The Dark Side
The Financial Times this week published an investigation into “the dark side of the US sports betting boom”.
The article is packed with rich data on the sector’s growth since the repeal of PASPA in 2018, and details how the US betting sector has transformed at breakneck speed.
While prior to 2018 punters would need to go to one of a select few physical locations to place bets on sports, today the vertical is readily available to the majority of the US population.
While that spells good news for companies in the sector and state budgets alike, the proliferation of sports betting across the US has also brought about its fair share of drawbacks.
The article tells the story of Dylan, for example, a 22-year old trainee lawyer whose gambling habit started with a $5 promo deal on DraftKings.
After winning $300 on the promotion and quadrupling those winnings playing online blackjack, “he was hooked,” the article says.
Dylan soon found himself maxing out four credit cards to fund increasingly risky bets, sometimes wagering as much as $5,000, “on everything from obscure tennis fixtures in China to Venezuelan women’s volleyball matches.”
Dylan eventually came clean to his family about his gambling habit, which saw him borrow and stake more than $50,000 over the course of a year.
The FT, in turn, used the case to illustrate the inherent risks of the rapidly growing online gambling industry in the US.
Since PASPA was overturned in 2018, Americans have wagered some $245bn on sports, the piece says, as problem gambling statistics have quickly become more and more alarming.
A New Jersey survey showed, for example, that 6% of the state’s residents were problem gamblers and as many as 20% exhibited signs of problematic play.
In Pennsylvania, meanwhile, 36.7% of online bettors surveyed admitted to observing at least one problematic element to their gambling last year.
The solution to problems like these is far from simple, but the piece does offer up a range of different insights into how to tackle the issue.
Readers are encouraged to view the full article, which has been widely shared among industry stakeholders this week.
What a trip
Sticking with the theme of problem gambling but now turning our focus to treatment, The Mirror this week put out a report on an upcoming world-first in the UK.
A team of British scientists is currently preparing to run a clinical trial using psilocybin – the psychoactive chemical found in magic mushrooms – to tream gambling addiction.
The government-funded study is set to offer the drug to patients from October, with a view to developing a new kind of addiction treatment that could later be made available through the Naitonal Health Service.
Among the top neuropharamacologists who make up the team of scientists is David Nutt, a former so-called ‘drug tsar’ in the UK, who previously courted controversy with claims such as that horse riding is a significantly more dangerous ‘addiction’ than the use of ecstasy.
“Nobody with a gambling addiction has ever been dosed with psychedelic therapy in a clinical trial so it really is quite a pioneering move,” said Rayyan Zafar, another scientist who is leading the new study.
“We’re super excited. We’ve been wanting to do this work for quite a while,” he added.
In the trial’s early stages, work will focus on just five initial patients, before being rolled out to others after the first set of tests.
Psilocybin has previously been used for the treatment of addictions such as tobacco and drugs, and has been proven to help patients, The Mirror said.
Neurologically, gambling addiction works in a similar way to substance addiction, Zafar said, explaining why psychedelic therapy may have a similar positive impact for those affected.
“Historically with psychedelic research in the UK there’s been very little institutional or government-backed funding so [the trial] is a really positive sign,” Zafar added.
“Maybe it’s a sign times are changing. It’s becoming more of a priority area and it’s no longer a fringe science.”
Now to the Racing Post, which this week featured an article on UK gambling regulation from Dan Waugh of Regulus Partners.
In it, Waugh argues that the Gambling Commission “needs to sort out [the] voluntary settlements mess” currently taking place in the UK.
The regulator “recently appears to have developed a phobia against enforcing its own rules, at least where the use of so-called ‘voluntary settlements’ are concerned,” he writes.
Voluntary settlements are paid by gambling firms in lieu of financial penalties, Waugh explains, with the proceeds being used to support gambling harm prevention initiatives.
One such initative attracted Waugh’s ire, however, as he pointed to a “mathematically illiterate” report, funded by Gambling commission settlements, produced by the National Institute of Economic and Social Research (NIESR) and based on what he calls “methodological balderdash.”
While funds secured through Gambling Commission settlements should not be used for political or lobbying efforts, he adds, the report “appears to be a thoroughly political project, aimed at persuading the government to adopt restrictionist policies as part of its Gambling Act review,” Waugh says.
“If this is the case then it is in breach of the rules concerning the use of voluntary settlement funds.”
Worst of all, Waugh points out, “although rules appear to have been broken, there is absolutely no recourse to sanction and no mechanism for retrieving the misspent funds.”
In similar fashion, several “overtly anti-gambling projects” also appear to have received public money and approval from the Gambling Commission to carry out their work, he said.
“The system of voluntary settlements is a mess – with funds that could be used to support those with a gambling disorder diverted to anti-gambling activism,” Waugh concludes.
“The mess is not entirely the commission’s fault but the absence of any acknowledgement that an issue even exists is troubling.”
The Gambling Commission has imposed a £337,631 regulatory settlement on VBET operating company Vivaro Limited in response to a series of failings by the firm.
The settlement follows an investigation into failings across Vivaro’s safer gambling and anti-money laundering (AML) processes. Proceeds of the settlement will go to socially responsible causes.
The Gambling Commission launched an investigation into Vivaro following a compliance assessment carried out in April 2021.
The investigation discovered that between October 2020 and June 2021, the operator failed to comply with several of its licence conditions and Gambling Commission codes of practice.
Among the breaches were failures to effectively enforce measures to prevent money laundering and terrorist financing, and failures to interact with customers in a way which minimises the risk of gambling-related harm.
The regulatory settlement consists of a payment in lieu of a financial penalty of £302,500 – which will go to National Responsible Gambling Strategy projects to pay for harmful gambling research and treatment – and a divestment of £35,131.
Vivaro will also be expected to undertake a third-party audit within 12 months of the conclusion of the review in order to examine whether it has effectively implemented its AML and social responsibility policies.
AML and terrorist financing failures
Regarding Vivaro’s AML failures, the Commission determined that customers had been able to deposit “significant” sums of money before KYC checks were carried out, while the operator failed to provide sufficient guidance to employees as to how they should verify customers’ source of funds in such cases.
AML trigger levels at the firm were also considered to be too high based on the average level of customer spend and were therefore deemed inappropriate for effectively managing money laundering risks.
Examples include one customer who was allowed to deposit more than £14,000 over two months with insufficient source of funds checks taking place, while another customer provided a bank statement showing a balance of £270,000 said to be winnings from other betting accounts.
In the second case, Vivaro failed to sufficiently consider the risks associated with recycled winnings, the Gambling Commission said.
Consumer protection failures
With regards to consumer protection and responsible gambling, failures included a customer being allowed to deposit and lose £4,000 over a period of four days.
Another failure related to a customer with a salary of £5,000 per month, who was able to deposit £20,000 over a period of five months – amounting to around 80% of their salary – with Vivaro failing to sufficiently review the level of spend.
In another identified shortcoming, Vivaro did not sufficiently consider the risks associated with funds that one customer had used to gamble that had originated from cryptocurrency.
“Cryptocurrency is considered high risk by Commission officials and should be subject to further investigation,” the regulator said.
VBET is the B2C sports betting and iGaming arm of industry supplier BetConstruct.