Igaming Focus: VIP programs come under enhanced scrutiny

Thursday, April 4, 2024 9:00 AM
Photo:  VIP programs come under enhanced scrutiny
  • Igaming
  • Hannah Gannagé-Stewart, CDC Gaming

As March Madness kicked off this year, the public scrutiny on betting promotions and VIP programs in the U.S. also started to hit the headlines.  

Most notably, on 19 March, U.S. Senator Richard Blumenthal (D-CT) wrote to eight major sports betting companies to demand they stop leveraging their customer data to target problem gamblers with incentives to bet. 

The VIP program has been central to gambling operators’ marketing strategy for decades. Despite it coming under attack by regulators in numerous jurisdictions, this remains an approach that will be hard for many to shake. 

Chief among its defences, of course, is the fact that unlicensed operators use this very same tactic to incentivise players and excluding licensed operators from these practices will likely make them uncompetitive in comparison. 

Nonetheless, addressing FanDuel, DraftKings, MGMBet, ESPNBet, Fanatics, Caesars, BetFred, and Bet365, Blumenthal urged that operators use their data to identify problem gamblers and direct them to help, rather than to entice them to make further bets. 

“Rather than leveraging data collected on users to identify those who may be gambling beyond their means, and then intervening to help, gambling companies instead use this data to entice frequent gamblers – including problem gamblers – to continue placing bets.  

“A common practice engaged in by major sports betting websites assigns VIP Hosts to frequent bettors. These are customer representatives whose job it is to provide those high-value bettors with promotions and credits to entice them to continue gambling, often at their own financial peril,” he wrote. 

Blumenthal cited a Wall Street Journal investigation in which a psychiatrist with an escalating gambling problem was repeatedly targeted by operators’ VIP programs and enticed to spend more. 

“Betting is known to be a highly addictive activity, and cognitive distortion can often take place within people who have lost large amounts of money due to gambling,” he said. “This leads to a dangerous habit of ‘chasing losses,’ or trying to recoup money lost by placing more bets.” 

Dubbing these practices “abusive”, he said they could not exist alongside operators’ purported desire to promote responsible gambling. He went on to request a response from each operator, including to 15 specific questions. 

These ranged from asking what their process was for enabling players to self-exclude to how they identify high-risk players and how many of those accounts they shut down.  

Blumenthal estimated that $3bn would be bet during March Madness this year, twice as much as was bet on the Super Bowl in February. 

Among his efforts to reduce harm from problem gambling, Blumenthal also proposed the Gambling Addiction Recovery, Investment, and Treatment (GRIT) Act in January, which looks to devote around half of revenue from the gambling taxes to addiction research and treatment. 

The National Council on Problem Gambling in the U.S. estimates that nine million American adults suffer from gambling addiction, at a national annual social cost of $14bn. However, unlike alcohol, tobacco, and drug addiction, there are currently no federal funds designated for problem gambling treatment or research in the U.S.  

Blumenthal’s plan is not so radical; the recent UK gambling reform white paper sought a similar arrangement, with operators moving from voluntarily funding research and treatment to a mandated levy.  

However, his efforts show a growing concern that the proliferation of gambling comes at a cost for some more vulnerable gamblers. With major states yet to legalise, the momentum behind these concerns could add to anti-gambling sentiment in those jurisdictions. 

Last week, several of the operators on Blumenthal’s hit list agreed to be part of a newly formed trade association aimed at promoting responsible gaming practices called the Responsible Online Gaming Association (ROGA). 

ROGA is billed as an independent trade association that will actively promote a new industry-wide best practices charter, overseen by one of the world’s foremost experts in the field of responsible gaming. 

Led by Dr Jennifer Shatley, who also presides over the Nevada Council on Problem Gambling, the new group comprises FanDuel, DraftKings, BetMGM, Penn Entertainment, Fanatics Betting and Gaming, Hard Rock Digital, and Bet365. They have pledged more than $20m to the organisation. 

The move follows last year’s formation of the Responsible Gambling Affiliate Association by founding members Better Collective, Catena Media, Gambling.com Group, Oddschecker Global Media, Spotlight Sports Group, and XLMedia. 

Clearly the industry sees the need to get on the front foot, but it is unlikely it will be enough to quell concerns among their critics. Until the reliance on VIP bettors is reduced across the board, the worrisome connection between incentives and problem gambling will continue to be raised.