006, January). Impacts of the Pan Pearl River Delta Economic Region on the development of Macao’s tourism (in Chinese). In Regional cooperation in Pan-Pearl river Delta and the Adjustment of Macau’s Orientation, 291-306. Macao, China: Centre for Macau Studies, University of Macau. (Co-author) Siu, Ricardo C.S. (2004, September). A preliminary investigation on the opportunities and challenges faced by Macao’s Small and Medium Enterprises (SMEs) with the opening of the casino industry. In The Development of Small and Medium Enterprises (SMEs) and the Enhancement of Comprehensive Competitiveness, 87-107. Macao, China: Centre for Macau Studies, University of Macau. Siu, Ricardo C. S. (2004, June). A preliminary discussion on a comprehensive plan for the development of Macao’s casino industry (in Chinese). In Macao 2004, . Macao S.A.R., China: Macau Foundation. Siu, Ricardo C.S. (2003, December). The role of Macau’s tertiary production in the regional economic cooperation system, 340-356 (in Chinese). Singapore: World Scientific Publishing Co. Pte. Ltd. (Co-author). WORKING PAPERS: “Table games or slots? Competition, evolution, and game preference in Macao’s casino industry? (Co-author) “Formal rules, informal constraints, and industrial evolution ? The case of the Junket Operator Regulation and the transition of Macao’s casino business” “The social economics of casino gaming”

RICARDO SIU Ricardo is currently employed as the assistant professor of Economics and International Finance servicing the Faculty of Business Administration at the University of Macau. At the same time, he also serves as the coordinator of the Gaming Management program at the Faculty. His research interests focus on the currency issues of the greater China economic system, China’s financial markets, and Asia’s gaming industry and tourism.

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It’s your job to compete

On a Grand Scale.

It’s our job to make sure you can.

November 14-16, 2006 | Las Vegas Convention Center November 13, 2006 | G2E Training & Development Institute You can’t compete in gaming on a global scale with yesterday’s game plan. That’s why we’ve reinvented Global Gaming Expo (G2E) again this year to put even more emphasis on the issues that matter to our international audience. With more than 99 countries represented, G2E truly is the international gaming event—with the fullest array of products and the smartest educational examination of global issues anywhere on the planet. In addition to a host of international conference sessions, G2E 2006 also will feature a new international keynote, State of the Industry: The Next Generation of Global Gaming. And, we’ve made it easier than ever for you to experience G2E, with a variety of enhancements throughout the show. It’s now a snap to register for G2E. Go to www.globalgamingexpo.com/AD for more Register by October 31 to enjoy special discounts to the Show and Conference. Special Hotel & Travel Deals are also available online. Questions? Call 1-203-840-5626. To Exhibit, call 1-203-840-5341. It’s the world of gaming. Right where you need it.

REGIONAL FOCUS: ASIA

THE IRRESISTIBLE ALLURE OF CASINO JOBS FOR MACAU’S YOUTH BY SOO-MAY CHENG

Even before the first pile was driven into a building site, the newly-established National Council for the Problem Gambling had been anticipating problems, and actively scouring the world for evidence and resources to develop a plan to tackle them. Having grown up with casinos and other forms of gambling (eg. horse-racing, dog-racing, and mahjong) around them, Macau’s residents have been a lot more blasé about gambling than Singaporeans, and felt less fear of their corrupting influences. However, the sudden explosion of casinos and the increased allure they have for younger jobseekers may be a hint that this is no time for complacency. How is this affecting youth in Macau, and what is their experience of being absorbed into this dominant industry?

here in the world would high school kids leave school early to work in casinos, often with their parents’ blessings? In Macau, it seems! With salaries reaching unprecedented levels, and the image of the gaming industry improved after liberalisation of casino operations in 2002, casino work that had once been associated with drugs, crime and vice is now looking very attractive. So attractive, in fact, that young people are leaving school early to jump on the bandwagon. This phenomenon has stirred some controversy, though debate remains muted in Macau in deference to the economic imperative of growing the casino gaming sector into a Las Vegas clone. Results of the 2nd Quarter 2006 Manpower Needs and Wages Survey of the gaming industry revealed that, at the end of the second quarter of 2006, there were 29,993 paid employees engaged in the gaming industry, an increase of 28.4 percent compared with the same period of 2005. About four-fifths were engaged in positions that are directly related to betting services, such as hard and soft count clerks, cage cashiers, pit bosses, casino floorpersons, dealers, betting service operators, etc., while the rest were engaged as services and sales workers, including casino and slot machine attendants/hosts, security and surveillance workers, etc., up 33.3 percent and 17.7 percent respectively compared with the same period of 2005 (DSEC website, 29th September 2006). It will be seen in other statistics later on that many of these are likely to be young people aged between 14 and 24. In June 2006, average earnings (excluding bonuses and allowances) for full-time employees rose by 15.4 percent yearon-year to MOP 12,615. Average earnings for the positions that are directly related to betting services was MOP 13,129, up by 16.2 percent over June 2005. The average earnings of

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the services and sales workers increased by 11.2 percent compared with June 2005 to MOP 7,354. At the end of June 2006, there were 5,699 vacant posts in the gaming industry, most of which were related to direct casino operations, while services and sales workers made up the remaining vacancies. With such an abundance of opportunities, it is no wonder that young people in Macau are drawn into the industry. Just what is luring youngsters to the casinos? What are the implications? And is there cause for concern?

Table 1: Vacancies by recruitment prerequisites

EASY ENTRY INTO THE INDUSTRY Headlines like the one carried in Hong Kong-based business daily, The Standard, on 3rd June 2005, “Dealer training courses attract thousands,” are typical. The Macau Tourism and Casino Career Centre (CCC) established by the Macau government to train residents for the huge demand for dealers and other casino personnel received more than 2,300 applications for the 600 training slots available. These courses are fully financed by a 45 million patacas (US$5.62 million) subsidy from the government, and any resident aged 16 or over can enroll without paying any tuition. A four-month course awards a certificate recognised by all casinos in Macau and internationally (since the course is accredited to the Atlantic Cape Community College in the USA). The gross shortage of dealers has seen graduates snapped up by employers, who at the end of 2005 had 4,646 vacancies, and who reportedly still need 6,000 to 8,000 dealers before the end of 2006. Some employers who cannot wait run their own intensive training or poach trained staff from competitors. And young Macau residents face virtually no competition from Hong Kong or Mainland Chinese youth as local laws do not allow non-residents to take up dealer or croupier jobs in the casinos. Such easy entry into the industry has lured many youngsters away from their studies prematurely. Table 1 shows that the gaming industry’s entry requirements in terms of work experience, professional qualifications, and educational attainments are not very stringent. Of particular relevance to our discussion here is that most positions do not require more than a higher secondary education, meaning 15-year-olds finishing Form 3 can take up jobs in casinos. So long as they know Mandarin or English – these being the critical languages of the new waves of customers expected from the Mainland and international markets – and are trainable, they can be almost assured of jobs.

HIGH SALARIES Macau dealers earn 13,000 to 15,000 patacas a month, with tips. Macau’s monthly median wage in the first quarter was 5,680 patacas. Graduates from the local universities fetch between 6,000 and 9,000 patacas. Dealers do not need much education beyond high school and a short course at the CCC or in-house. Very quickly, they can buy into a rewarding lifestyle that affords them a flashy car or down payment for one of the increasingly costly apartments in the city. It is difficult for young people to refuse the opportunity for such instant gratification. It is noteworthy from Table 2, however, that non-resident workers are being paid more than resident workers, suggesting that non-residents are hired at more senior or skilled levels than locals. 66 ■ Casino & Gaming International

Majority of vacancies by occupation Prerequisites

Overall

Clerks

Services and sales workers

37.5 62.5

45.0 55.0

14.0 86.0

Professional qualification Yes 16.4 No preference 83.6

22.0 78.0

0.4 99.6

Educational attainment Primary education Junior secondary ed Senior secondary ed Tertiary education No preference

0.7 32.3 48.6 13.4 5.0

15.6 68.4 16.0 -

78.5 4.8 0.6 16.1

Language skills (can choose More than one) Of which: Mandarin 60.9 English 77.1

60.7 95.9

72.2 34.5

Watching experience Yes No preference

Source: DSEC Website, October 2006

Table 2: Average earnings of Residents and NonResidents in the Gaming Industry by Occupation

Occupation Clerks Of which: Hard and soft count clerks, cage cashiers, pit bosses, casino floorpersons, dealers, betting services operators, etc. Services and sales workers Of which: Casino and slot machine attendants /hosts, security and surveillance workers, etc.

June 2006 (MOP) Overall Resid. Non-Resid. 12,959

12,561

20,916

13, 129

12, 719

20,901

7,354

7,183

8,882

7,365

7,316

7,833

Source: DSEC Website, October 2006

IMPROVED IMAGE OF CASINO GAMBLING Director of the CCC, Raymond Chan, has rejected criticism of the industry for causing last year’s 22 percent increase in the school dropout rate, saying, “since gaming is the leading industry of Macau, we should encourage more young people to join.’” (The Standard, 3rd June 2005). Since the arrival of Las Vegas titans Sheldon Adelson and Steve Wynn in 2002, Macau has been rapidly transformed from a sleazy gambling “sin city” into a Las Vegas-style integrated family resort with hotels, conventions, and family-friendly entertainment wrapped around gaming tables and slot machines, the

REGIONAL FOCUS: ASIA

Table 3: Youth participation in the labour force Age 14-24 No. ‘000 % in labour M F force 2004 – Q4 24.6 90.8 11.7 12.9 2005 – Q4 28.7 91.7 13.0 15.7 2006 – Q1 28.4 30.1 92.7 92.6 2006 – Q2 13.3 15.2 15.1 14.9

2. 3.

Restrict the number of gaming tables and suspend land grants for casino construction to slow down the casino expansion until local business and the market have had more time to deal with the impact of liberalisation. Set industry wage guidelines to discourage unhealthy price competition for workers. Introduce education in school about gambling so that young people can establish a correct attitude towards the industry. (Blogmacau, 18th September 2006)

Source: DESC website, Oct 2006

Table 4: Higer Secondary School (Form 4 &5) Indicators Indicator

Repetition rate School completion rate School leaving rate Dropout rate

School Yr 2001/2

School Yr 2002/3

School Yr 2003/4

8.1% 70.5%

7.4% 73.7%

5.9% 77.3%

6.5% 0.7%

5.5% 0.7%

6.7% 0.8%

Source: DSEJ Website – Oct 2006

industry has gained some respectability (Business Week Online, 7th October, 2002). No less than the Vice Chairman of the National People’s Congress (highest policy making body in the Central Chinese Government) has remarked that Macau’s gaming sector “symbolises pluralism”. At the opening ceremony of a seminar on Confucianism held in Macau in September, Xu Jialu said that gaming could be tolerated as long as it was not abused and did not cause family destruction and discord. The gambling taxes were, he said, important foundations for social stability (Blogmacau.info, 27th September 2006). Indeed, gambling taxes have even before the end of casino mogul Stanley Ho’s monopoly accounted for half of Macau’s total revenue. With the new Las Vegas casinos in operation for less than two years, Macau’s gaming revenue is already on the verge of outstripping that collected on the Las Vegas Strip (CNN.com, 28th September 2006). The People’s Daily (19th September 2006), China’s government-managed newspaper, reported that Macau collected 12.47 billion patacas (US$1.5 billion) in direct gaming taxes in the first eight months of 2006, up 14.4 percent from the previous year. Gaming taxes now account for 73 percent of the total government revenue.

CONCERNS OVER NEGATIVE IMPACT OF GAMBLING With such endorsement, it is no wonder that parents who once viewed casino work as corrupting for their children are now persuaded by the economic arguments to accept or even encourage their children to join the industry. Protests have been voiced, but only within very limited confines of civic or religious media. In September this year, the Macau New Chinese Youth Association organised a “Citizens’ Forum” where it voiced concerns that the rapid development of Macau’s gaming sector has brought out social problems, such as gambling addiction, crime and changes in values among young people. Its suggestions to the Government were to:

Father Peter Chung Chi-kin, director of the Macau Diocesan Youth Pastoral Centre warned against over-relying on the gaming sector for economic growth, as ‘gambling – which the Catholic Church and other religions reject – encourage the attitude of “reaping without sowing” and would bring about many social problems’ (Catholic News, 7th February 2002). Somewhat more strongly worded is this opinion posted on the Macau Mission’s website: Many years ago Macau was given the title; “Macau, city of God, there is none more loyal!” Today, Macau’s loyalty is to false gods and the immoral things of man. Gambling is the major industry of the city. Organized crime, corruption, prostitution and drugs are commonplace. The city seems to have been sealed up by the evil one. (Macau Mission, October 2006) Teen involvement in casino employment is likely to invite more of such diatribes, but what are these fears based on? A look at some facts and anecdotal evidence may confirm if there is a real danger of moral degradation of young employees working in casinos.

YOUTH EMPLOYMENT IN MACAU Youth employment in Macau, as in Table 3, shows a slow but steady upward trend. More than 90 percent of youths aged between 14 and 24 are in the work force. While specific age breakdowns are not available for the gaming industry, it is possible to guess from Tables 1 and 2 that many of these employed youths are working in the gaming industry. This age group is typically in school or university in advanced economies that emphasise upgrading the quality of their human resources, so the preference of Macau’s youth for employment is a worrying sign that, in the long run, a generation or more of the resident human resources in Macau may lose its international competitiveness. The wage differential between resident and non-resident workers in the gaming industry shown in Table 2 should be a warning sign that Macau’s residents may become permanent underlings to imported managers and professionals.

SCHOOLING STATUS It may be surmised from the first row of Table 4 that fewer and fewer youths in higher secondary classes are choosing to remain in school if it means having to repeat a year. With plentiful job options in the gaming industry that do not require a completed high school education, these young people do not see the point of “wasting their time” in school. Likewise for the school leaving rate (when students leave after only one year of secondary school) and dropout rate (when students leave anytime during the last two years of secondary school). Thankfully a majority (77.3 percent) was still completing their secondary education in 2003/4 academic year, but an update to the current school year (when it becomes available) will show a more accurate picture. Casino & Gaming International ■ 67

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THE EXPERIENCE OF SOME YOUNG CASINO WORKERS While empirical evidence has not yet become available, it is possible to surmise from some anecdotal comments of young people working in casinos that they are quite upbeat about their jobs and are confident of their ability to stay clear of the corrupting influence. Mandy, 20, a dealer or croupier, finds the job really interesting and gets to meet all sorts of people. “It’s really rewarding to watch people get so excited when they’re winning,” she says. “It’s also nice to not have to do the 9-5 office job, and there’s variety in that you can deal different games, from Blackjack, to Roulette, through to Baccarat. And the more games you can deal, the more money you earn. It’s good money for what we do.” Mandy has been working in the casino since it opened a year ago, and after a few weeks of on-the-job training, was able to work at the tables. She has learnt that she needed stamina to stand for long hours and work shifts, a high level of mental concentration to cope with the calculation of pay-outs, and a thick skin to take the insults of players who lose money. Asked if she saw herself staying in this profession, she said she intended to be “around for a long while.” And did she gamble? No, not at all. Equally positive is Janice, also 20, who works part-time as a “marketing host” in one of Macau’s newest casinos. She deals with junket operators and high rollers in the VIP rooms in the evenings and goes to classes in the day at a local university where she is earning a bachelor degree. The casino work offered her a chance to pick up working experience before she graduates, and she is glad to have improved guest service skills after only four months on the job. She finds the VIP room environment very posh and pleasant, so going to work is certainly not a chore. Coming from a well-to-do family herself, she has not been tempted to gamble or to buy expensive things like accessories spotted by her gambling clients. But she admits that one bad point about her work is that it “makes me change my idea of money, because the gamblers don’t seem to see money as money, but as water to throw out recklessly.” And she is unwilling to change jobs because of the high salary she earns. Nevertheless, Janice is determined to complete her studies first, and will decide on whether to make her casino job her career only after reviewing her options upon graduation. Peter, a local Chinese, is younger than the two girls. Three years ago at 16, he had decided that he had had enough of school, and left without completing high school to work in a well-established casino. Now, he has moved to another casino that has opened recently, and feels more stressed. Why did he move? “I wanted a change of environment. Besides, they are paying more here.” But soon, he found that the Hong Kong managers are much more demanding than the Macanese ones he used to work with at his former workplace. The pace is faster, and he has to speak more Mandarin which takes more effort than his native Cantonese. As gaming supervisor, he has to move amongst the tables and the customers and sometimes explain the rules of games or help out a dealer or two. He has found that the biggest group of customers are from Mainland China, and they are more eager, impatient and loud, but less superstitious and serious than the Hong Kong players who used to frequent his former workplace. How does he manage the stress? “I play mahjong (a Chinese table game) or drink 68 ■ Casino & Gaming International

with friends, or sleep.” Has he considered a change of profession? “What else can I do? Who else will pay me as much as what I’m earning here? The industry is now growing and the chances for promotion are good.” Will he go back to school? “No, this school of hard knocks is teaching me more than what the books can teach me.”

CONCLUSION It seems Macau’s young casino workers have joined the casinos with eyes wide open, and there is little immediate danger of their work choices corrupting their usual way of life. Except for the arrest of two dealers found stealing chips, there has been little evidence of the cheating, compulsive gambling and drinking problems among casino employees that are serious enough to attract university research attention in America, Canada and New Zealand. That is not to say Macau’s authorities should not begin to deal with potential problems before they surface. They may take a leaf out of Singapore’s book. Singapore’s Government has opted – against strong public protests – to award gambling licences to international operators to build and manage “integrated resorts”. Before the first pile is driven into a building site, the newly-established National Council for the Problem Gambling has been anticipating problems, and actively scouring the world for evidence and resources to develop a plan to tackle them. Having grown up with casinos and other forms of gambling (eg. horse-racing, dog-racing, and mahjong) around them, Macau’s residents have been a lot more blasé about gambling than Singaporeans, and felt less fear of their corrupting influences. However, the sudden explosion of casinos and the increased allure they have for younger jobseekers may be a hint that this is no time for complacency. The government-sponsored Centre for Quality of Life Studies in Macau has identified many issues for further research and action, such as housing and traffic conditions, but has conspicuously left out gambling (Chan, 2005). With more and more young people entering the heart of gambling establishments as employees, where before they only watched from the outside, the dissenters may well be proven right.

SOO MAY CHENG Soo May Cheng is Associate Professor of International Business at the University of Macau, Macau Special Administrative Region of China. She has published in the Asia Pacific Journal of Management, the Journal of Enterprising Culture, the Asia-Pacific Business Review, among others. She has taught executive, graduate and undergraduate programs in Singapore, Australia, Taiwan, China, Hong Kong and Macau. Her current research deals with cross-cultural, interdisciplinary and international comparisons of service quality, management style, and corporate social responsibility. (Contact: smchenginmacau@yahoo.com)

UK: GAMING EDUCATION, TRAINING & MANAGEMENT

ACADEMY IN POLE POSITION TO REAP BENEFITS OF CASINO GROWTH BY EMMA ELSON

The Casino Advisory Panel is due to inform the UK Government of its decision on the location of the first and most substantial of casino developments by the end of this year. From the very beginning the bidding process has raised both expectations and controversy surrounding rival interests and undue political influence. Since February, when the Blackpool Regional Gaming Academy (RGA) was established, the RGA has operated with the confidence that, whatever the

f the 40 students who have undertaken the BTEC Advanced Diploma in Casino Operations (Croupier Training) at the UK’s first Regional Gaming Academy (RGA), 38 have now been placed in work in casinos upon graduation with 25 of those joining local casinos in the Blackpool area. Such has been the success of the RGA which opened in February this year, at Blackpool and The Fylde College, Bispham, nr Blackpool. The Academy’s relationship with the Gala Casino group has flourished with 103 Gala Team Leaders being up-skilled by the College – also to receive the BTEC Advanced Diploma in Casino Operations. Of the 103 members of staff 46 have completed the course, 17 are due to complete shortly and the remaining 40 are expected to finish over the next 12 months. The Coin Slot Technology learners are a mixture of local people and gaming staff already working in the industry wishing to learn a new skill. The first cohort of HND Coin Slot

outcome with the ‘supercasino’, it fully expects to meet the training challenges following implementation of the Gambling Act 2005. The RGA founded its value on the anticipated demand for professional gaming personnel that the whole programme of casino development requires.

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Technology students graduated from the RGA in June 2006. Of the first 12 graduates one has gone on to teach at the RGA, two have gone on to further education with the rest now employed locally. The Gaming Academy has also developed a new Bespoke Training Coin Slot short course for a local security company aimed at giving their staff an overview of what a slot technician actually does inside a machine. Twenty four officers are on this course that started in September. With minimal advertising the Gaming Academy is still filling all of its courses in advance. Much of this can be put down to the outstanding press coverage generated by the uniqueness of the RGA itself. The Regional Gaming Academy is a key player in Blackpool’s bid for the UK’s first supercasino, and The Blackpool and Fylde College’s support is clear from the Principal and Chief Executive Pauline Waterhouse who, speaking at the Casino Advisory Panel’s (CAP) Blackpool visit on Friday 8th September, said: “Blackpool and The Fylde College has never been in a better position to help the local population secure the exciting new employment opportunities afforded by regeneration. Close examination of the gaming industry and the rate at which it is expanding has led us to believe that the future demand for professional, skilled technicians will be high. The majority of graduates from the regional gaming academy have taken jobs in the Blackpool area. Our courses are not only aimed at providing low level employees but staff right up to management level.” A glowing endorsement of the RGA came from CAP panel member Neil Mundy who said he was impressed by the range of courses on offer at the Regional Gaming Academy. Since its launch the Gaming Academy has begun to forge even closer links with industry receiving three VIP visitors – one twice – in just the six months it has been in operation. The growing support from major players within the industry and the excellent relationship with such high profile companies like Carnival Cruise lines will further cement the RGA’s place as a first class training institute.

70 ■ Casino & Gaming International

The first VIP guest was Mr Rodney Dofort, Vice President of Carnival Cruise Ships, on Friday 21st March. He came to the Academy to see first hand the training facilities at the College. Whilst there he addressed a keen audience with an interest in working on one of Carnival’s 73 casino cruise ships. He said: “This Gaming Academy is a truly special place to learn about the gambling experience. It has tremendous potential to make excellent croupiers for the future.” Rodney was so impressed with the Academy that he made his second visit on 17th August – less than six months after the first - to host an interview day for his company. Delegates were selected by Carnival and admittance was by invitation only. Mr Dofort gave four seminars with the rest of his time taken up by interviews and table tests. Amongst those offered jobs on the day was RGA graduate Seb Schools. Twenty three-year-old Seb, from Blackpool, was snapped up to work as a trainee croupier on one of Carnival’s international cruise liners. He explained: “I decided to do the BTEC Advanced Diploma at Blackpool and The Fylde College because I didn’t know what I wanted to do with myself. “Studying here has changed my whole life around and I have loved every minute of it. The tutors here are fantastic and the support every student gets is great. I just hope I can be a good ambassador and go and do the RGA proud.” It was a massive achievement and months ahead of schedule for the RGA itself who had been hoping to talk to Mr Dofort about the possibility of Carnival taking its graduates in the future. It is also groundbreaking that a company such as Carnival has employed someone with no previous live gaming experience. This highlights the standard of the training given by the RGA. A key factor in Rodney Dofort’s decision to keep coming back to the RGA is the importance placed by the RGA on Customer Service. The second VIP guest to the RGA was Mr Rodney Brody, Head of Development: UK and Europe for Las Vegas Sands. Las Vegas Sands (LVSC) is the leading American entertainment company that owns and operates the Venetian Casino Resort and the Sands Expo and Convention Centre in Las Vegas and the Sands Macao Casino in Macao China. In the UK LVSC is working to create world-class leisure complexes featuring hotels, restaurants, conference centres, sports amenities, casino retail outlets and health facilities, in partnership with football clubs and other organisations. The fact that Mr Brody requested a visit to the RGA be included in his itinerary was a major coup in such a short amount of time for the Gaming Academy and showed that its reputation is spreading far and wide. The third visit was by Andrew Tottenham, managing director of Development Europe for Harrah’s – the world’s biggest casino operator. The company, which owns Ceaser’s Palace in Las Vegas, is interested in investing millions in Blackpool should it win the coveted first supercasino licence. Andrew declared: “I’m very impressed the College has taken the initiative to do this now. I’ve seen other gaming academies but not one which is as integrated as this into higher education and the industry. To know this is here is essential to our business.” The RGA is already investigating areas in which to expand including a second building adjacent to the supercasino – should Blackpool get it – with even more courses on offer. A new foundation degree is already up and running in

UK: GAMING EDUCATION, TRAINING & MANAGEMENT

Casino Operations Management and the RGA is now accepting independent applications from local casino staff. Gala will be joining this new programme next September. Local casinos are supporting the RGA by allowing members of the RGA team into their premises to keep up to date with the industry and to observe best practice and the nongaming areas. Regional Gaming Academy Student of the Year, Kirsty Olroyd, is now working in a local casino and has enrolled on the new Foundation Degree in UK Casino Operations Management. Kirsty, a mother-of-two, enthused: “Working in a real casino is very different to ‘working’ in the Regional Gaming Academy casino for obvious reasons! However, I really think that the RGA did everything it possibly could to prepare us for life in the real world. “The only differences I have encountered have been small, for example, the casino I work in now has different procedures to what we learnt at the RGA. But at the RGA we learnt basic procedures because it is well known that when you go to work in a casino they are all going to have their own procedures, each different to the rest. I have enrolled on the Foundation Degree because I really want to keep furthering my education and I was told I had good enough grades from my Diploma. I’m really excited about it.” The Foundation Degree in UK Casino Operations Management is a two-year one-day-a-week course with the option of a third year to make it into a full degree. The main entry requirement is industry experience and at the end of this course graduates can take their new skills into the gaming industry or indeed transfer them to any other kind of business. With study amounting to only 15 hours a week the Advanced Diploma course has been structured to allow mums a career whilst taking nothing away from their responsibilities to their families. It also allows people that are out of a work a way back into work as they can study for up to 16 hours a week without their benefits beings affected, hence making it easier for them to enroll at College, study and consequently find employment. With rapid technological changes in coin slot technology taking place in the industry all the time RGA staff are constantly in contact with representatives from gaming companies and suppliers to remain at the forefront of their game. With many members of staff having come from within the industry their contacts and close links have become invaluable in the continued success of the RGA. The Academy is lucky enough to be able to take delivery of new machines at least twice a year. The machines, although not brand new to the industry, are new to the learners and therefore allow them to train on the most up to date machines available. The majority of coin slot machines are donated or obtained at a reduced cost by the Academy and the range now includes machines from years ago – that are still used in some casinos and arcades – and machines that are just a few months old. Learners need to know how to fix them all which is why the RGA has such a broad range. The RGA keeps up with the gaming social responsibility issues and attends the GamCare conference each year to ensure that it keeps up-to-date on where the industry is as a whole with responsible gaming. Teresa Tunstall, Head of Development and Training at Gamcare, delivered a seminar to students at the RGA which was videoed and will be used on every future course to

ensure that students know their responsibilities regarding their casino’s code of conduct for responsible gaming. One of the key messages that Theresa aims to get across in her seminars concerns handling problem gamblers and a croupier’s role in identifying those affected and their duty to report their findings to their line manager. Once every three months the RGA also has a visit from the Gambling Commission. An inspector will come into the Academy and sit down with all new trainees to tell them about the Commission’s work and to discuss their anticipated role as a casino employee. Although the RGA has is always looking to learn from other institutes and is keen to build on new ideas and initiatives. The RGA is continuing to explore the experiences of other training facilities and during a trip to Las Vegas in November for the G2E conference expect to visit two educational facilities. During these visits Principal and Chief Executive Pauline Waterhouse, Head of the School of Engineering Ian Smith and RGA Manager Colleen McLaughlin will be talking to their American counterparts and sharing ideas and best practice. It is hoped that a network will develop between all of these institutions that will evolve and develop over the next few key years as the gaming industry in this country expands. The RGA has connected well with the local community, especially Blackpool council, which is pleased to call it a key component in Blackpool’s bid for the UK’s first supercasino. The RGA enjoys a healthy relationship with Blackpool Council with the two bodies working closely together on generating support and media coverage for the bid and the RGA itself. Of the RGA and the possible supercasino, according to Alan Cavill, Blackpool’s Head of Corporate Policy and Development: “It’s all about developing a route to employment for people rather than just saying here’s some training and then leaving it to them. We want to make sure that local people are fully equipped to take up the jobs that will be created.” As the RGA’s reputation grows so does the ambition of all those involved. The RGA wishes to build on the already well established industry relationships and work with all major players in the gaming industry to get them all on board. When these people think of training, we immediately want them to think of the Regional Gaming Academy, Blackpool.

EMMA ELSON Emma Elson is Blackpool and The Fylde College’s Press Officer. Emma joined the College in December 2005 from the Lancashire Evening Post newspaper, based in Preston. After graduating from Edgehill University College in July 2002 Emma joined the Evening Post as Editorial Assistant. She spent three years with local newspapers and was taken on at the College partly for her background in the newspaper industry. Emma applied for her current job as she was looking for a challenge and thought that co-ordinating press activity for one of the largest colleges in the country would provide that challenge. With her first big job being the launch of the Gaming Academy she has not been disappointed.

Casino & Gaming International ■ 71

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UK CASINO SCENE

THE NEW UK GAMBLING ACT: SOME SALUTARY LESSONS BY PETER COLLINS

The Governmentâ&#x20AC;&#x2122;s general hopes of passing an uncontroversial new gambling law foundered on its casino policy or rather its lack of a consistent and coherent one which would palpably minimise social costs and maximise public benefits. Most people think that the passing of the new UK Gambling Act in 2005 was a shambles. And certainly, as far as casino policy has been concerned, it looks like a sustained object lesson in how not to govern a country.

ver five years the Government had available to it a Gambling Review Body Report, a Department of Media, Culture and Sport (DCMS) Response Paper, a Select Committee Investigation Report, the proceedings of an initial Parliamentary debate, a joint Policy Statement on Casinos by the Office of Deputy Prime Minister (ODPM) and DCMS, two Joint Scrutiny Committee Investigations and Reports with Departmental responses to them, as well as the product of constant official consultation and evidencegathering throughout this whole process with all interested parties which issued in literally millions of words of written and oral testimony and consumed prodigious quantities of time and money. And yet towards the end of 2004 the Government was taking to Parliament a Bill whose quasi-free-market casino component was so patently flawed and incoherent that it was not only excoriated in the press but it was attacked by all parties in the House of Commons and had to be not merely amended but totally reversed at the Committee stage after the Second Reading. This U-turn actually issued in what is not objectively a bad policy of limiting the number of new casinos and harnessing them to the securing of economic benefits of the sort which casino projects are especially good at delivering by having independent, tendering procedures for deciding where they should be located and which projects should be licensed. However, the Government had left it so late to get to an acceptable policy that there was insufficient time left to debate the new policy properly and the Tories were therefore able to try to make political capital by forcing a further restrictive, albeit quite illogical, change. Worse, the Government had never thought through what

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>> The best tax policy for casinos is one which, through a competitive tendering process, captures upfront and in kind the abnormally large or oligopoly profits (known to economists as “economic rents”) which are made available as a result of restricting the number of casinos authorised to allay public worries about negative social impacts >> needed to be done to implement the policy of restricting new casinos to which they had been belatedly converted. They thus left open a loophole whereby casino companies could still apply for licences to open or extend casinos under the old 1968 rules even after the Act had received Royal Assent. The result is that as far as casinos are concerned the Government will have secured a result which absolutely nobody wanted. There will be a hundred or so new casinos, most of them in the old permitted areas, only one of which will deliver any significant economic benefits to the community as a whole over and above those which accrue to the consumers and suppliers of casino products. Anti-gamblers will be unhappy that the declared objective of preventing a proliferation of new casinos has so conspicuously failed and all but one of the local authorities which made plans to benefit their electorates by securing investment, employment, non-gambling amenities and

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tourism enhancement though licensing international style casinos will see their hopes dashed.

THE GOVERNMENT’S DEFENCE To be fair to Government, they never intended to take legislation through parliament which would be focussed on the authorisation of new casinos. Their objectives from the outset were to revise the 1968 Act and to address issues which that Act did not consider, notably gambling via new technology and problem gambling. They also wanted to extend consumer choice where this could be done safely. In respect of these issues, Government may fairly claim that its legislation has been largely successful. Many anomalies, archaisms and unnecessary pieces of regulation in the 1968 Act have been removed. Government is pioneering the difficult task of regulating remote gambling.

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The Gambling Commission and the Responsibility in Gambling Trust (RIGT) have been successfully established. The former is ensuring that demonstrating social responsibility is a necessary condition for being licensed to operate any gambling business. The latter is within sight of raising the £3m p.a. recommended by Budd to fund research, prevention and treatment in the area of problem gambling and now works closely with organisations like GamCare, Gordon House and the Universities of Salford and Nottingham Trent to ensure the delivery of high quality services to minimise the harm caused by excessive gambling. Government policy now also recognises that for most people gambling provides harmless fun and, consequently, government has extended consumer choice and removed unnecessary barriers which infringed the principle that individuals should be able to decide for themselves how they will spend their own time and their own money in pursuit of enjoyment.

WHAT WENT WRONG? The Government’s general hopes of passing an uncontroversial new gambling law foundered on its casino policy or rather its lack of a consistent and coherent one which would palpably minimise social costs and maximise public benefits. There were four principal reasons for this failure which I shall consider in turn. Thus Government: ■ misread public opinion ■ misunderstood the international casino business ■ had a poor grasp of what is and what is not relevant to preventing the authorisation of new casinos from having negative social consequences but and an even poorer one of how to harness the development of new casinos to the delivery of public benefits ■ had only a very shallow understanding of the

exceptional importance to different sections of the gambling of protecting themselves from competition; consequently government both underestimated the ferocity and cunning with which the competing sectors of the industry would lobby their interests.

PUBLIC OPINION In the UK, as almost everywhere else in the world, public opinion is divided about gambling. Some see it as purely harmless entertainment and consequently view suggestions that it should be prohibited or singled out for special restriction as indefensible. Such people are likely to think there should be at least as free a market in gambling as there is in alcohol. At the other extreme there are those who feel, often but by no means always for religious reasons, that gambling is still immoral; that it is bad for the individuals who engage in it; that it also impacts negatively on non-participants and on taxpayers who have to fund the extra public services needed to address the social problems which gambling creates; and, in general, that it has a morally corrosive effect on both individuals and communities. Between these extremes there is a more moderate view which is probably held by a majority of voters. This is that, on the one hand, provided they do not illegitimately harm others, adults should not be prevented from doing as they please, even if this means they doing things like gambling which may be risky or which others may think immoral. On the other hand, most people still do not think of casinos in the same way as they think of restaurants or theatres. They feel there is something about gambling which makes it not quite like taking drugs or consuming pornography, but in some ways similar. As such, proposals to extend commercial gambling opportunities generate widespread unease which governments need to allay. The Casino & Gaming International ■ 75

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unease may be related to fears about people running themselves and their families by gambling too much or to worries that somehow “too much” gambling would be a bad thing for a variety of “quality of life” reasons. The existence of these conflicting views ensures that no legislation which will have the effect of legalising more commercial gambling is ever uncontroversial and it was simply naïve of the UK Government to expect that their legislation would be an exception. More generally, the nearest any contemporary democratic society can hope to get to a democratic consensus is acceptance that: ■ if we are to have more gambling we will have less of it than would emerge if the provision of gambling were left to market forces ■ we will only authorise more gambling if we can be satisfied that everything that reasonably can be done, will be done to minimise the harm caused by excessive gambling ■ the gambling we authorise must be linked to the delivery of public benefits to the community as a whole including its non-gamblers and especially its least advantaged members. Given this the UK Government’s claim, constantly reiterated until the final U-turn, that it would somehow ensure that there would be no undue proliferation of new casinos but that the provision of new casinos would also be left to the market was always incoherent so doomed to be unacceptable and unworkable.

INTERNATIONAL-STYLE CASINOS What the Gaming Board of Great Britain’s submission to the Review Body called “international-style casinos” are large entertainment complexes where the core activity is gambling and, at least, in the West, the dominant form of gambling activity is the playing of electronic gambling machines. These machines are recognised as the most popular and lucrative forms of gambling and also as the most potentially addictive for a minority of players. However, these risks are smaller when the machines are located in a casino than when they are more conveniently located outside casinos. Smaller casinos of this type have several hundred machines and larger ones typically have 1,500-3,000. These casinos also offer table games in whatever number they think will optimally serve their market and they offer many other forms of entertainment as well. Except where such casinos are located so as to attract gamblers from other jurisdictions where casinos are prohibited, most customers will be locals. Because of the popularity of their product, internationalstyle casinos have been established for some time throughout the Western world: mostly small ones in Europe and large ones in the rest of the world including North America and Australasia. They have, however, never been developed in the UK because here the number of machines permitted in Casinos as well as the size of their prizes have always been drastically restricted (until recently to 10 machines with a maximum payout of £1,000). From the outset and throughout the process of reform in the UK no-one in government really thought through the issues which would be involved in authorising international76 ■ Casino & Gaming International

style casinos to be built in the UK. Initially, government thought they were simply extending the number of licensed casinos of the sort which are familiar in the UK and liberalising the way they were allowed to operate. Eventually they realised they were, in fact, authorising the entry into the UK gambling forest of a wholly new animal which was very large, initially rather frightening to the natives, but potentially domesticatable to the benefit of all. Unfortunately, no-one in government had the time, resources or incentive to study this new creature in depth in the various places where it lived abroad. Nor, for the most part, did they have the humility to recognise their ignorance and to acknowledge their need to learn about quite a difficult subject. They also lacked courage and candour in addressing the question of what this might mean for established UK businesses.

MINIMISING HARM AND MAXIMISING ECONOMIC BENEFITS Because they did not understand international casinos, the decision-makers sought to minimise their potential for harm by addressing the wrong issues and sought (eventually) to secure public benefits from their development without understanding the necessary conditions for achieving this. Thus, in the name of reducing the risks of increased problem gambling, they tinkered repeatedly with minimum floor sizes and maximum numbers of machines per venue, as well as with the size of the maximum prizes as the key determinant of what machines could be operated where. They consequently proposed regulations in these areas which, at best, would have failed/will fail to solve the problems they were supposed to address and, at worst, would have exacerbated or will exacerbate the problems. But problem gambling is not associated with the number of tables and machines per venue and, even if it were, it would be totally pointless to limit the number of tables and machines without also limiting the number of venues. Nor is there evidence to show that category A machines, the vast majority of which have jackpots of only a few thousand pounds, are demonstrably more addictive than £4,000-limit category B machines or even £500-limit machines. On the other hand there is good evidence to show that the more electronic machine gambling is located conveniently to where people live and work the more likely they are to get into trouble by gambling on impulse. There is also good evidence that the key to keeping problem gambling numbers to a minimum is an effective public awareness campaign which ensures that consumers understand the dangers of gambling and how to avoid them. But the Government could not agree amongst itself where new casinos should be located in relation to convenience nor were they effective in spelling out the basis of their strategy for dealing with a potential proliferation of casinos so as to allay public nervousness and neutralise the parts of the media and the parliamentary opposition which were hell-bent on making trouble. In respect of securing regeneration and other economic benefits from casinos, Government also failed to understand that it could not expect developers to build casino projects which would subsidise expensive public interest projects if they could just as easily develop casinos which would offer the same products to the same customers without investing in non-gambling infrastructure, and which moreover could

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offer cheaper and more convenient gambling. Hence, the incoherent proposal in the 3rd August 2003 Casino Policy Paper issued by ODPM and DCMS, of permitting “large” and “largest” casinos to be developed and operated under identical conditions, save that the “largest” casinos would be expected to invest in regeneration. Recommending that the government set limits to the number of new casinos which it authorised was deemed to be anti-free-market. In fact, however, it was precisely an understanding of how the market would work which ensured that under the Governments unlimited “large-and-largest” proposals it would have been impossible for “largest casinos” to compete with merely “large ones” and consequently none of the former would have been built. The truth is that to secure public benefits from casino projects (as opposed to the private benefits which consist in the enjoyment individuals get from consuming gambling services or the money they make supplying them) you need to have a taxation policy at the outset: otherwise no-one can work out how much capital investment their project can sustain, especially in public interest projects - hotels, conference centres, sporting and live entertainment facilities, conservation projects, low cost housing, transport infrastructure, and the enhancement of regional tourism product - many of which will not by themselves make a profit or sufficient profits to attract investors. The best tax policy for casinos is one which, through a competitive tendering process, captures upfront and in kind the abnormally large or oligopoly profits (known to economists as “economic rents”) which are made available as a result of restricting the number of casinos authorised to allay public worries about negative social impacts. This is the best policy because it harnesses the creativity of the private sector and forces would be operators to devote their talents and experience to working out how their project can deliver maximum benefits to the community the casino is to be located. In this way, the public can get the best possible value for money with the least risk out of what are effectively taxes on anticipated gambling revenues.

IDEOLOGY AND PROTECTIONISM Finally Government, while priding itself on the extensiveness of its consultation processes, in fact failed to realise that this would lead to an unholy alliance between principled antigamblers and domestic industries seeking to protect themselves from competition, in which both would attack the bill on the populist grounds that it would lead to a sensational increase in problem gambling. These claims were buttressed by what can least impolitely be described as commercially commissioned advocacy research which collated such evidence as supported the view the paymasters wanted supported and ignored all counter-evidence. The potency of the PR which this unholy alliance was able to generate eventually overwhelmed the politicians and, as things stand, although everyone is agreed that whatever the right number for regional casinos, it cannot be one (though it might be none), no politician is prepared to stand up to the potential wrath of especially the Daily Mail and those who control it.

CONCLUSION It is clear from all this that what we should have had is a casino environment in which existing casinos could have

stayed as they were in August 2003 but not grow in number or size. On the other hand they could have had category A machines as well as the removal of all the restrictions which have in fact been removed. At the same time the Government should have authorised the development of a specified number of new casino projects, for which UK companies would be in a strong position to bid, which would be integrated entertainment complexes and which would bring significant economic benefits to relatively deprived areas and individuals. This would probably have given us a total of about 140 casinos in all. Instead we will have probably 220 new casinos, little regeneration and a result that no-one intended, although some foresaw it. None of this is very important in the greater scheme of things except for one thing: it is symptomatic and illustrative of why, in general, we are so badly governed. Understanding the fiasco of UK casino policy gives insights into why we have such difficulty generating and implementing good policy with respect most conspicuously to health, education, law enforcement, transport, agriculture, foreign relations and the conduct of war - and not just us but all modern democracies. The problem is not individuals but structures. In the process that led to the passing of new UK law for casinos nobody was` especially unintelligent or malevolent. In both the public and private sectors the principal actors were simply doing what they are paid to do and behaved with no more dishonesty than is common to all politics and business. Even the press were doing no more than what they are paid to do, namely to pander to our more shameful appetites, in this case for moral smugness and xenophobia. The trouble was that those who were involved in the decision-making had inadequate time and little incentive to engage in the hard work of acquiring the comprehensive and complex knowledge necessary for anticipating problems and developing solutions. There was also a radical failure of interdepartmental co-operation, especially between the DCMS, ODPM, Health Services and the Treasury. It was Donald Rumsfeld who, reflecting ruefully on the errors in Iraq for which he more than most had been responsible, told Bob Woodward that the American “system of government makes competence next to impossible.” The same is true of our system of government and this is the most important lesson of the UK casino debacle, and the one most worth exploring further.

PETER COLLINS Peter Collins is Professor of Public Policy Studies and Director of the Centre for the Study of Gambling at the University of Salford. He is the author of the book “Gambling and The Public Interest” (Praeger books, 2003). He is Executive Director of the South African National Responsible Gambling Programme and was part-time CEO of GamCare in 2004. He was an expert advisor to the Joint Scrutiny Committee of the UK Parliament examining the new UK Gambling Bill.

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UK: ORIGINS OF GAMBLING

BACKWARDS OR FORWARDS? GAMBLING REGULATION IN HISTORICAL PERSPECTIVE BY JULIAN HARRIS

In the first of two articles examining the historical context of gambling in the UK, the emergence of organised gambling – especially the ‘gaming houses’ of the 18th century – and efforts of the state to guard the population against perceived vices and excesses, are given their due place. From Edmund Burke, Napoleon and Wellington to the Royal Commission and the

hilosopher Edmund Burke, in a speech in the House of Commons in 1780, declared: “Gambling is a principle inherent in nature”. It would be difficult to argue otherwise. The dice that we know today were used for gaming by the ancient Egyptians and the Romans. In 1500 BC the Chinese played a form of roulette with spinning discs, and were playing card games as early as the twelfth century. Even Leonardo da Vinci had a rather unsuccessful attempt at developing a gambling machine. Nation states have long seen the possibilities of using lotteries to raise money. The first such example in Britain was when Queen Elizabeth I approved the first lottery in 1588 in order to raise funds to repair the Cinque Ports, the principal defence towns on the South Coast.

Budd Report, the legitimacy of gaming increasingly emerged. The proliferation of uncontrolled gambling between 1960 and 1968 led to tough Government regulation that forms the bedrock of a responsible and efficient industry noted for its quality and probity today.

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But human attitudes to gambling have always been contradictory, as with attitudes to other pleasures, or vices, depending on your point of view. In his The Last Essays of Elia (1832), Charles Lamb wrote that “a number of moralists condemn lotteries and refuse to see anything noble in the passion of the ordinary gambler. They judge gambling as some atheists judge religion, by its excesses,” and the course of history is littered, as are nineteenth century novels, with examples of those who gamble to excess, sometimes to the point of financial ruin. John Montague, the Fourth Earl of Sandwich (1718-1792), was a hardened gambler and gambled for hours at a time at the Beef Stake Club, sometimes refusing to get up even for meals. It was said that he invented the sandwich, by ordering his valet to bring him meat between two pieces of bread, causing others to order “the same as Sandwich”. The famous leader and foreign secretary Charles James Fox was introduced to gambling by his father, Lord Holland, at an early age, and is widely credited with turning Eaton College into a renowned gambling den during his school days. The eighteenth century in particular saw a boom in gambling, and the development of “gaming houses”, generally in taverns, coffee houses and gentlemen’s clubs. The first half of the century saw the first attempt by the State to control gambling by legislation, with Queen Anne’s Act of 1710 which sought to outlaw the lending of money for the purpose of gambling, and George II’s Act of 1745, which prevented the recovery of gambling debts. By the early years of the nineteenth century, gambling was becoming more organised, and the first recognisable casinos were developed. It is a little known fact that, aside from political enmity and military prowess, those two giants of the age in Europe – the Duke of Wellington and Emperor Napoleon both shared a love of gambling, though Wellington’s game was hazard, whilst Napoleons was vingtet-un. It was Napoleon who first legalised gambling in France in 1806, and reinstated the Redoute Casino, possibly the world’s first, in Liège. When William Crockford opened the first purpose built casino in London at 50 St James, it was the Duke of Wellington who became the first Chairman in 1827. William Crockford retired in 1840 with about £1,200,000, a staggering amount of money for those times [over £40 million today]. Aside from the ability of the upper classes to indulge in their favourite games in private, before 1960 a mix of severe restrictions and outright bans, for example on roulette, existed on most forms of commercial gambling. As with so much legislation relating to social or moral issues, legislation relating to gambling has often sought to reflect the mores of the times. Victorian legislators sought to protect the public from many of the vices by which those who have to work for a living could be corrupted, including gambling as well as drink. The legislation was however

piecemeal, and certainly by the first half of the twentieth century, was complicated and difficult to understand. Horseracing had been given the royal seal of approval by King Edward VII at the beginning of the century; so oncourse betting was permitted, whilst all betting off-course was prohibited. Whilst gaming was not in itself illegal, there was a risk of illegality where chance played a part. However, when the first Royal Commission of 1949/1951 reported, there were no casinos and the law, whilst complicated, in effect prohibited all commercial gaming of any significance. As the Commission put it: “Anyone who plays, elsewhere than in a private house, any gaming in which there is an element of chance for money or money’s worth runs a grave risk of committing a penal offence. Indeed there are certain games, such as roulette, which it is illegal to play even in a private house………”. In some ways the Commission was forward thinking; it concluded that the law relating to betting, lotteries and gaming was obscure, illogical and difficult to enforce. It recommended a need for simplification and clarification of a code. It found no support for the belief that gambling, within “reasonable bounds” does serious harm either to the character of those who take part in it, or to the community generally. Because expenditure on it represented not more than one percent of personal expenditure and the 100,000 people engaged in the industry represented less than one percent of the number of people employed, the economic effects were unimportant. The Royal Commission also concluded that legislation should interfere as little as possible with individual liberty to take part in the various forms of gambling, but should impose restrictions to discourage and prevent excess. As their report put it: “Gambling as a factor in the economic life of the country, or as a cause of crime is of little significance, and its effects on social behaviour, insofar as they are a suitable object for legislation, are in the great majority of cases less important than has been suggested”. Although the Royal Commission did not actually propose the introduction of commercial gaming, it recognised the need for such facilities to be available in clubs and for legislation to permit the making of charges for the right to take part, provided that the amount of those charges was no more than would be reasonably required to meet the actual cost of the facilities provided. Unfortunately, the 1960 Act went further than the Commission’s recommendations, in allowing a fixed charge to be made in advance to members of a club to participate in gaming. The Act applied to proprietary clubs as well as members clubs, and led directly to the emergence during the 1960s of commercial gaming. This can be attributed to the fact that there was no requirement that the amount of the charge should be limited to the true cost of providing the

>> John Montague, the Fourth Earl of Sandwich (17181792), was a hardened gambler and gambled for hours at a time at the Beef Stake Club, sometimes refusing to get up even for meals. It was said that he invented the sandwich, by ordering his valet to bring him meat between two pieces of bread, causing others to order “the same as Sandwich” >>

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facilities, nor was the right to charge limited to members’ clubs. It was this, and the ingenuity of commercial operators in devising arrangements facilitating the playing of unequal chance games on an apparently equal chance basis that led to commercial gaming on a huge and unforeseen scale. These clubs began to provide casino games with charges for each shoe of chemin-de-fer games, and introduced variations of roulette, blackjack and dice to make these normally equal chance (and therefore lawful) “unequal chance games,” and therefore run profitable games for the casinos. Sessional charges were made for each spin of a roulette wheel and the bank was “offered” to players. These and other devices to make commercial casinos profitable were regularly challenged by the Police. The casinos in turn appealed each decision, in some cases as far as the House of Lords. Some arrangements were found to be legal, some illegal. The consequence was that the 1968 Act was difficult to enforce. In addition, because the creation of a commercial gaming industry had not been foreseen, no restrictions had been placed on it: there were no restrictions on advertising; the Police had no right of entry to the clubs; there was no regulator, and such checks as the Police sought to apply through criminal proceedings were slow. Gaming promoters were able to stay one jump ahead of the law by switching the basis on which they operated. At the same time casino proprietors enlarged their clientele through the provision of cabaret, dancing and entertainment. Whilst the 1960 Act may have failed to achieve its object, in that it created the conditions for the proliferation of commercial gaming, at least it had the socially desirable effect of creating such an industry openly, where everybody could see what was happening, rather than surreptitiously. This led to the sensible realisation that suppression was neither practical, nor desirable. By the mid 1960s, commercial gaming was out of control. There were more than 1,000 casinos operating in the UK (compared with approximately 160 today), unscrupulous operators were taking advantage of customers, and criminal involvement in gambling was rife. In 1962, the then Colony Club in Berkeley Square was closed down and its proprietor, the famous American movie actor George Raft, famous for his gangster roles both on screen and in reality, given his connections to the Mafia, was deported. Something had to be done.

GAMING ACT 1968 In 1968 the Government wisely concluded that there was no possibility of suppressing commercial gaming, and instead sought to bring it under strict controls. This is a lesson which the US Government could perhaps usefully learn in relation to online gambling. The philosophy of the 1968 Act was that commercial gaming facilities could be provided “under appropriate supervision, but only on the scale needed to meet the unstimulated demand for them”. The principle upon which the Act was to proceed was that “no one can claim a right to provide commercial gaming; it is a privilege to be conceded subject to the most searching scrutiny and only in response to public demand”. The purpose of the controls was threefold: 1. 2. 3.

To purge commercial gaming of its criminal elements; To cut out excessive profits; and To ensure that gaming is honestly conducted in decent surroundings.

Beyond that the intention underlying the Act was to reduce drastically the number of commercial clubs providing games other than bingo, to restrict bingo to a neighbourly form of gaming for modest prizes and to check the proliferation of gaming machines. In 1968 Parliament rightly concluded that the effect of suppression would only be to drive gaming activity underground and “into the hands of crooks and racketeers”. It was to be treated as a vice which could not be prevented, and which would therefore be allowed, but subject to significant and stringent control from the Courts, the Gaming Board, the local licensing authorities and the Secretary of State. As such, the 1968 Act was remarkably successful, with the number of casinos being reduced at a stroke from over 1,000 to 115 (of which 20 were in London). This was partly achieved by limiting casinos to certain geographical areas, on the recommendation of the new Gaming Board. The historical perspective of gaming in the UK, and in particular the uncontrolled explosion of commercial gaming between 1960 and 1968, explain why Parliament created such a strict regulatory framework based on the principle that a licence is a privilege and not a right, and placing such emphasis on the importance of satisfying only “unstimulated demand”. I mentioned earlier that in some ways the first Royal Commission was far-sighted in its attitude in 1951, in seeing only a need to have restrictions to prevent excessive gambling. The free for all of the 1960s, unwittingly created by the 1960 Act, convinced Parliament that this libertarian approach would not work, and a much stricter regime was imposed than might otherwise have been the case. The industry that the 1968 Act created has been highly regulated, responsible and efficient. It enjoys a worldwide reputation for quality and probity, now operated mainly by public companies with a large proportion of institutional shareholders. The tight regulatory framework intentionally stifles and prohibits most of the normal forms of competition, and in the process created a controlled and protected market for certified staff and licensed operators.

DEREGULATION Successful though the 1968 Gaming Act was, it reflected the circumstances of the 1960s, and by the late 1980s had become out of date. In 1978 the Rothschild Commission Report summarised its philosophy in regard to gambling as being: “To interfere as little as possible with individual liberty to take part in the various forms of gambling”. That Commission recommended 46 proposals for change, but no legislative time was ever found to implement them. By 1990 there were numerous towns and cities where casinos were not permitted, but which had grown to an extent that they could justify licences on population and minimum travelling time criteria. The prohibition on advertising prevented even listings in trade and telephone directories was anachronistic, as was the rule that no one could enter a casino without a “cooling off” period of 48 hours. It was ironic that legislation supposedly motivated by a desire to protect citizens from themselves, in London at least mainly constrained foreign tourists and business visitors. No other country applied such a restriction. Under pressure from the industry, the Home Office, still then responsible for gambling matters, produced a Consultation Paper for limited reform in February 1996. Casino & Gaming International ■ 81

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These proposals were for limited deregulation: for example a reduction in the 48 hour rule to a 24 hour rule, some relaxation of the ban on advertising and an increase in the number of permitted areas, whilst retaining the demand criterion. This was not to be wholesale reform, but some liberalisation of the existing regime. The Conservative Government that proposed it lost the election the following year and the proposals were therefore shelved, until the new Labour Government introduced the next important stage of gambling reform, which promised so much, but in the end delivered so little.

THE PROMISE OF BUDD In the beginning there was Sir Alan Budd. By the late 1990s, it was universally acknowledged that gambling law, and in particular the Gaming Act 1968, was outdated and overdue for reform. Apart from the anachronistic restrictions governing the operation of casinos, such as their inability to advertise, perhaps the most glaring was the inability of the legislation to recognise technological developments since 1968, such as the advent of the internet and automated gaming devices. Aside from the industry itself, even the regulator, the Gaming Board, and the biggest gambling charity, GamCare, agreed that the industry should be freed from the shackles binding it to a past age, to enable competition between operators within the industry and with other leisure facilities. The demand criterion had achieved the objectives of preventing proliferation and unfair competition, but it also served as an enormous barrier to entry, and kept the industry within a small group of operators. More practicably, social mores have changed: gambling was no longer regarded as a vice which had to be licensed and controlled only because it could not be suppressed, but as a perfectly proper adult leisure activity which would be permitted provided that it was offered fairly and in a socially responsible way. The Government and the Gaming Board believed that the piecemeal approach adopted under the Deregulation and Contracting Out Act 1994, which the previous Government had proposed, had revealed inadequacies and would leave inconsistencies. More comprehensive reform was thought to be necessary. In 1999, the Government appointed a Committee to be chaired by Sir Alan Budd to review gambling regulation and to make recommendations for reform. The Report was published in July 2001 with 176 recommendations for reform, all but 20 of which were accepted by the Government. Sir Alan Budd and his Committee concluded that attitudes to gambling had changed: whereas then existing gambling policy was based on the principle that gambling should be “tolerated”, it had now become a mainstream leisure and tourist industry. The Committee’s recommendations were designed to simplify the regulation of gambling and extend choice for adult gamblers, whilst seeking to ensure that gambling remained crime free, conducted in accordance with regulation and honest, so that players knew what to expect and would not be exploited, and with proper protection of children and other vulnerable people. Most importantly for casinos, the demand criterion was to be abolished, and a free market approach adopted, possibly save in relation to resort (now regional) casinos where the Committee’s terms of reference did not extend to the question whether a monopoly right should be granted in a particular location. 82 ■ Casino & Gaming International

A draft Bill was published in November 2003, and further draft clauses were published in February and March 2004. The Bill followed on from the publication of a Government White Paper “A Safe Bet for Success” published in March 2002. Following the publication of the draft Bill, there was pre-legislative scrutiny by a Joint Committee of both houses, which produced two reports in April 2004 and July 2004, with Government Responses to these in June and September 2004. The Bill as originally drafted deliberately provided no restriction on numbers, on the basis that the market would decide how many casinos it could sustain to counter any element of unfair competition, in breach of the guiding principles set out in the Act. What was proposed was therefore a removal of the barriers to entry and the means by which numbers of casinos have been so drastically limited, but coupled with additional regulatory and social responsibility measures, to ensure that the industry would remain crime free and with the exception of the 1960s would not be repeated. The attitude to gambling foreshadowed by the World Commission Report of 1951 was finally to be realised. Before that could happen however events, and more particularly politics, intervened, and the process envisioned by Budd, pursued by the Government and refined by the Parliamentary Joint Scrutiny committee was derailed. In the next article, I shall look at what happened, examine the consequences and place them in the historical context I have described against the backdrop of the new regulatory system currently being developed.

JULIAN HARRIS Recognised as a leading expert in national and international gambling and licensing law, Julian Harris is highly regarded by both operators and regulators throughout the world. He and John Hagan are the founder partners of Harris Hagan, the first UK law firm specialising in legal services to the gambling and leisure industries. He, John and other members of the firm have been at the forefront of those advising UK and international operators alike on the opportunities presented by the UK Government’s major reform of gambling law. With over 20 years experience of gambling law Julian has advised some of the world’s largest gaming and entertainment industry corporations. He and his team have also advised trade associations, including the British Casino Association and the Casino Operators’ Association of the UK. Julian came to specialise in this area representing the Gaming Board for Great Britain (the UK regulator) for five years early in his career. Julian is an experienced advocate, a respected and sought after conference speaker and the author of numerous articles and papers for gaming and legal publications and in the national press. He is recommended in all sides to the legal profession, and has been described by Chambers Guide as “astute” and “never misses a trick”. Julian is a Trustee of the International Association of Gaming Attorneys.

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UK: ORIGINS OF GAMBLING

PERNICIOUS VICES AND THE 100 YEAR PASSAGE FROM PROHIBITION BY GREGORY ANDERSON

It is important to try to understand the wider framework of change with respect to gambling in Britain, to see how it has evolved over time and to locate the Budd Report within this process. Over the past century gambling in Britain has been transformed from a largely illegal activity to one which when legalised attracted close administrative control to the current situation where there is increasing reliance on the operation of the market.1

n July 2001 the Gambling Review Report was published (henceforth Budd Report after its author Sir Alan Budd), making no less than 176 recommendations the main thrust of which was to simplify the regulation of gambling. The British government has, with very few exceptions, accepted the recommendations. Budd faced the problem of identifying the regulatory choices which confronted the British government in respect of commercial gambling at a time of economic deregulation and increasing globalisation. The key to successful regulation was to simultaneously widen the choices for adult gamblers, keep gambling crime-free and provide protection for children and the vulnerable. (Miers 2003). Since the 1980â&#x20AC;&#x2122;s economic deregulation in Britain and elsewhere has been undermining the regulatory framework of commercial gambling. The Budd Report can be seen in large measure as a response to this continuing process. A few landmark events can help illustrate this point. The passage of the Betting, Gaming and Lotteries (Amendment) Act in 1984 which allowed bookmakers to turn their back-street business into smart high-street ones was probably more important in this process than previously acknowledged (Dixon 1991). Ten years later the introduction of the National Lottery created a more business-friendly climate into gambling. At the same time the National Lottery with its freedom to advertise and monopoly position disturbed the regulatory playing field. (Miers 2003). Apart from economic drivers the pace of social and political change has accelerated. Anti-gambling interests are neither as powerful nor as well-organised as they were in the past. By the time of the Budd Report there was growing acceptance by a wide range of interested and informed

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opinion in Britain that since gambling presented no fundamental problems for the majority of those who engage in it a wider measure of deregulation was acceptable. The issue facing politicians, legislators and others is how to equate their social responsibility for the small minority of problem gamblers and children with the increasing pace of economic and social change. (Miers 2003). It is important to try to understand the wider framework of change with respect to gambling in Britain, to see how it has evolved over time and to locate the Budd Report within this process. Over the past century gambling in Britain has been transformed from a largely illegal activity to one which when legalised attracted close administrative control to the current situation where there is increasing reliance on the operation of the market. Just how dramatic the change in attitudes to gambling has been over this period is reflected in the recommendations made by a Select Committee on Betting which was taking evidence almost exactly 100 years before the Budd Report. In contrast to the Budd Report the recommendations of the 1901-02 Select Committee represented the high point of the prohibition culture which had been growing in Britain during the nineteenth century. The Committee’s recommendations were embodied in the 1906 Street Betting Act. Since the 18th century gambling in Britain was increasingly depicted as the most pernicious of vices (drink and the drink trade were the objects of similar hostility). To its critics the moral argument against gambling appeared unanswerable; it was often cited as a cause of family breakdown, suicide and crime and even of national decline. Its ubiquitous nature cutting across gender and social boundaries and occurring in a variety of settings caused widespread alarm. Public disapproval was underpinned by a cluster of restrictive legislation which sought to separate gambling from other ‘legitimate’ activities, to stigmatise and marginalise it and eventually prohibit it.2 Increasingly, especially with the 1853 Act, legislation was aimed at popular gambling. By the mid-19th century only betting on-course, gambling in ‘gentlemen’s clubs’ and credit betting were legal. Workingclass gambling was restricted to the streets.

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And there it flourished partly due on the supply-side to the ingenuity of street bookmakers, the growth of the sporting press and to technical change embodied in the Post Office Telegraph (1870) which transmitted results in seconds and partly to the inability of officials to stifle the popular demand to gamble. The persistence of gambling, alcohol consumption and other forms of bawdy popular entertainment set limits on middle-class social control in the working-class communities of nineteenth-century Britain (Reid 1992). Many sections of the urban poor lived ‘a world apart’ from both the respectable working class and from the moral values and Christian mantle of middle-class society. This did not deter Christian middle-class reformers; rather it energised them since they were persuaded that a ban on street betting and other forms of gambling if possible would bring in its train huge private and social returns. Not only efficiency gains, and individual moral improvement but the prospect of a new social order beckoned. At its heart the real fear of the anti-gambling lobbies, especially of the more extreme non-conformist elements, was not that losses might worsen the plight of the poor – but that a run of good luck might make some of them rich and undermine the work ethic. (Garnett and Wright 2003). Although the moral entrepreneurs almost certainly overstated the amount of working-class gambling and the extent to which it dominated the lives of all but a minority, their lobbying was increasingly intense and effective. The National Anti-Gambling League which was formed in 1890 was perhaps the best organised middle-class pressure group in Britain since the Anti-Corn Law League. Its success proved the effectiveness of single-issue lobbying. (Dixon 1991). While the NAGL’s stated aim was to root out gambling from the top to the bottom of British Society there was no appetite in political circles for an assault on gentlemen’s pastimes. Working-class street betting became the focus of the attack and it was this, following NAGL evidence before the Select Committee which was embodied in the 1906 Act. That the 1906 Act was passed by a Liberal Government associated with a reform programme affecting pensions, unemployment insurance and education often regarded as a precursor of the modern welfare state is not surprising. Antigambling, like restrictions on the drink trade, was part of the

UK: ORIGINS OF GAMBLING

reform agenda. The large non-conformist element in the Liberal Party was a vital factor but anti-gambling crossed party lines and the Labour Party leadership was just as opposed to it. Although it has been argued convincingly that the prohibition of Street Betting was recognised as a failure of public policy as early as the 1920’s (Dixon 1991) the 1906 Act continued to dominate gambling policy until the 1950’s. The price that was paid for its continuation was not simply one of policy failure but of fractured social relations. The prohibition of street gambling occurred during a period when the relationship between police and public in Britain was being reshaped on the basis of shared values and consent. (McMillen 1996). There is evidence that the police, especially at local level, faced with a law which was unenforceable preferred to collude in widespread evasion. (Reid 1992). The spectre of police corruption was also an issue which was being taken very seriously in official circles. Even when the law was enforced defendants were produced and fined in a somewhat ritualistic fashion. In effect street betting was regulated but not seriously suppressed. (Dixon 1991). The NAGL, which closed in the late 1940’s, now faced an uphill struggle. Not only was the 1906 Act being flouted but the anti-gambling lobby was dealt two further blows between the wars. Firstly, the electric hare transformed nineteenth-century hare coursing into modern greyhound racing while the Football Pools companies successfully avoided legislative attempts to stop their activities and became the most popular form of working-class gambling by the 1930’s. It was also an activity which many working people did not regard as gambling at all. A sure sign of the weakening of the moral crusade was the increasingly defensive posture of old stalwarts of ‘Moral Entrepreneurship’ such as Seebohm Rowntree. Although Rowntree’s views were not uncommon in early 1950’s Britain the tradition he represented was in fact fading fast. In his last Social Survey of 1949 Rowntree thought that the Football Pools might be nationalised rather than suppressed and the profits put to good use. The pools were already being taxed (1947 Duty) a fact which anticipated the introduction of the Premium Bonds in 1956. (Garnett and Wright 2003). In 1906 a move like the introduction of the Premium Bonds linking the softer end of gambling to national savings might have cost the Chancellor his career. But economic realities and social relations in post-war Britain had moved on a pace. Since gambling was not held to be a valuable social good, once legitimated its revenues were legitimate and potentially fruitful targets for taxation. (Miers 2003). Attempts to tax gambling in 1926 had been disastrous since it could not be extended to off-course betting unless it was legalised, the 1947 Football Pools Duty showed what could be done while in 1956 a state-run lottery was effectively introduced. The chequered history of the lottery is a good litmus test of the changing relationship between gambling, the State and the people. In 1826 the last drawing of the old 18th century annual lotteries was held. This was despite, or rather because of, its popularity. In official circles these annual events were inextricably linked with crime and crowds. This authoritarianpaternalistic position remained until the 1950’s and did not finally disappear until 1994 when the National Lottery was introduced. In the last fifty years the attitude of the British State

towards gambling has been transformed. The linked processes of the spread of the gambling market, of more egalitarian social attitudes and of a changed relationship between the governors and the governed have driven this change. The 1960 Betting and Gaming Act is often seen as a landmark in this respect. And this important Act may have been more of a precursor of the permissive legislation of that decade than is generally acknowledged (Garnett and Wright 2003). Certainly the 1960’s legislation helped to create a legitimate gambling industry which Budd’s recommendations will now help to push into new and less regulated territory. However, the 1906 Street Betting Act was a critical landmark in all subsequent gambling legislation not because it succeeded but because it failed. By their very insistence on prohibition the anti-gambling lobby lost the battle since it created the spectre of an unenforceable law.

REFERENCES 1

‘A Tale of Two Reports: The 1901-02 Select Committee on Gambling and the Gambling Report of 2001’, published by the Society for the Study of Gambling, Newsletter 37, http://www.societystudygambling.co.uk/ news_archive.htm (abstract only) Among the legislation which isolated gambling from other patterns of economic and social behaviour were 1774 Gambling Act which sought to stop wagering on the lives of at-risk strangers (moral hazard) by basing insurance contracts on a legitimate ‘insurable interest’, the 1845 Gaming Act which took gambling debts out of the legal process, and the 1853 Cash Betting Act which was aimed at working-class betting.

READINGS D Dixon, From Prohibition to Regulation (Oxford 1991) M Garnett and R Weight, The A-Z Guide to Modern British History (London 2003) D Miers, The Gambling Review Report: Redefining the Social and Economic Regulation of Commercial Gambling, The Modern Law Review, Vol. 66, 2003. J McMillen, (Ed.) Gambling Cultures (1996) A J Reid, Social Classes and Social Relations in Britain, 1850-1914 (1992)

GREGORY ANDERSON Dr Gregory Anderson is a senior lecturer and former head of the Department of Economics at the University of Salford. He was a visiting Professor at the State University of New York in 2005. His research interests include the economic history and economics of the service economy and occupations in the UK and the history of risk, insurance and gambling. He is co-organising an international conference at the University of Hanover in Germany in November 2006, the theme of which is the Historical Management of Risk and which will result in an edited collection of essays. An example of a recent article is G. Anderson, The Emergence and Development of Fidelity Insurance in Geneva Papers in Risk and Insurance, 2004. His current interest is the differential development of insurance and gambling as industries in the UK and elsewhere.

Casino & Gaming International ■ 87

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SOCIAL & MEDICAL RESEARCH

TURNING THE PUZZLE OF ADDICTION INTO POSITIVE EXPRESSIONS OF EXPERIENCE CHERYL LEWIN INTERVIEW WITH HOWARD SHAFFER

The massive growth in global gambling is accompanied by an ever greater ease of technological accessibility for gamblers. There is, in consequence, concern for a parallel addiction risk for a number of players. Since this is an increasingly international issue, the ability to put workable preventative measures in place is paramount. Nevertheless, many do and will succumb and that is creating the perception that an ever more vigilant concern needs to be exercised in order to search for ways to turn addiction from its destructive effects into a durable, life-enhancing way forward.

CL: You have been working in the field of psychology for over thirty years now, how have your goals and objectives evolved? HS: Right from my early days in training I have been interested in addictive behaviour and wanted to know why and how people do things that weren’t necessarily in their self-interest. I discovered addictive behaviour is in people’s short-term self-interest, but not in the longer run. Today, there is so much science and math available that the whole population probably should be more involved with it. What I’ve done is to take my work and try to figure out different ways to tell the public about this remarkable puzzle called addiction in ways that, like me, they can also enjoy their curiosity, test their ideas, and see the magic in how the science of it all actually gets done. Along the way I’ve created different products to provide avenues for people to learn about scientific research in the way that non-scientists can get just as excited, interested and curious about it as I am. My staff and I created BASIS - Brief Addiction Science Information Source - which was the first weekly summary of addiction-related science for the public. I thought that this would be like the Boston Pops. What we wanted to do is create something to bring out the enjoyment of science, like classical music, which people often tend to think is boring and perhaps beyond their capacity, to the wider population. What we wanted to show them is it’s not beyond anybody’s capacity; everyone can do science. After all, we all do it when we solve problems but, at the same time, we can make it exciting and interesting to them. We wanted to change the world and bring respect to those who study and Casino & Gaming International ■ 91

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treat addiction as well as those who suffer with it. That is where BASIS came from. CL: Can you provide an overview of BASIS and its mission to strengthen worldwide understanding of addiction through research, education and information exchange? HS: BASIS has a number of journals that cover a variety of topic areas: gambling, drinking, smoking and it also covers arts and the humanities. The arts and humanities provide a cultural view of addictive behaviour, so we cover that. It’s become very popular and it’s used all around the world. Users come from every corner of the planet and their numbers are growing. BASIS also provides a valuable training experience for our new staff because, when they work on BASIS, they also learn about the different sciences associated with the particular area that they are coming to study. So it has two purposes: it educates the public and it also educates new and young staff members. CL: You have developed a new programme called EMERGE for training gaming companies’ employees and other interested individuals with evidence-based responsible gaming information. Can you share some of your thoughts about this programme and its implementation at this time? HS: I did some of the first studies on the gaming industry’s employees and learned that, for certain health problems, they were a higher risk. I wanted to return to the industry, which

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provided early support for my gambling research, information that could help them better protect the health of the industry’s workers. So we created EMERGE, a training programme for industry employees. It’s the first of its kind, an online programme with ready access 24/7 and it’s just beginning to be field tested. It will be rolled out in 2007 for the industry generally to use. The interest for it has come from all over the world and people have said this is what is needed. And again, this is a different educational approach to that of policy-based programmes. EMERGE does include policy, but it also includes the basic scientific evidence associated with gambling-related problems. It’s an evidencebased programme. We don’t really share our opinion about gambling with the industry; what we do share is what science teaches us. We put it in a framework that everyone can understand and, hopefully, get excited about. CL: Have you translated into other languages? HS: Not yet, but we are planning to do so by making it culturally appropriate for other parts of the gaming industry that are not located in the United States. CL: Do you think there is an adequate international level of public policy debate and decision making where clinical approaches to problem gambling are concerned? What are the issues that need to be addressed today? HS: Well, I think all policy discussion is welcome and the best policies are local. So, international discussions are important.

SOCIAL & MEDICAL RESEARCH

I do think that more international discussions are necessary from a science perspective, because there is considerable variation in what gambling means to different cultures. Different people have integrated gambling into their lives in different ways. The problem with gambling disorders is that there is considerable variation around the world. In certain Asian cultures, for example, people don’t see pathological gambling as a psychiatric illness. They see it as a set of poor choices that reflect badly on the family. If we are going to understand this construct called pathological or disordered gambling, we have to begin to make it culturally sensitive and we need to understand the construct doesn’t exist outside of our own mind. We’ve created this construct and the people who suffer with it change with the ebb and flow of the time. In some cultures people who gamble too much would be revered while for other cultures they would be chastised depending on the cultural values related to money, work, and so on. Neither public policy nor our contemporary science adequately addresses these differences. CL: In your journal A Science-Based Framework for Responsible Gambling: The Reno Model (2003) you address the need for responsible policies toward identifying gambling related harm. Can you elaborate on that? HS: The Reno Model was developed to provide a framework for encouraging international discussion and debate. It wasn’t intended to answer all the questions. It was intended by my colleagues Drs Alex Blaszczynski and Robert Ladouceur to stimulate an important dialogue. When the gaming industry, all industry, see science as the foundation for discussion, we could then advance effective policy because the policies would be evidence-based and not simply down to peoples opinions. The Reno Model encourages the industry, the gaming industry in particular, but we really by extrapolation can apply it to any industry to apply their policy using science as a guide. The Reno Model is essentially that kind of a framework. Interestingly it’s been responded to all around the world both favourably and unfavourably. When I say favourably, people are using it to talk and debate about how they should generate the best policy, for the most people. Unfavourably, people have simply misinterpreted it as suggesting that we were telling people what to do when, in fact, what we were setting up is sort of a strawman or framework for people to fight about. I do feel that when people are talking and interacting, the chances for good ideas are better than when they go their separate ways. CL: In your book Futures at Stake you discuss the reality today of youth exposure to gambling, the media, the Internet, sport betting and their peers. You discuss the fact that youth of today have been raised like no generation before them in an era of gambling acceptance. What early interventions have proven to be effective and where do you see the need for prevention in the future? HS: This is a complicated area and that is so for several

reasons. We don’t have a lot of information about prevention yet as far as gambling is concerned. There are some efforts: promising programmes that suggest education and awareness might be helpful. Historically with addiction, education alone has failed to be an effective deterrent. Teaching people about a problem doesn’t necessarily change their behaviour and that’s been shown in a variety of other addictive behaviours. The most important issue here is to examine history. History should be our teacher. If you study the history of technological advance, such as cars, radios, television - and there are many other examples - what you find is that cultures change with new technology, and there were people getting out-of-control with that technology. In the 1930s, people in the United States thought that Jazz music on the radio was equivalent to the use of heroin. People feared that it would anesthetise a generation and break-up families. Even psychiatrists were concerned that young people dancing to Jazz music was dangerous to their health. We survived Jazz; we now revere Jazz. Jazz is a uniquely North American and Cuban activity that people seem to enjoy. It seems to me that it has not been more responsible for family problems than many other things. We similarly worried about television, and still worry about television and its influence on us. We worried about cars. We should be concerned about these things, but simultaneously our experience has been a good preventer or enabled timely intervention. As people gain experience with technology, they learn to use it properly. We are struggling with how much use we should make of cell phones today: whether they are interrupting school or whether they are dangerous on the highway. The science is just beginning to emerge, in some detail. So, to get back to gambling, I think that gambling on the Internet is an unknown. To be very specific, gambling on the Internet is being considered by some as one of the most dangerous technological advances. I have a feeling that fear has evolved for a number of reasons. People were worrying about computers when they first came out: how dangerous they would be to our families. Gradually, we are coming to a balance about how much we can use them in our lives. Though it is very early in the process, we are doing the same with gambling on the Internet. Gambling on the Internet has one unique characteristic that people are forgetting. You need credit. Young people can only get credit through their parents. So the bottom line is that the best prevention for gambling on the Internet is the best prevention for drinking too much, or using drugs, or almost any other excessive problem we have domestically or internationally: families need to talk to their kids. Parents and children need to talk together. If parents don’t allow their young children access to their credit cards they can’t gamble on the Internet, period. The moment we put Internet gambling into the context of all the other things that young people can do, none of which might be good, we can put it into better perspective. Let’s take a look at all the bad things they might do: they might have sex at too early of an age, they may drink too much, they may drink and drive, they might use illicit psychoactive drugs, or they might gamble on the Internet, Casino & Gaming International ■ 93

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and they might gamble excessively. The easiest of those things to stop is gambling on the Internet because if you cut off the credit then they are done, at least they are done with the resources that are currently available to them. If they need to get a job to get their own credit card to gamble on the Internet then there may be some positives that can come from young people working more than they would otherwise. They would learn how to manage their own money. I am not so quick to panic over this. CH: A recent BASIS article discussed that the US House of Representatives has approved Bill HR4411. The article explains: “If the senate and the President agree federal anti-gambling will expand to affect online gambling, primarily online poker. This law, if passed would make it a felony to operate an illegal online website or accept money transferred in any form. This Bill would also allow the DoJ [Department of Justice] or any State court order to require internet service providers to block links that are specified as gambling websites.” Do you think this approach is necessary? HS: Government regulations for the Internet are going to be very difficult to implement because the Internet is used by people from different cultures. Even the idea of the Internet is confusing. The Internet isn’t a thing. The Internet is just a series of connections between computers. As long as computers can communicate with one another that means that regulators would have to regulate every computer user on the planet. I don’t think that’s likely. One anecdote to this, we do have new scientific evidence suggesting that gambling on the Internet might not be nearly as destructive as we had hypothesised before we began the study. This research is due to be released sometime next year. CL: What new ‘avenues’ are you currently focused on for the future? HS: One of the other projects that I have worked on recently is the ‘Expressions of Addiction’. Currently this is developing on a website http://expressionsofaddiction.com/ to bring the humanity of the addictive experience to the public. I want people to better understand the common threads that run through addictions. Before my training in psychology, I had worked as a professional photographer and what interested me was the context of their lives and how, through the photographs, people’s portraits were revealed in a way that reflected the way they thought of themselves. A photograph has the capacity to change how people appear to the outside world or sometimes to themselves. I wanted to capture the emotional aspect of their experience. I took thirty-five years away from photography and recently decided to bring my photographic skills and my interest in psychology together. So I am photographing people in various stages, phases and expressions of their addiction experience: some who are struggling in the most difficult ways and others who have celebrated as much as thirty years of sobriety. By putting their stories together – because all of the photographs are accompanied by the actual “story” and interview of each person – you can see that addiction is a fundamental human experience. 94 ■ Casino & Gaming International

People don’t set out to do this to themselves and people end up in the most difficult situations in part because of bad luck in life, or they were born into a family at the wrong time to parents who really didn’t want them, or couldn’t care for them, or didn’t have the capacity to care for them because of their own problems. So these photographs, actually several photographs of each person, tell the story along with their interview text. My hope is that people can see the humanity in this disorder. For me, it helps round out the message I want to send to the world. My message is that it isn’t always just about science and that there is a human side to all of this. One way to help people is to let the world know about this particular problem. Obviously, I’m passionate about science and getting the world to enjoy science, but while scientists debate the issues, it is important for the world to come together and understand the humanity of this problem. We don’t want to lose people in the translation of science. Our conference, ‘Lost In Translation’ (November 2006), ties together some of these issues because by bringing the humanity of the experience, the suffering associated with the experience, together with scientific investigation and scientific discovery. The conference is intended for clinicians, scientists, industry, regulators and public policy makers. Our goal is to make this world a better place where people can be accepted, really, for global acceptance. HOWARD SHAFFER & CHERYL LEWIN Dr Howard Shaffer is associate professor in the Department of Psychiatry at Harvard Medical School (HMS) and director of the Division on Addictions at Cambridge Health Alliance, a teaching affiliate of HMS. His research, writing and teaching on the nature and treatment of addictive behaviour have shaped how the health care field conceptualises and treats the full range of addictive behaviour. His gambling research has yielded the first reliable prevalence estimates of disordered gambling behaviour; the first longitudinal study of casino employee health risks; the first national study of college student gambling, and a new syndrome model for understanding addiction. Shaffer, a licensed psychologist and certified addictions specialist, is currently the editor of the American Psychological Association’s scientific journal, Psychology of Addictive Behaviors. National Center for Responsible Gaming (NCRG) and the Institute for Research on Pathological Gambling, a Division of Addictions, Cambridge Health Alliance, a teaching affiliate of Harvard Medical School, held the 7th annual conference on November 12th-14th in Las Vegas: www.globalgamingexpo.com for more information. Cheryl Lewin is president of Gaming Solutions & Assoc. and sits on the Board of the Brief Addiction Science Information Source at Harvard Medical School. She is a member of the Illinois Counseling Association and Licensed Professional Counselor, CADC, National Certified Recovery Specialist.

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Correction: In CGI Issue 3, 2006, ‘Macau: A Miracle in the Making?’, table p.39, 2001 Gross Gaming Revenue, should read: ‘MOP 18.1bn’.

96 ■ Casino & Gaming International

Email: ________________________________________________ Address: ______________________________________________ ______________________________________________________ Town/City: ____________________________________________ County/State: __________________________________________ Postcode: ______________________________________________ Country: ______________________________________________ Telephone: ____________________________________________ Facsimile: ______________________________________________ Type of Business: ________________________________________ Signed_____________________________ Date: ______________ Once completed, send to: Casino & Gaming International, Subscriptions Dept.,Woodland Place, Hurricane Way, Wickford Business Park, Wickford, Essex SS11 8YB. United Kingdom. Or Fax to: +44 (0) 1268 766 516 ALTERNATIVELY, VISIT WWW.CASINOANDGAMING.NET FOR MORE INFORMATION

We are just as open to meeting you and your requirements. Visit us at G2E in Las Vegas, November 13–15, 2006 and at the WLA Convention and Trade Show in Singapore, November 12–17, 2006.

Welcome!

We’re open... Not only are we open… … for new

businesses and new partnerships.

Our entire business model is based on openness. From system software to hardware, games and services. Based on industry de facto standards, our

modular

system architecture is developed to enable easy integration with external systems, products and games.

Content Space gives you access to a

wide variety of games from top suppliers as well as the possibility to continuously adapt them to the forever changing market conditions.

www.aceinteractive.se

Our Open

Founded in 2003 as a focused effort to develop and market the next generation of systems for operations of interactive gaming terminals, ACE Interactive is today a wholly owned subsidiary of Aristocrat Leisure Ltd.

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