Canadian Gaming Business

Canada's Premier Gaming Industry Magazine

Vol. 14 No. 2

www.CanadianGamingBusiness.com

Fall/Winter 2019

PM 40063056

SOCIAL STUDY

More than just a distraction, social casino games have a lot to offer the industry

+

Cleaning Up

CanadianGamingSummit.com June 15-17, 2020 Toronto, ON

How Canada’s casino operators need to respond to money laundering

2 | Fall/Winter 2019

Fall/Winter 2019 Publisher

Volume 14 No. 2

contents

Chuck Nervick chuckn@mediaedge.ca 416.512.8186 ext. 227

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Editor Greg Furgala gregf@mediaedge.ca Advertising Sales

Chuck Nervick chuckn@mediaedge.ca

Senior Designer

Annette Carlucci

www.CanadianGamingBusiness.com

22

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annettec@mediaedge.ca

Production Manager

Rachel Selbie

rachels@mediaedge.ca

Circulation

circulation@mediaedge.ca

Product Specialist

Danielle Stringer

danielles@mediaedge.ca

Proudly owned and published by:

President Kevin Brown

President & CEO Paul Burns

5

EDITOR’S NOTE

6

MESSAGE FROM THE CGA

8

COVER STORY

Social Study Slot games are more popular than ever on mobile phones, but what can they offer the industry?

kevinb@mediaedge.ca pburns@canadiangaming.ca

Senior Vice President Chuck Nervick chuckn@mediaedge.ca

Canadian Gaming Business is published four times a year as a joint venture between MediaEdge Communications and The Canadian Gaming Association To advertise: For information on CGB’s print or digital advertising opportunities: Chuck Nervick 416-512-8186 ext. 227 chuckn@mediaedge.ca Copyright 2019 Canada Post Canadian Publications Mail Publications Mail Agreement No. 40063056 ISSN 1911-2378 Guest editorials or columns do not necessarily reflect the opinion of Canadian Gaming Business magazine's advisory board or staff. No part of this issue may be reproduced by any mechanical, photographic or electronic process without written permission by the publisher. Subscription rates: Canada $40* 1 yr, $70* 2 yrs. USA $65 yr, $120* 2 yrs. International $90* 1 yr, $160* 2 yrs. *Plus applicable taxes.

Postmaster send address changes to: Canadian Gaming Business Magazine 5255 Yonge Street Suite 1000, Toronto, Ontario M2N 6P4

Official Publication of the Canadian Gaming Summit

14 INDUSTRY Q&A

theScore’s Big Bet The Canadian sports media company has made its next big play in the United States’ burgeoning sports betting market

22

REGULATION AND COMPLIANCE

Cleaning Up The “Dirty Money” report rocked Canada’s gaming industry. How should it respond?

27 INDUSTRY PROFILE

Playing Safe The Responsible Gambling Council is making unsafe play a thing of the past

29 TECHNOLOGY

Let's Get Critical It's time to start treating gaming infrastructure like a high-value target

ADVERTISER FEATURES 18 We Clean This House

By Nilfisk

20

Gaming Innovation Spotlight

By PlayStudios

20 17

20 14

20 12

20 11

9 0 20

TM

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ScientificGames.com The look and feel of the games and their individual components and displays are trade dress of Scientific Games Corp. and its Subsidiaries. TM and © 2019 Scientific Games Corp. and its Subsidiaries. All rights reserved.

4 | Fall/Winter 2019

editor'snote

Betting on Change Canadians are still eager to gamble, but how they do so, and how the industry serves them, is rapidly changing LIKE THE GAMES it develops and operates, the gaming industry doesn’t lack for excitement. More casinos are being announced, built and opened; start-ups are introducing new innovations set to transform everything from games to outreach to customer analytics; and regulatory adjustments seem inevitable. All said, from the casino f loor to back office, change is inevitable.’

How that change plays out, though, is an open question. We can expect new casinos to generate more revenue, but predicting the long-term impact of tech and regulation is a guessing game. While things are in the midst of disruption, sometimes, the only way to get a proper hold of events is time.

Social casino gaming is a case in point. Ten years ago, it was brand new and unpredictable. Since then, though, some patterns have emerged. Our cover story, “Social Study” (page 8), looks under the hood of the social casino game market, examining its past, present and — with restraint — its future, as well as how the established land-based gaming industry can take advantage of it. Along with our look at social casino games, you’ll also find: • Derek Ramm’s overview of money laundering B.C. in “Cleaning Up” (page 22), and how the gaming industry ought to response • A Q&A with John Levy (page 14), CEO of theScore, a sports media brand that’s gone all in on sports betting with the launch of its new app • The latest issue of Canadian Gaming Lawyer, which looks into the future of gaming in Ontario, anti-money-laundering, online gaming regulation, and more.

As dangerous as it may be, it’s not impossible to make a few calls about the future — it just takes a bit of patience and, of course, a bit of reading.

Gregory Furgala Managing Editor

Canadian Gaming Business | 5

messagefromtheCGA

Working Together to Move our Industry Forward

BY PAUL BURNS, PRESIDENT AND CEO, CANADIAN GAMING ASSOCIATION

SINCE THE INDUSTRY gathered in Edmonton at the 2019 Canadian Gaming Summit in June, the Canadian Gaming Association (CGA) has been active on behalf of its members, working on several issues that are significant to Canada’s gaming industry.

The CGA has applied to seek leave to intervene in the upcoming Supreme Court of Canada appeal in Atlantic Lottery Corporation v. Babstock et al. in support of the appellants, the Atlantic Lottery Corporation (ALC) and its video lottery machine suppliers. The appeal involves a class action which alleges that the ALC must disgorge the profits it has earned from its video lottery terminals on the theory that they violate the prohibition on three-card monte of the Criminal Code and are not exempted by its conduct and manage power.

This will be an important appeal for the gaming industry as a whole, and an excellent opportunity to persuade the Supreme Court to implement a clear and balanced approach to Part VII of the Criminal Code. It will ensure that the perspective of the Canadian gaming community is represented and ask the Supreme Court to adopt a principled framework for Part VII that benefits the industry as a whole.

In British Columbia the CGA was recently granted standing at the Cullen Commission of Inquiry into Money Laundering launched by the provincial government to examine the extent, growth, evolution and methods of money laundering in various sectors such as gaming and horse racing, real estate, financial services, luxury goods and professional services including legal and accounting. The CGA made the decision to seek standing to ensure the gaming industry is evaluated and considered in fair and factual manner.

The work of the Commission will directly affect the interests of the Canadian gaming industry, as the Commission’s Terms of Reference empower the Commission in Section (2)(a) “to make recommendations the commission considers necessary and advisable, including recommendations respecting the following: i. the regulation of [gaming and horse racing]”.

The CGA through its submission will outline the Canadian gaming industry’s commitment to AML best practices, continuous improvement including the examination of emerging technologies, and learnings from jurisdictions outside of Canada.

6 | Fall/Winter 2019

We will be working with our members and industry partners to ensure the Commission has the best possible information as they evaluate recommendations that affect our industry.

Moving to Ontario, as announced in the spring provincial budget, the Ontario government is working to create an open licensing system for online operators in the province. The Ontario government recognizes that consumers' gambling preferences continue to evolve, and with Ontarians spending over $500 million annually gambling online using grey market websites, the government will establish a competitive market for legal online gambling that will reflect consumer choice while protecting the consumers who play on these sites.

In late June the CGA participated in the Ontario government’s consultations on online gaming led by the Ministry of Finance.

The consultation with key industry stakeholders was designed for the government to gain feedback on its key objectives for its model: Enhanced Consumer Choice, Consumer Protection, Market Growth and Reducing Red Tape. We continue to follow developments closely and will be happy to provide the government with any additional information if required.

Lastly, we will be closely following the current federal election as the CGA remains committed to our industry’s quest to amend the Criminal Code to enable single-event sports betting.

This remains a priority and we have been working to re-engage community stakeholders. Recently the CGA met with senior representatives from the NHL, NFL and NBA to gain insights into their approaches to sports wagering. We will continue our efforts to ensure the next government of Canada takes action to permit single-event sports wagering.

The CGA’s purpose is to advance the evolution of Canada’s gaming industry, and we are committed to ensuring that issues of common cause that affect a large number of our members and the industry as a whole are front and centre in terms of our priorities. By working together, my hope is to collectively resolve these issues in a manner that allows our industry to continue to prosper and grow.

Paul Burns President & CEO Canadian Gaming Association

coverstory

SOCIAL ST Social casino games have become a standby on mobile phones, but what are they, and how can they benefit the land-based casino industry?

BY GREGORY FURGALA

8 | Fall/Winter 2019

TUDY

coverstory

“Social casino game” seems like a bit of a misnomer, which is understandable. They’re typically played by a single person, on their phone, with no input from others. They offer an escape from the world, not a crowded avenue through the middle of it. The promised social interaction seems dubious.

Canadian Gaming Business | 9

coverstory

THE NAME IS EASILY explained by its origins, though. In the late aughts, when Facebook was still relatively new, a handful of games started appearing it. FarmVille counts as one of the earliest to take off, while others, like Candy Crush followed suit. Amongst them was a handful of slot machine games, and they were all played on social media.

Hence, social casino games. It’s not the most original name, but it stuck.

An untold number of simple slot games emerged on the platform then, but the f irst social casino game — we’ll just stick with the accepted nomenclature — to really catch on first appeared in 2010. Slotomania, developed by Israel-based Playtika, emerged on Facebook and migrated to smartphones later, and has since become a behemoth with what feels like endless content. Players level up to unlock more than 100 slot games with seemingly endless thematic variation, including Vegas Cash (level one), Kiss of the Vampire (level 84), and all the way to 69 Fun

(level 384). More games are on their way as well, with the unreleased Flippin’ Naughty teased at in the menu for players that have unlocked all the content before it.

With decent Wi-Fi, the game takes fewer than 60 seconds to download, install, open and start playing. When you “arrive” at the virtual casino, Lucy, the app’s virtual host, helpfully gives you a bag of coins to get started, which prompts a three-hour countdown until the next gift.

It’s not real money, mind you, just in-game currency.

The player doesn’t win real money and can play as long as they don’t run out of the virtual currency they’re given or have won. It doesn’t cost anything to start playing, either — Playtika makes money off of the 1 to 5 per cent of players who choose to buy more currency or other in-game bonuses and advantages. Known as free-to-play, or “freemium,” the model enables anybody to play in any jurisdiction without running afoul of the regulatory apparatus governing casinos and gambling since, despite functioning like a slot game, there’s no actual money at stake. It’s an incredibly popular model that drew in fresh startups, traditional game developers and casino operators, including IGT, Aristocrat, Caesars, Scientific Games, and more.

THE MAKING OF A GAME

Paul Mathews, co-founder and president of PlayStudios, was amongst those drawn in. When social casino games came around, Mathews was already an industry veteran with t wo successful businesses behind him, both of which developed traditional and digital slot games, and both of which were sold to IGT. In 2010, he noticed the rudimentary slot games that were popping up on Facebook. They seemed popular, and more importantly, almost all of them had one thing in common: they weren’t very good. “There’s the content we had been making for years,” says Mathews. “[My partner and I] said, ‘Look, they’re playing slot machines, they don’t look that good, and some people are paying and there’s no chance of cash out. It’s not gambling.’ We thought we could build a better mousetrap, so we got directly into the space.”

Mathews and his former partner had left the industry by that point, but the poor quality of games on offer, and the experience they had in traditional slots, proved too good an opportunity to pass up. It wasn’t simply a matter of re-hashing some old code from a previous game, though.

While Mathews and his partner had plenty of experience developing effective math models, compelling characters and striking visuals — the basic ingredients of a good slot game — he found himself in the business of making a video game, and the demand on the player was different.

10 | Fall/Winter 2019

“The slot machine making part was something we were familiar with. But what we didn’t know, and most people didn’t because it was a brand new industry, is about what we call the metagame,” says Mathews. “The actual game and progression that players go through from one level to another, and the underlying economy of the game. How many chips do you give out? At what intervals? When you sell chips, do you sell 100,000 or 100 million?”

Upon entering this new space, Mathews had stumbled across the key difference between social casino games and land-based slot machines. When someone visits a casino, it’s a self-contained experience, and they’re essentially locked into the playing until they decide to leave. With an app, players can quickly and easily download another and start playing — unless you convince them not to. Plus, there’s no actual payout. The basic reward mechanic that’s underwritten slot machines since the very beginning is insufficient in the context of a mobile or online game that players can access on their own. People simply won’t stick around to play it like they would a standard slot machine.

They need that additional incentive to stick around.

The solution is a tried and true one in video games: a progression system. From Super Mario Bros. to Tetris to Call of Duty, a modern military first-person shooter

content, and they’re basically invested in the game, it’s hard to get them to start at level one with us, and the same thing in reverse,” says Mathews. “Those switching costs get higher.”

BURGEONING MARKET

The seemingly endless demand for social casino games have made them one of the industr y’s big w inners

“The basic reward mechanic that’s underwritten slot machines since the very beginning is insufficient in the context of a mobile or online game.” franchise, players move through a set of levels, earning a sense of overarching accomplishment for their effort.

In Mario, that simply means moving through the game; in Tetris, the blocks fall faster and the player’s score climbs as they keep playing; in Call of Duty, the player’s character levels up as they take down opposing players and win games, earning new rewards for doing so. In PlayStudios’ myVegas app, players progress through a series of different slot games, unlocking new games and content under the auspices of an overarching Las Vegaslike experience.

“If someone is playing one of our competitor’s games, and they’re at level 1500 and have unlocked a lot of the

this past decade. A recent report from Eilers & Krejcik Gaming, a gaming market research firm, estimates that social gaming generated $5.2 billion last year, with slot games making up 70 per cent of that. While that’s only a fraction of the global $500-billion casino and gaming market, Eilers & Krejcik also estimates that the social casino market enjoyed 10.9 per cent growth in 2018, a number buoyed by easy access, a low barrier to entry and the growing ubiquity of smartphones. Social gaming on Facebook suffered a modest decline of 1.5 per cent, but was more than offset by 2.5 per cent growth on mobile, ref lecting the continuing shift of users away from gaming via social media to purpose-built apps. Nevertheless, Canadian Gaming Business | 11

coverstory

“The growth rates, the amount of people that play daily or monthly, has started to slow down. It doesn’t mean companies have stopped acquiring customers, but there’s a lot of churn in this industry.”

Facebook is still adding monthly users worldwide — 2.4 billion as of the second quarter of 2019, a modest increase since the same time last year — making it a valuable platform for acquiring new players worldwide.

But how sustainable is that growth? When Canada’s first commercial casinos opened in the ‘90s, provincial governments were battling a global recession, and, the theory went, casinos offered governments an attractive new stream of gaming revenue on top of commercial lotteries. That theory bore fruit: nation-wide between 1992 and 1997, government gaming revenue doubled. But between 2006 and 2016, net gaming revenue in Ontario grew by only 17 per cent, the bulk of which was achieved in the last year of that span. That last year may portend an increase (and the provincial conservative government certainly seems set on boosting gaming revenue), but it could also represent an outlier. Either way, it was less than the rate of inf lation, demonstrating that while gambling in Canada can generate steady, consistent revenue, the market can only absorb so much.

12 | Fall/Winter 2019

There’s little data pertaining exclusively to social casino gaming in Canada, but it’s not unlikely that its market penetration will play out similarly. Even Mathews concedes that the exponential growth at the outset of the 2010s was fuelled by its novelty. “The growth rates in ‘11, ‘12 and ‘13 were pretty astronomical because it was just happening, but the markets continue to grow from a revenue standpoint.” The industry has consolidated, though, and that wild growth has settled somewhat.

“Where there’s a challenge for the industry is acquiring new players. The growth rates, the amount of people that play daily or monthly, has started to slow down. It doesn’t mean companies have stopped acquiring customers, but there’s a lot of churn in this industry.”

UPPER LIMIT

Some early adopters have already adjusted their stakes in the segment. In 2017, IGT sold Double Down Interactive, its social-focused subsidiary, for $825 million, a healthy return on approximately $500 million IGT paid for it in 2012 (the exact price was subject to Double Down’s ongoing performance). In a statement, IGT’s CEO Marco Sala said they had simply grown the value of the brand to a point where it could maximize its return. "After several years of strong, organic growth and increasingly attractive valuation levels, the time is right for us to maximize the value of this asset for our shareholders.” While it wasn’t a clean break — a Korea-based social casino operator continues to host IGT digital games in exchange for ongoing royalties — it’s nevertheless a significant departure from developing social games itself.

Caesars Interactive Entertainment (CIE) was the second high profile exit from the social casino gaming market. In 2016 Caesars sold Playtika, which it bought only five years previously, for $4.4 billion. That sale, though, was likely motivated by Caesars’ precarious financial situation. In 2016, Caesars’ operating arm, Caesars Entertainment Operating Co Inc., was going through bankruptcy proceedings and seeking approval for an $18-billion restructuring plan. Playtika, which earned CIE $765 million in 2015, was one of Caesars’ most productive and valuable assets. Offloading it may have been a prerequisite to its restructuring plan being approved by a bankruptcy judge.

In short, yes, Caesars and IGT, both major players in game development and operation, left a burgeoning market, which can be a bad sign. But in their cases, they both had good reason to leave it. Moreover, Double U and Playtika haven’t exactly been scrapped for parts and patents. Playtika has maintained its position at the top of

the social casino game developer heap with a whopping 28.2 per cent market sha re, a nd Double U ha s 8 .6 per cent market share. They were sold, but they’ve still thrived. Calvin Ayre reports that Playtika generated $348 million in revenue in the first quarter of 2018 alone, while iGamingBusiness estimates that IGT rode into 2019 on five consecutive quarters of pro forma revenue g row th. Moreover, other compa n ies, including est ablished i n du s t r y pl a y e r s l i k e S c i e nt i f i c Ga mes a nd A r istocrat , a s well a s game developers like Zynga and Big Fish Games, have all maintained or increased their commitments to the space.

5 million people a month play ing our games, the numbers are prett y interesting. We’re effectively as close to a free channel as they can imagine.”

It’s too early to say exactly where social casino games will land in the myriad offerings of the casino and gaming industry globally, much less Ca n a d a . D espit e h av i n g nea rly a decade to play out in the open market, the variables at hand — smartphone uptake, social media usage, industry consolidat ion, player acquisit ion, industry partnerships, regulations — make long-term forecasts unreliable at best. But in the short term, at least two points seem clear.

BACK TO LAND

First, the i ndu st r y w i l l k e ep g row ing. Despite g row th slow ing dow n since the heady days of the e a rl y 2 010 s , s o c i a l c a si no g a me s are still acquiring players and still generating revenue. The companies that have backed out of the space did so for reasons unique to them — IGT maximized the value of a developed asset, and Caesars was more or less forced to part with Playtika — while others have continued bank ing on the increased g row th of the social casino space. It’s many times smaller t h a n t he g loba l g a m ing indust r y, but it’s still a growing multi-billion dollar market.

Second, while social casino games developed apar t from casinos, the sim ila r it ies in g a mes a nd t hemes w i l l br i n g t hem clo s er t o g et her.

T h at do e sn’t m e a n s o c i a l c a si no apps w i l l b e come g a mbl i n g apps — a t l e a s t n o t u n l e s s t h e r e ’s a major reg ulator y shift — but they show promise as a sig nif icant new c u s t o m er a c qu i sit i o n f u n n el fo r est ablished land-based casinos while keeping new players engaged w ith developers’ apps, mit ig at ing that all-important churn rate.

Land-based casino operators and social casino game developers have a lot to offer each other, and it’s likely the savvier operations on both sides of the developer/operator divide will start partnering up and blurring the line between the two. Casinos need to stay relevant, and to do so, they need to go where their customers a re. I nc re a si n g l y, t h at ’s on t hei r phones.

W h ile socia l ca sino g a mes a ren’t gambling, casino operators and game developers have managed to establish a functional relationship between them and real-world, land-based casinos.

In addition to original content, which includes games developed from the g round up, from math models to themes to characters, slot machine developers, including Aristocrat, IGT and Konami have por ted some of their gaming IP into apps, giving their games a second life on mobile phones.

Perhaps more importantly, however, is how social casino games can be used as a new platform for audience acquisition via loyalty and rewards.

In PlayStudios’ myVegas app, players can earn t wo t y pes of currenc y: a virtual currency that players bet, win, lose and occasionally buy, as well as gold coins. While the base currency functions like cash in a casino, the acquisition of gold coins isn’t tied to the outcome of the game; instead, they’re loyalty points that are acquired over t i me, br i n g i n g a rea l-world benefit into the game without tying it to gambling. “If we’re making a game called myVegas, and it’s all about the Vegas ex perience — there’s a strip, there are properties — then we should probably send them to Vegas.”

To date, PlayStudios has acquired more tha n 70 pa r tners, including MGM and Gateway. In return, casino operators give PlayStudios access to shows, restaurants or hotel rooms, helping to f ill seats and space that might other wise go empt y. “ We’re driving traff ic to those properties,” says Mathews, “and because we have

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Canadian Gaming Business | 13

industryQ&A

THESCORE’S

BIG BET

The Canadian sports media company has made its next big play in the United States’ burgeoning sports betting market September is a big month for sports fans. The NHL, NFL and NCAA football seasons all start, while the NBA, which kicks off in October, starts to spin out the next season’s big narratives. Meanwhile, the MLB winds down, with team jockeying for playoff spots before the big show. That makes it a busy time of year for theScore, a Toronto-based sports media company, but the launch of its new sports betting app, theScore Bet, has made the month anything but routine. Launched at the beginning of September in New Jersey, theScore Bet is the company’s big play to capture a piece of the $150-billion sports betting market in the U.S. Canadian Gaming Business spoke with John Levy, CEO of theScore, about why developing a sportsbook was a natural decision for the company, and why theScore Bet has an edge of its competitors in the sports betting space.

This interview has been edited for length and clarity.

TELL ME ABOUT THESCORE BET.

John Levy: We’ve always dealt openly and honestly with betting, and always thought of it as part of what people are passionate about in sports — even our TV network had a ticker on it with the odds. As we migrated to mobile technology, we skewed a lot younger and discussed sports in an open and authentic way, and naturally, sports betting was a part of that. It was something we thought about and integrated into what we were offering.

We always hoped that at some point in the future sports betting would come out into the open and be licensed, legalized and taxed, and that’s what happened in the U.S. 14 | Fall/Winter 2019

We thought the best approach was to face it headon and become the operator of a sportsbook. To do that, we created the new app, theScore Bet, which is basically a sister app to theScore. Our approach is prett y different because there’s a lot of good betting apps out there, in Europe, the grey market, in North America, and now in the real market in the U.S., but those betting apps are really just transactional. We wanted to create something that was more integrated into our core app, and give users the opportunit y to bet inside theScore brand. It’s an exciting time for us, and it’s the culmination of something we’ve been thinking about for a whole bunch of years.

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industryQ&A SO BETTING ON SPORTS WAS ALREADY PART OF YOUR DNA. THE LEGAL AVENUE WAS JUST AVAILABLE NOW.

Correct. We could’ve gotten involved in the grey market, but we didn’t. We wanted to stay clean because we knew that, once it opened up, in order to get licensed and be a participant, you have to come with clean hands, so that’s what we did. But it’s really a natural extension of what we were doing.

The other companies involved in New Jersey, where we launched, are predominantly betting apps, and they’re trying to integrate content and data into their apps, and we have the opposite philosophy. We already have you loving our content and loving our app. It’s a really different way of looking at the whole industry, and it’s very exciting.

WHY DID YOU DECIDE TO LAUNCH IN NEW JERSEY?

New Jersey was one of the first to become legal; it’s been up and operating for about a year now. Once PASPA [the Professional and Amateur Sports Protection Act, which made sports betting illegal] fell about 11 or 12 months ago, we had to do a whole bunch of things to be ready to launch. First, we had to build the technology. We went out and did a deal with Bet Works to build the back-end betting technology that we could integrate with the front end of the app. It was a lot of work; six months of heavy, heavy lifting, and because of who we are and what we are, we weren’t going to come to market with any product that was any less effective than what we already had. We had certain expectations that had to be met.

Number t wo, we had to get a license to operate in that jurisdiction, so through Bet Works and the people that became our partners, we got to k now people in New Jersey, and the way the licensing worked in New Jersey, which was very favourable. Basically, the licensing process in New Jersey was any designated racetracks, or casino had the ability to issue or operate up to three licenses, or what are called skins. We hooked up with this guy, Dennis Drazin, who was very instrumental in New Jersey in actually getting the law changed with Governor Christie, and he has a racetrack called Monmouth Park, and he was awarded three licenses. Two were given to other people, and we signed the third.

New Jersey is a very robust state. The sports betting that was already starting before we got there was generating tremendous numbers. In the first year of operation, there was approximately $3.2 billion wagered in New Jersey alone. It’s crazy, it’s unbelievable. And about 65 or 70 per cent of that market is cornered by DraftKings and FanDuel. I think William Hill has a third, and the major other brands are 1 per cent or something each. It’s a great opportunity for us to get into a state with that much interest in sports betting, and for us to show what we can do — over time, not overnight — to grab a signif icant portion of the market share.

16 | Fall/Winter 2019

ARE YOU PLANNING TO ROLL OUT ELSEWHERE?

Absolutely. We also did a deal with one of the regional gaming companies in the States called Penn National, which gave us the ability to basically open up in 11 more states in the U.S. as the regulations open up on a state-by-state basis. It gives us two states that are operable right away, which are Indiana and Iowa, and probably in the next nine to 12 months you’ll see theScore Bet show up in those states as well. It gives us a roadmap for the next couple of years, and in addition to New Jersey, it lets us cover about 30 per cent of the population of the United States. Plus, it doesn’t preclude us from doing deals with other states. For example, New York isn’t part of that for us, and Florida isn’t part of that. Our intention is pretty clear: we’ve set our goal to become one of the predominant sports betting companies in North America.

THE APP JUST LAUNCHED, BUT WHAT’S THE PICKUP BEEN LIKE? WAS THERE ANYTHING UNEXPECTED?

Obviously, it’s really early days. We’re about two-and-a-half weeks in, but things are going very well. What we’re really focusing on, to be quite honest, is to make sure that everything is operating at the level that’s expected. It’s not just the betting app; it’s also something integrated and intertwined with our core app. Obviously, there are little glitches here and there, but nothing we didn’t anticipate, nothing we couldn’t handle, and we’re really very proud of our maintenance team, and our engineers who worked really hard and who put us in a good position.

When we think about how it’s going to do, we kind of think in the context of quarters and months. We’re expecting to have significant market share by the end of the first year and into our second year.

That doesn’t mean that we’re not looking at it on a day-to-day and week-to-week basis, but in the short term, the numbers of kind of meaningless. But are we happy? Yeah, we’re very happy.

ARE USERS TRANSITIONING BETWEEN THE CORE APP AND BETTING APP AS INTENDED?

That’s one of the things we’re watching very carefully right now, because that’s how it was designed. What we’re trying to do is reflect the natural behaviour of how people bet on sports.

One of the phenomena that happened in the last few years is in-game betting. In baseball, they’ll bet the first three innings, then the next three innings, and the next three. In football, baseball, basketball, they’ll bet on almost a play-by-play basis. About 40 to 50 per cent of all betting on sports now is in-game betting. So again, that leads naturally to how people use our app. When you’re on our app, if you favour a team, we send you all this information and all these alerts as the game is in progress, and then you decide to make another bet in the game, or change your bet. It’s a natural behaviour. That’s why we think it will be so effective over time.

CONTENT / TECHNOLOGY / SOLUTIONS

At Scientific Games, we are

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THE IMPORTANCE OF CLEANING IN A PUBLIC FACILITY Many building owners and managers still view cleaning as a “cost.” But cleaning should be regarded as an investment. It helps improve team spirit, enhances worker productivity, improves employee attendance, helps protect building assets, and when viewed in dollars-andcents terms, cleaning pays for itself many times over.

Those are big, bold statements on the value of effective cleaning. So, just to prove our point, let’s examine some studies on the benefits of cleaning, and we’ll let you decide if cleaning is a cost or investment.

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risks that may be associated with buildings that are not as clean.

locations so that private discussions can be kept private.

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To help trim costs, the insurance company decided to do two things:

Preserving Building Assets A major North American insurance company installed carpet in their hundreds of office locations. The carpet had to be cleaned once or twice per year and in most cases, only lasted roughly three or four years. Maintaining and replacing the carpet cost the insurance company hundreds of thousands of dollars every year.

The insurance company toyed with the idea of removing the carpet, but found that when they did so, agents and customers felt a lack of privacy discussing their insurance needs. Carpet helps quiet

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The Recreational Landscape Whether you enjoy the serenity of our vast open spaces or the buzz of our vibrant cities, Canada has much to offer. And casino gaming is an exciting part of our recreational mix. From an economic perspective, our industry touches every province, accounting for nearly 200,000 jobs and generating over $9 Billion in revenues for governments, charities, and First Nations’ initiatives. Our strong industry association, the quality of our business members, and the thoughtful regulatory environment in which we operate all contribute to our industry’s outlook.

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A less complicated alternative to these online offerings is the free-toplay casual casino game. This popular style of mobile and computer app - while not actual gambling - does offer customers a similarly enjoyable experience.

Casinos Get Casual In the US and Canada, free-to-play casual casino games are big business.

On Facebook, social casino games accounts for 45% of the platform’s $1.6 Billion in total games revenue. On mobile devices, where games generate $83 Billion in revenue, 6% is attributed to the casual casino genre.

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their own apps, in-house. And others have acquired existing apps, like Caesars Entertainment. But perhaps the most unique model is the one offered by PLAYSTUDIOS, who has partnered with a range of gaming and entertainment brands, including Gateway Casinos & Entertainment, Cirque du Soleil, MGM Resorts International, and KONAMI. PLAYSTUDIOS is an independent developer of three of the top ranked apps in the casual casino genre. What differentiates their apps from the other category leaders is that they each run on top of a robust loyalty platform called playAWARDS. This platform allows PLAYSTUDIOS to integrate its partner brands into its beautifully designed casual games, not just as advertisements, but as part of an overall entertainment experience. As a result, a large number of extremely receptive consumers engage with partner brands, frequently and over an extended period of time - ensuring that they remain topof-mind. PLAYSTUDIOS is then able to drive traffic from its portfolio of apps into the real world by offering “gamified promotions” to its highly engaged players.

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CONTACT INFO BELOW: Jeff Netzer | jeffn@playstudios.com Partner Development |

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CLEANING UP

The “Dirty Money” report rocked Canada’s gaming industry. How should it respond?

BY DEREK RAMM

22 | Fall/Winter 2019

regulationandcompliance

The news broke, oddly enough, while I was on my way to an anti-money laundering conference in Las Vegas in the autumn of 2017. “Have you seen the news?” a colleague back in Ontario asked me over the phone. “All hell is breaking loose in British Columbia.”

THE MORNING OF September 22 , 2017, B.C.’s attorney general David Eby issued a news release outlining details of an anti-money laundering compliance review that had been commissioned by the province’s gaming regulator.

At the time, I downplayed it and told my colleague that these stories tended to be cyclical: every few years, for whatever reason, the press turns its attention to casinos. I recalled the CBC reports from almost ten years ago, where reporters went undercover into casinos to investigate whether they could launder money. Then there were the Freedom of Information requests a few years later, where the media acquired some Suspicious Transaction Reports and proceeded to report the blindingly obvious fact that, well, casinos are required to report suspicious activity.

At the end of the day, nothing had really happened as a result of those media reports, other than Canada’s gaming industry perhaps getting a bit of a bloody nose.

“If history is any indication,” I told my colleague, “there will be a few more headlines and the story will fade.”

I couldn’t have been more wrong.

Only days after the attorney general’s press release, M in ister Eby appointed for mer RCM P deput y commissioner Peter German to conduct an independent re v iew i nt o a l leg e d money l au nder i n g i n Br it ish Columbia casinos. The review culminated in a 250-page report entitled “Dirty Money” that was released to the attorney general in March 2018 and the public at large in June 2018. “Dirty Money” can be summarized in four words: everybody dropped the ball.

Peter German identified a “collective system failure,” c it i n g i n f i g ht i n g b e t w e en t he pr o v i nc i a l c r o w n corporation and gaming regulator, an inadequate response from law enforcement and an ineffective regulator y regime as contributing factors leading to certain Lower Mainland casinos unwittingly serving as “laundromats for the proceeds of organized crime.” The report went on to provide sweeping recommendations to reform B.C.’s gaming industry, with a view to combatting money laundering more effectively.

The at tor ney g enera l t hen t a sked G er m a n w it h reviewing B.C.’s horse racing industry, luxury car dealers and real estate market. A second report, creatively titled “Dirty Money Part Two,” was delivered in March 2019 and released to the public in its entirety in May 2019.

Turning the volume up to eleven, German’s second

review took place concurrently with two other studies into B.C.’s real estate market that had been commissioned by the Ministry of Finance.

Neither of the “Dirty Money” reports, in the words of Minister Eby, were intended to be “f inger-pointing exercises.” But between the government’s determination to tackle money laundering and the hundreds of news stories that dominated print and broadcast media over the past two years, members of the public — and certainly some elected officials — were looking for answers. Thus, on May 15, 2019, Premier John Horgan announced that the provincial government will hold a public inquiry.

Retired B.C. Supreme Court justice Austin Cullen was appointed to head the commission of inquiry into Money Laundering in British Columbia (dubbed the “Cullen Commission”).

The Cullen Commission has a broad mandate, including the authority to compel witnesses and order disclosure of documents. According to its website, the Commission’s mandate is to make f indings of fact with respect to the extent, growth, evolution and methods of money laundering in British Columbia, with regard to specific economic sectors; the acts or omissions of responsible regulatory agencies and individuals, and whether those have contributed to money laundering in the province or amount to corruption; the scope and effectiveness of the anti-money laundering powers, duties and functions of these regulator y agencies and individuals; and the barriers to effective law enforcement in relation to money laundering. The Commission’s work has already begun and it’s tasked with delivering an interim report within 18 months and a final report by May 2021.

What can we expect? It’s safe to say a lot of the focus will be on B.C.’s real estate and luxury car markets. But given the first “Dirty Money” report’s account of the apparent dysfunction within the government agencies tasked with managing and regulating the province’s gaming industry, we should also expect plenty of fireworks when it comes to casinos.

W hile the Commission’s work is impor t ant, one overarching challenge is that the federal government holds most of t he ca rds when it comes to money laundering compliance and enforcement. First, there’s the Criminal Code itself, which designates the offences for money laundering. Then there’s the Proceeds of Canadian Gaming Business | 23

regulationandcompliance Crime (Money Laundering) and Terrorist Financing Act, which governs anti-money laundering compliance and reporting in the casino and real estate sectors. Even if British Columbia, or other provinces, were to adopt new anti-money laundering measures in response to the Commission’s findings, they would still have to line up with federal requirements (although B.C. deserves a big round of applause for being the first Canadian province to introduce a public land ownership registry).

Ultimately, anyone involved in gaming or the antimoney laundering field needs to be paying close attention

to the Cullen Commission. The reality is that Canada’s gaming industry is a large, vital and mature business that makes substantial contributions to the broader Canadian economy. It is a sig n if ica nt dr iver of invest ment , employment, development and innovation, generating billions of dollars of economic activit y that benef its public priorities like social welfare, education and health.

Much like the “Dirty Money” reports, it’s almost certain that the f indings of the Commission will reverberate beyond B.C.’s provincial borders. I believe it’s critically important that Canada’s gaming industry stakeholders

Responding to a “Decade of Dirty Money” The IIGET investigates several illegal gambling operations, but only make a handful of arrests. Inundated with reports of illegal activity, the IIGET opens more than 400 case files.

The Gaming Control Act is passed, establishing the Gaming Policy and Enforcement Branch (GPEB).

March 2004 2002

The Solicitor General releases a report that made several recommendations to BCLC and GPEB on how to improve anti-money-laundering measures. Both organizations accepted the recommendations, and put particular emphasis on developing cash alternatives.

May 2008

A review finds that while the IIGET is capable of handling mid-level targets, it lacks the capability to handle high-level targets, citing a lack of resources as the cause. The report recommends extending the term of the IIGET for a year; that the IIGET improves its reporting to the board with regards to its backlog of cases, its investigations and their outcomes; and that it develop a plan outlining the extent of illegal gambling in B.C. and how different branches of government could tackle it.

Officials from GPEB, BCLC, RCMP, FINTRAC, CRA and CBSA attend a workshop informally called the "Money Laundering Summit”. The consensus is that yes, money laundering is an active problem.

CTV and CBC reports once again put alleged money laundering at B.C. casinos in the spotlight. After the CTV story aired, a senior director at GPEB said there had been a "steady and significant rise" in suspicious cash transactions and it is "not slowing down in any way, regardless of any measures that have been implemented to curtail [suspicious] money coming into casinos in B.C.”

May 2013

April 2015

April to October 2014 A progress report filed by GPEB notes that suspicious buy-ins with stacks of $20 bills are increasing.

24 | Fall/Winter 2019

2007 2005

GPEB and RCMP create the Integrated Illegal Gaming Enforcement Team (IIGET), a unit made up of 12 RCMP officers whose purview includes illegal gambling outside of casinos.

August 2011

CBC journalists publish a series of high-profile stories related to B.C.’s gaming industry, organized crime and money laundering.

June 2015

A new ministerial mandate letter is issued directing GPEB and BCLC to develop and execute a strategy to curtail money laundering, with specific reference to developing cash alternatives.

regulationandcompliance allow for more f lexibility in customer due diligence and risk assessment. Ontario’s gaming regulator (AGCO) rolled out a well-reasoned standards-based approach to regulation several years ago.

Of course, what is broken must be fixed. We’ve already seen a number of knee-jerk reactions to the events in B.C. in various parts of the country through the imposition of overly-prescriptive obligations. Such a “tick-the-box” approach to compliance is rife with risk and often creates unnecessar y operational challenges without yielding better outcomes.

prov ide the Commission w ith reasoned, ev idencebased information on approaches and best practices to combat money laundering. (I mention this because, having been involved in f inancial crime prevention for over 20 years, I’m concerned with the recent trend in the gaming industry to adopt strict rules-based anti-money laundering compliance requirements.)

Globally, f inancial regulators have been moving to a risk-based approach to compliance for several years.

In fact, the Government of Canada released new antimoney laundering regulations this past summer that will

Source: DIRTY MONEY: An Independent Review of Money Laundering in Lower Mainland Casinos conducted for the Attorney General of British Columbia, Peter M. German QC, March 31, 2018.

Media reports surface about FINTRAC issuing a $670,000 fine against BCLC for various reporting violations. BCLC appeals the fine and, more than eight years later, the Federal Court sets aside the penalty.

March 2009

2010

July 2009 The government disbands the IIGET, saying its accomplishments, or lack thereof, didn’t justify its cost.

January 2011 The final IIGET report is released. It states that “organized crime is prevalent in casinos at several levels,” and that since 2003 FINTRAC has been flagging suspicious transactions for the RCMP, which didn’t investigate them, citing a lack of resources.

The B.C. government announces the formation of the Joint Integrated Gaming Investigation Team (JIGIT), tasked with investigating unlawful gaming in B.C. casinos with particular emphasis on organized crime and money laundering. Unlike the IIGET, which focused on illegal gambling outside of casinos, JIGIT is focused on what’s happening inside casinos.

October 2015

The “Dirty Money” report is published. Peter German, its author, concludes that, “For many years, certain Lower Mainland casinos unwittingly served as laundromats for the proceeds of organized crime.”

September 2017

April 2016 The RCMP conducts a series of raids and makes numerous arrests as part of its E-Pirate Investigation, which linked underground banking with proceeds of crime and casino gaming. The E-Pirate Investigation eventually collapses because of alleged disclosure issues concerning police informants.

The CBC reports that millions of dollars in dirty money were allegedly laundered through B.C. casinos the previous year. An RCMP officer told reporters, "We're suspicious that it's dirty money… The casino industry in general was targeted during that time period for what may well be some very sophisticated money-laundering activities by organized crime."

March 31, 2018 The B.C. Attorney General releases a report on alleged money laundering in B.C. casinos, which had originally been commissioned by GPEB in September 2015. The report prompts another bout of intense media coverage and leads the Attorney General to order an independent review of money laundering in Lower Mainland casinos.

Canadian Gaming Business | 25

regulationandcompliance The Financial Action Task Force (FATF) — the intergovernmental organization that sets global standards for combatting money laundering and terrorist f inancing — addressed this ver y issue over ten years ago in its guidance to casinos: “By adopting a risk-based approach, it is possible to ensure that measures to prevent or mitigate money laundering and terrorist f inancing are commensurate with the risks identified. This will allow resources to be allocated in the most efficient ways. The principle is that resources should be directed in accordance with priorities so that the greatest risks receive the highest attention.”

“The alternative approaches are that resources are either applied evenly, or that resources are targeted, but on the basis of factors other than risk. This can inadvertently lead to a ‘tick box’ approach with the focus on meeting reg ulator y requirements rather than on combating money laundering or terrorist financing efficiently and effectively.”

A wise police sergeant I once worked with said it best: “Good anti-money laundering policy should be designed to catch bad guys, not drive business away.”

Whatever the findings of the Commission may be, it is vitally important that those involved in the fight against money laundering embrace practical, well-thought solutions that ensure regulatory policies, priorities and government objectives are properly aligned to presentday risks.

Here’s also hoping the Cullen Commission will be able to answer a few burning questions that I’ve had over the course of my career: Is the current Canadian legislative framework for gaming adequate, or does it inherently create insurmountable conf licts bet ween government agencies? Are sufficient resources deployed to combat money laundering in British Columbia, and indeed, in Canada? Are some of the barriers to effective law enforcement in relation to money laundering selfimposed? Are the roles, functions and accountabilities of the gaming industry’s various stakeholders properly aligned to optimize the coordination and expertise of those stakeholders?

Regardless, the next two years will unquestionably be an interesting time for Canada’s gaming industr y.

To misquote the legendary Bette Davis: “Fasten your seatbelts, it’s going to be a bumpy ride.”

Derek Ramm is Vice President of MT>Play, a global gaming advisory firm. Prior to joining MT>Play, he held senior roles at the Alcohol and Gaming Commission of Ontario (AGCO), Finan cial Transactions and Repor ts Analysis Centre of Canada (FINTR AC) and the Ontario Lottery and Gaming Corporation (OLG). He also served as a Commissioner on the Bermuda Casino Gaming Commission.

Any opinions expressed in this article are those of the author and do not necessarily represent those of his current or former employers.

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PLAYING SAFE

Casinos used to be designed to maximize the take from its patrons, whatever the cost. The Responsible Gambling Council is helping make that model a thing of the past

BY GREGORY FURGALA

In 1980, Tibor Barsony was convicted of embezzling money and unceremoniously sent to prison.

He was a compulsive gambler, and his conviction and stint in prison was the depressing rejoinder to losing his family and money for the same reason. Even amongst compulsive gamblers, Barsony’s story is exceptional. But the main thrust of it, that a gambling addiction upended his life, isn’t.

WHEN BARSONY was released, he was determined to get help, to get better. Unfortunately, Canada at the outset of the 1980s was short on resources for him. Instead, Barsony went to the United States where he found help and brought the lessons he learned back home, and in 1983 he established the Canadian Foundation on Compulsive Gambling, which in 1997 was renamed the Responsible Gambling Council (RGC). It was founded as both resource and redemption for Barsony and others, who in Canada number in the thousands. The council’s current operating principle isn’t far off of its origins, either. Humanity, says RGC’s CEO Shelley White, is a pillar of the organization. “Gambling is a legitimate form of entertainment,” she says. “But it should not come at a human cost.”

The foundation’s beginnings, to put it mildly, were humble.

Barsony set up an office in his basement and sent out 100 letters to influential Ontarians to get problem gambling onto their radars.

After years of reaching out to policy makers in Ontario, Barsony launched his first awareness program in a Windsor casino in

1994. A year later, he launched Canada’s first problem gambling conference. Since then, the RGC has published more than 20 studies on problem gambling, covering electronic gambling, youth gambling and prevalence; developed RG Check, a responsible gambling accreditation program that has been adopted by more than 70 casinos across Canada; launched initiatives like Game Brain, a game-show-like event that educates youth about problem gambling, how to recognize it and what resources are available; and led several other efforts to reach out and assist compulsive gamblers in Canada. The RGC’s footprint extends past the Canadian border, too. From its Toronto office, it operates programs in Singapore, Europe and the United States.

If it seems like a lot, that’s because it is. Despite organizations like the RGC being relatively new to the industry, problematic and addictive gambling isn’t (Barsony being one of many cases in point), and across the population, some people will inevitably gamble irresponsibly. It can be hard to spot, too. Nigel Turner, a gambling addiction researcher at the Centre for Addiction and Canadian Gaming Business | 27

industryprofile Mental Health (CAMH), says gambling addiction is relatively quiet. Unlike alcohol or drug abuse, gambling addiction doesn’t have any easily understood outward symptoms. “It’s an individual, personal disaster that happens,” says Turner. “There are no obvious signs. People don’t walk down the street staggering because of a gambling problem.”

That difference aside, gambling addiction has more in common with substance abuse than not. People typically engage in it for two main reasons, says Turner. First, it feels good. Winning, he says, is thrilling, and provides a high not unlike a drug. Second, it’s numbing, and an escape. “To some extent it’s a good thing,” says Turner (and who hasn’t needed a moment to just forget about everything?), “But if you rely on it too much, it gets much worse.”

The CAMH website notes that compulsive gambling can be socially, psychologically and even physically harmful.

“Problem gambling is not just about losing money. Gambling problems can affect a person’s whole life. Gambling is a problem when it gets in the way of work, school or other activities; harms the person’s mental or physical health; hurts the person financially; damages the person’s reputation; and causes problems with family or friends.”

On the casino floor, Turner says compulsive gambling can function like highway hypnosis, the phenomenon where people drive a long distance, effectively negotiating traffic, turns and the usual dangers of driving, but have zero recollection of the trip.

“Our brain learns to do things, and it gets to a certain point where it says, ‘okay, I know what I’m doing, I’ll just take over and not bother with conscious thought,’” says Turner. “When you start driving, everything has to be very meticulous. You have to think about everything you do. After a while, you get really good at driving, and you barely need to pay attention to driving.” Pulling the lever (or pushing a button) effectively becomes automated, and very, very harmful.

Preventing and treating gambling addiction is, obviously, a major challenge with no silver bullet, which has made the RGC’s portfolio of programs, initiatives and areas of research necessarily diverse. One of its largest programs, though, reckons with it at the source: casinos.

RG Check puts casino operators through a gauntlet of 47 criteria spread across eight standards, including responsible gaming policies, employee training, self-exclusion, assisting patrons who may have a problem with gambling, informed decision making, advertising and promotion, access to money, and venue and game features. Some of the criteria are incredibly simple. For example, having visible clocks so players can easily see how much time has passed, or keeping ATMs off of the casino floor. Ensuring patrons aren’t over-served alcohol is one, which is already legally required.

Some of the criteria are slam dunks, but no less important. All of it helps prevent players from zoning out and, extending the highway metaphor, ending up somewhere they don’t want to be.

Other criteria are stickier. For example, what if a casino operator’s advertising is targeting problem gamblers? How do you best train staff to discreetly identify and approach problem gamblers about overplaying and addiction? How do you adequately train your entire staff on key responsible gambling concepts, and ensure that that training is readily understood and accessible? Installing clocks is easy, but overall, RG Check is a significant business-to-business undertaking that requires buy-in from stakeholders at all levels of the organization. To pass, operators need an overall score of at least 70 per cent, with no less than 50 per cent in any one area. If they 28 | Fall/Winter 2019

don’t pass on the first assessment, they have six months to address what they’re missing, and with the RGC’s evaluation in hand, have a roadmap of how to do it. Operators need to submit to a re-evaluation every three years to keep their accreditation.

The RGC’s second major program tackles problem gambling at the second source: the players themselves. In 2005, the RGC piloted its Responsible Gambling Information Centres (later referred to as Responsible Gambling Resource Centres. Funded by the OLG, the centres were physical spaces set up inside casinos with the goal of providing casino staff and patrons referral services and a resource for information on problem gambling, and to raise awareness about safe gambling. The two-year evaluation noted it was a success, prompting the continuation and expansion of the program.

The centres really took off in 2016 after a retooling, though.

Renamed PlaySmart Centres, the outward focus shifted toward educating patrons about how different casino games worked. It also expanded the original initiative to reach out to infrequent gamers, developed ethno-cultural-specific messaging, and re-evaluated responsible gambling training in partnership with CAMH. While Turner believes that knowledge can pre-empt and resolve a lot of problems, part of the battle is just optics. “[Responsible Gambling Resource Centres] were a bit intimidating. A lot of people don’t want to admit they have a problem, and they may think of that as, ‘I have a problem if I go there.’ They made it more inviting and more friendly.” It’s always been about education, he continues, but simply reframing its purpose made them more effective. It’s a quietly held problem because people are unwilling to broadcast it, and availing themselves to resources meant to help them could unintentionally do that.

“We’re partners, we’re knowledge experts for them,” says White of the RGC’s role. “They don’t want people to have a negative experience with their product.” While engaging with programs like RG Check and PlaySmart may seem onerous, it shows players that they’re on the up-and-up, providing a service while mitigating its acknowledged risks. They operate in the same way a good bartender does if their customer looks like they’re about to have one too many: they step in and give up the sale in favour of the customer’s health. Despite putting casino operators through their paces, White says its relationship with the industry is positive.

It recognizes the value the RGC brings to the table.

But the industry, as ever, is changing. When Barsony was frequenting casinos, compulsive gamblers were almost exclusively male; now, Turner says women make up approximately 40 per cent. The RGC has to keep up with new ways to access gambling, from apps to websites to different lottery products, and while the rate of problem gambling has declined substantially since a high in the early aughts, Turner speculates that it may jump back up as more casinos open. White has taken note, too. “As regulators increase the availability of different gambling products,” White says, “there needs to be additional research.”

What if Barsony caught himself because he noticed how much time had passed? What if someone dropped by to check on him? What if, in a moment of clarity, he had someone to reach out to, who could read the signs and simply say, “Tibor, give this number a call. It’ll help”? Would he have embezzled that money? Would he have gone to jail? “The bottom line,” says White, “is that RG is an integral strategy in the gaming industry. It’s tremendously important, but it needs to change and innovate with the industry.”

LET’S GET

technology

CRITICAL

Casino and gaming operators run important systems and collect high-value data. It’s time to start treating them that way

Over the last year, I’ve had critical infrastructure protection on my mind. Critical infrastructure (CI) is an area that is increasingly getting attention from both the IT industry and the hacker community. Bulletproof has been part of a strategic partnership with CyberNB and some major industry players to create a collaborative critical infrastructure operations centre. This “CI-SOC” will be a first-of-kind facility to protect CI assets.

Critical infrastructure is a category that includes power systems, water, fo o d supply a nd t ra n spor t at ion.

These verticals are increasingly being targeted by attackers because of both their susceptibility to attacks, as well as their overall value as a target since successful attacks can have a massive societal impact. Protecting these CI organizations is important business!

How does this relate to gaming systems?

It is obviously hyperbole to call gaming

systems critical infrastructure, but as I have been researching CI protection, I have come to realize that there are many technical and organizational parallels between critical infrastructure and gaming systems. Turns out, critical infrastructure systems can be used as a model for how to protect our gaming infrastructure.

First of all, let’s talk about the similarities.

Here are five areas where both gaming systems and CI systems are similar:

High value: When thinking about value,

from a security perspective, you need to think about replacement value, lost revenue or the impact of the loss of functionality, and the value of the data. For both CI and gaming systems, all these tick-boxes in the valuation equation are checked. Gaming systems not only have an intrinsic value in terms of revenue, they also contain high value patron data. A high percentage of attacks today are not about stealing cash, but about stealing data.

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technology Targeted: Any high-value organization is a target and the gaming industry is no stranger to highly sophisticated and targeted attacks — technology is just the new vector for attacks. Similarly, critical infrastructure is increasingly being targeted because of the high impact and the opportunity for leverage it provides.

Highly integrated: Gaming systems, like CI systems, are highly integrated. There is no doubt that integration provides value. For example, being able to integrate gaming and patron management systems, or entertainment and hotel management systems, provides both a better customer experience and more value to the operator.

Similarly, integration of CI infrastructure with management platforms also provides high value to CI operators. However, whenever integration occurs, risk is increased.

Poor vendor support: Typically, vendors of specialized equipment, whether it is a gaming system, centrifuge or an MRI machine, are really good at engineering their systems for the task required, but they are not great at maintaining those systems in a secure way. This is especially true when integration comes into play.

Updating these systems is often difficult, to say the least.

Compliance-driven: In any compliancedriven industr y, securit y is more challenging. Compliance plays an important role in ensuring that systems perform as they are designed. However, compliance creates a challenge in a dynamic situation like cyber security, where new vulnerabilities and attack techniques are released daily. Having compliance-driven systems that can’t be easily updated for security creates an opportunity for problems.

Given the similarities between critical infrastructure and gaming systems, we can draw upon experience with CI to better protect ourselves in gaming environments.

Below, we get into the key points that you can use to protect your network:

user makes a mistake or maliciously tries to gain access to your data.

Users should also never be given admin rights on their standard user accounts.

If you have administrators that require administrative rights, give them a separate account for admin tasks. Do not allow them to use that for normal day-to-day tasks. Despite what your technical team will tell you, they do not need admin rights on their day-to-day account.

DON’T TRUST USERS

Just like you monitor your game floor activity with guards, you need to monitor your network, systems and user behaviour for suspicious activity. This needs to be done 24/7, regardless of your business hours, because your systems are still turned on. It also needs to be done by experts. For the same reason that you use trained security guards, you also need to use trained security analysts for

Like with CI, we know that user screening and monitoring is key. From a prevention perspective, education is the key to preventing user-based security issues, but you also need to protect your critical systems from your users. Users should be segmented by role, and permissions should be granted accordingly. This will limit the exposure of data and systems if a 30 | Fall/Winter 2019

ZONE YOUR SYSTEMS

While testing networks, we often see that organizations have flat, unprotected networks. Logically they are all on the same plane, without any barriers. This type of flat structure means that both attackers and malware can propagate unabated in your network. Breaking up your system into logical networks, protected by a firewall, allows you to maintain optimal control over what is happening in your network.

Zoning becomes more important when you have systems that are highly sensitive, poorly supported by vendors or that cannot be updated because of compliance requirements. If you cannot update your systems at least monthly (or quicker when there is a critical patch released), you need to have them highly segregated.

It is a best practice to zone your systems based on business function and the sensitivity of the system. Your gaming systems are an obvious first choice for segmentation, but what about your patron systems, your HVAC control systems or your cash counting machines? Internetenabled devices are another common example of poorly managed and patched systems. If you have a lot of them in your environment, you should be protecting yourself from them by segmentation.

Critical Infrastructure operators tightly segregate their systems because they need to control interactions and attacks. You should do the same.

MONITOR YOUR SYSTEMS

monitoring your network. When things are discovered, you need to be prepared to act on them quickly.

Similar to critical infrastructure clients, gaming operators often have systems that do not inherently allow for monitoring.

You can’t necessarily put a log collection agent on your slot machines. In these scenarios, you can still do monitoring, but it might be at a gateway level, or at an upstream control system. In most cases there is a way to monitor a given system.

DON’T ASSUME YOU’RE PHYSICALLY SECURE

Critical infrastructure operators know that restricting physical access is key, but they assume that it will be breached. Systems need to be secured independent of physical controls. This is part of a “defense in depth” strategy. For example, can an attacker walk into your back office and plug in a laptop?

No? Our penetration testers are frequently able to do just that! We have done the exact same thing in a police agency data center! Just because you think you have good physical security doesn’t mean that it is infallible. Assume that your physical security will be breached when you design your security.

In a recent webinar on incident response in gaming systems, I described some of the trends in attacks against gaming clients that we see in our security operations centre. I also described that in many ways our industry has been lucky. Like the CI industry, we haven’t traditionally been a focused target of hackers.

Most attacks are still using generic attack techniques. While these are still devastating to the victims, it is the targeted attacks that need to be keeping you up at night.

When the focus swings to our industry, it will be a ripe fruit to be picked.

THE CRITICAL LESSON

Casino operators need to treat your systems similar to critical infrastructure, because to you, your team and your clients, it is critical infrastructure. Could you recover from a two week outage due to a breach? Could you recover if all of your client data and was stolen and you had to notify them? Treat your systems like critical infrastructure and you’ll have a better chance of not needing to answer these hard questions.

Andrew Jeffries is co-founder and vice president of security services at Bulletproof, an IT security firm and subsidiary of Gaming Laboratories International.

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