12 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2025 Are there new hotspots that could become relevant in the battle against illegal gambling? A. Kötter: A key trend of our industry is digitalization. This does also mean that the borderline between gaming and gambling is becoming more relevant and difficult to manage. We see that more and more lotteries are moving forward legally and responsibly forward with gaming elements, e.g. for digital scratch cards in their product portfolio. The regulator sets clear restrictions how the individual gaming element should look like. On the other hand, there is a new generation of highly entertaining multiplayer online competitive games that involves players paying money to acquire tools to help them win. Technically, though, the money is not being wagered or gambled as there is no monetary prize. So even though there is money being spent, these games do not fit the traditional definition of gambling as having Chance+Wager+Prize. Even so, the player experience has many similarities to gambling and involves spending money to play a game that is potentially even more addictive than gambling. In fact, a growing number of players are spending huge amounts of money on these games, and the operators are making huge profits. The problem is that these games are often not clearly regulated and are played by people of all ages including children. This raises problematic questions: What is the interface between gaming and gambling? How should these games be regulated? How do we protect children and consumers from the dangers of problem gambling when it comes to new forms of gaming that are not properly classified and often not even regulated? We are already seeing an increase in the number of young adult players showing problematic gambling behavior. I consider this an important issue as these games are becoming more and more popular because they are so entertaining. It would seem like this could be an issue in which the interests of lottery converge with the interests of commercial gambling operators. Wouldn’t everyone in the games-of-chance industry want to see tighter regulations applied to gaming that is not taxed and regulated as they are? A. Kötter: Operators driven by pure short-term commercial interests will always lobby for less regulation and lower costs. At present, they seem less concerned about problem gambling and harm to consumers and children. Our role, as state-sanctioned lotteries, is to serve society and fund good causes. Protecting the consumer is part of our DNA. Our stakeholders expect lottery operators to be the adults in the room, protecting society's interests. And they’ll hold us accountable if those standards of integrity and player protection are not met. We want everyone, parents and children alike, as well as our political constituents who shape regulatory policy, to be educated and informed about the risks and to be able to find the right solution or regulation. I hope that in the future lotteries are not finding themself at a significant disadvantage compared to large operators who are not subject to the same high standards as we are. This scenario has already happened time and again. Illegal online operators build up their customer base to a point where governments decide they have no choice but to regulate and tax their earnings. A. Kötter: Their player base, which was acquired illegally, instantly puts them into the dominant market-share position in some regions. The result is that criminal behavior is rewarded, and the operators who have complied with the local laws and regulations are then put at a competitive disadvantage because the illegals have the players, and the capital acquired from years of either not paying or underpaying taxes. The operators who have been profiting illegally for years while build up their player base are now lobbying to come into the legally regulated markets. We talked about this cycle at the PGRI conference in Fort Lauderdale in 2019. The syndrome has gained momentum since then. Some operators even continue to operate illegally in markets where they cannot get a proper license, while operating legally in other markets with a proper license. This simply gives these illegals the best of both worlds and the opportunity to maximize their profits. Some illegals push hard to obtain a proper license to operate in the legally regulated markets, even to the point of ending their illegal activities in that jurisdiction. One reason for this may be that the availability of investment capital to grow the business, or to hedge the risk winning a high jackpot, is discouraging illegal activity. So, the air is getting thinner for these operators. Isn’t it the case that the WLA and the EL (European Lotteries) increased their level and effectiveness of communications with political stakeholders and that had some influence on these trends away from illegal online gambling? A. Kötter: In 2014 the Council of Europe created the Convention on the Manipulation of Sports Competition - also known as the Macolin Convention. The WLA was one of the parties that created the first draft. The final version was the joint effort of more than 50 states worldwide. We have put forward the concept that if a company is operating illegally anywhere, then they should be considered an illegal operator. And no jurisdiction should condone illegal operations by rewarding them with a license to operate legally. The WLA is working intensively with the EL and the regional associations on this important issue. How did the World Lottery Association contribute to those initiatives? A. Kötter: The important starting point was a common understanding of what is illegal. Based on this, the WLA compiled a list of current illegal activities and legal measures taken against them. We produced white papers clarifying the difference between legal and illegal gaming, illegal gambling business and lottery operations and even templates that could be sent to the regulation bodies. Together with some multi-jurisdictional lottery cooperations we even touched on the issue of brand protection. “NO JURISDICTION SHOULD CONDONE ILLEGAL OPERATIONS BY REWARDING THEM WITH A LICENSE TO OPERATE LEGALLY.” continued on page 14
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