Governments around the globe either ban gambling or legalise and regulate it. Very few allow it to happen uncontrolled. The stated purposes to regulation are to protect the vulnerable, stop underage gambling, ensure it is fair to the customer, and keep the “bad guys” out. The unstated purpose is to generate significant tax revenue.
Keeping the “bad guys” out can mean keeping the customers in the regulated sector and away from the black market, where unregulated operators “prey” on unwitting punters.
A few years ago, I met the Finance Minister of the city-state of Bremen, Germany. This minister had the gambling portfolio; when the finance minister has responsibility for gambling, you immediately understand what a jurisdiction’s priorities are. Although each lande (state) in Germany can set its own gambling tax rate, the states had, at the time, coalesced around an initial rate of approximately 60% of GGR that rapidly progressed to over 80% at higher levels of GGR.
The city-state had a white elephant in the form of a shopping mall and a space-themed park that had soaked up vast amounts of government and EU money (read: taxpayers’ money) and wanted to see if allowing gambling at the site could entice one of the large casino operators to buy the elephant and thereby staunch the haemorrhaging of money from the public coffers.
The mall had been finished to a high quality (there is a synergy between high-end retail and casino gambling), there was ample parking, and it was entirely possible that a large casino with entertainment and food and beverage venues would be viable. But there was one hurdle, the gaming tax rate. I let the minister know that operators might be interested, but only if the gambling tax were dramatically reduced.
Surprisingly, he thought this was entirely possible and really did not see a problem. We left it that. He would speak with his colleagues and get back to me.
About a week later he called to apologise. Reducing the tax rate was impossible. He had spoken to the Justice Minister, who informed him of the tacit agreement between the German states to keep their gambling tax rates broadly similar and that they used high tax rates to control the supply of gambling products. If the Finance Minister reduced the gambling tax rates, other states would follow suit and more casinos would be economically viable. This was considered a bad thing.
Reducing the number and scale of casinos means that fewer people would gamble in regulated casinos. Research has shown that the closer you put casinos to a population centre, the more of the population will gamble and on average, the number of times they visit increases, but the average amount they spend each visit decreases.
There is now a common theme in European governments: Gambling is bad for some and access to it needs to be strictly controlled. I know that gambling can be devastating for some people and those around them, but for the vast majority, it is harmless entertainment. It seems that we have lost this perspective and in trying to protect those whose gambling is dangerous, we are making it more difficult for those whose gambling is benign (or perhaps beneficial!). The cynic in me says that many in the public-health sector would be happy to see gambling banned altogether.
To protect the vulnerable, we are using very blunt tools, such as affordability checks, timeouts, maximum bets, prize limits, etc. But this one-size-fits-all approach makes the gambling less entertaining, more difficult to access for the many, and more expensive for operators to do business.
Studies try to estimate the size of the black market. On the one hand, regulators point to those that minimise the black market and on the other hand, operators point to those that state that it is much larger than regulators think and it is growing.
I tend to think the black market is bigger than regulators think (I would say that, wouldn’t I?); the more “friction” we put in the way of customers and the gambling that they like, the more motivation they have to gamble somewhere where there is less friction. Inevitably, the friction that regulators are putting in place for every gambler will lead to some moving to black-market operators.
Sadly, I believe, those that we need to protect will be the first among those to move to unregulated operators who have no one’s well being at heart, apart from their own.
Despite the public-health sector’s apparent desire, banning gambling is not an answer. Gambling is definitely not tobacco; the harms from tobacco are much greater and less discrete. The public-health sector and regulators would serve the general public better if it focussed research on why only some people have gambling and other disorders, how we can identify them early, and what can be done to assist them to function in a society where there is a balanced approach to the protection of the few and the personal freedom of the many.
