Category Archives: Social Costs

UPDATE: Supreme Court Strikes down Federal Sports Betting Ban, Creates ‘Wild West’ for Sports Gambling and Potential Devastation for Problem Gamblers

Casino Watch Focus has reported on the ongoing efforts lead by New Jersey to reverse federal bans of sports betting. After many failed attempts, New Jersey has finally succeeded in opening the door for them to regulate sports gambling. This obviously opens the door for every state as well, and the ramifications will be serious. In an op-ed piece published by the Hill, John W. Kindt, a professor of business and legal policy in the Department of Business Administration at the University of Illinois’ Gies College of Business, who for 20 years has focused his specialty research on the societal, business and economic impacts of decriminalizing gambling activities, outlines how such a reversal of policy creates a Wild West: 

On Monday, the Supreme Court issued its decision in Murphy v. NCAA, a case brought by the State of New Jersey to overturn the 1992 Professional and Amateur Sports Protection Act (PASPA), which was sponsored, ironically enough, by former Sen. Bill Bradley (D-N.J.), a professional basketball legend, to protect the integrity of U.S. sports. Trying to legalize sports gambling, New Jersey lost twice in U.S. district court and twice in the Third Circuit U.S. Court of Appeals between 2012-2014. In a perplexing move, however, the Supreme Court accepted New Jersey’s appeal and heard the case on Dec. 4, despite the recommendation of the Office of the Solicitor General advising the court to reject New Jersey’s appeal.

Generally ignoring the practical economic and social effects of enabling unregulated “real time” sports gambling, for example by kids on cell phones, a divided court decided “to destroy PASPA rather than salvage the statute” complained Justice Ruth Bader Ginsburg in her dissent.

The majority decision focused almost exclusively on New Jersey’s myopic arguments invoking the “anti-commandeering” principle of a 1992 case New York v. United States, while ignoring the obvious interstate impacts and the well-established Commerce Clause empowering congressional action on interstate sports.

While appearing innocuous to the uninitiated, the Murphy case will quickly generate ubiquitous and unregulated “Wild West” sports gambling. It is academically well-documented that this type of gambling is poised to explode with local and strategic economic impacts negatively affecting the U.S. economy.

While unlikely, immediate congressional actions regulating the practical impacts of the Murphy case are necessary.

While the Supreme Court cited the U.S. Gambling Commission’s 1999 Final Report, the court missed the Final Report’s numerous recommendations against gambling in cyberspace — particularly sports gambling.

Sports gambling in real time on cell phones and computers was highlighted as an example of the “crack cocaine” for hooking college students, teens and kids into addicted gambling. The Supreme Court also missed a wide spectrum of negative economic and financial issues associated with widespread sports gambling.

The complete editorial can be read HEREAdditionally, its important to understand this move might be the single greatest expansion of gambling seen by a single court case. The ramification of such explosive legalized gambling cant be overstated. A Press Release by the National Council on Problem Gambling explains their position: 

“Today’s ruling by the Supreme Court is the largest potential expansion of gambling in our nation’s history now that an additional 49 states have the opportunity to legalize sports betting. NCPG believes the expansion of legalized sports gambling in the United States will likely increase gambling participation and gambling problems unless steps are taken to minimize harm,” says Marlene Warner, President of the NCPG Board of Directors.

NCPG’s wide-ranging and deep experience in these fields since 1972 allows the organization to provide a clear-eyed perspective on both the benefits and pitfalls of legalized gambling, and to find a middle way that addresses concerns on all sides. Revenues from legalized sports betting must be viewed in the context of social costs. Research has shown that current gambling activity generates over $115 billion in overall revenue to local, state and federal government, but also results in $6.5 billion in associated costs, including criminal justice and healthcare costs. These costs are often hidden and difficult to see. Approximately 2% of adults experience gambling problems, or approximately 5 million people. These social and economic impacts must not be ignored.

For more information on the dangers of gambling, please visit CASINO WATCH & CASINO WATCH FOUNDATION

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New Loot Box Legislation Proposed Domestically as Foreign Governments Ban them in Video Games: Publishers State they Wont Stop Exposing Children & Gamers to Such Practices

Casino Watch Focus has reported on the ongoing realization that loot boxes are simply a sophisticated form of gambling in video games. More and more jurisdictions are becoming aware of loot box and skin gambling as they are expected to reach revenue over $50 billion dollars by 2020. Many domestic jurisdictions have already proposed regulations, studies or called for the industry to self-regulate. Minnesota is the most recent to propose legislation. An online source explains: 

[N]ew loot box bill was introduced in Minnesota this week. The bill joins other state level legislative efforts in the USA, which were introduced since the global loot box debate peaked in the second half of 2017. State Rep. Rick Hansen (DFL-South Saint Paul) introduced the bill H.F. 4460, which “would regulate ‘loot box’ gambling in video games”. The matter was discussed and both parties spoke in favor of the bill. According to Rep. Hansen “People are spending real money on random drawings in video games. Minnesota regulates gambling and when loot boxes meet the threshold to be considered gambling, then we need to treat it as such and regulate it too.”

The bill prohibits the sale of a “video game containing a system that permits the in-game purchase of (1) a randomized reward or rewards, or (2) a virtual item that can be redeemed to directly or indirectly receive a randomized reward or rewards to a person under 18 years of age” [sic].

Additionally, no video game may be sold or provided unless accompanied by a warning stating: “Warning: This game contains a gambling-like mechanism that may promote the development of a gaming disorder that increases the risk of harmful mental or physical health effects, and may expose the user to significant financial risk.” For games sold through electronic means, the warning must be acknowledged by the purchaser.

The Minnesota bill has a long way to go before it becomes binding legislation, as do most of the domestic bills discussed recently. However, several foreign government have passed and implement regulations including outright banning loot boxes from video games. The online European source The Verdict explains: 

Belgium has followed the Netherlands in banning the sale of loot boxes in video games, as Europe begins to crack down on what it deems to be illegal gambling operations run by major game publishers. Speaking to /Verdict/, a Belgian Gaming Commission spokesperson said: “The Belgian Gaming Commission has come to the conclusion thatreal-money loot boxes are gambling. This means that in Belgium, these types of games are prohibited unless licensed.”

If they do not adapt their games, they all potentially face criminal prosecution. Punishments would include up to five years in prison and fines of up to €800,000, which could be doubled if it is found that minors were involved.

It is highly likely that this would be the case. Approximately 22% of video gamers are aged between ten and 20 years old according to Statista, which is largely the cause of the Belgian Gaming Commission’s concerns. The Belgian Gaming Commission added:

“Real-money loot boxes are not innocent. Especially because the video games that they appear in are often played by children. “The Gaming Commission wants to protect the players in general and vulnerable groups (e.g. minors) in particular.”

Despite all these bans and all the discussion of how loot boxes are gambling and harmful to children, publishers don’t seem to willing to stop such predatory practices. EA, the publisher whose Star Wars video game Battlefront started this backlash, has been the most vocal about their inability to part from this gaming mechanic. The Verdict continues:

The loot box debate has been going for some time, but the bans issued by the Netherlands and Belgium are the first sign that governments are beginning to take notice. However, at least for the time being, publishers are unlikely to be too concerned.

Tom Wijman, market consultant at video game research company Newzoo, told Verdict: “I don’t expect publishers to be too worried, it should be quite simple to turn the option for loot boxes off for Belgian and Dutch bank accounts, and those markets are pretty small compared to the United States or UK.”

EA stated that it disagrees with Belgium’s ruling. A company spokesperson told /Verdict/ that the company welcomes discussions with Belgian authorities, but did not confirm whether it intends to comply with the request to remove these items from its games. EA CEO Andrew Wilson has since told industry analysts that the company plans to continue pushing forward with services such as Fifa Ultimate Team, which generates vast revenues through the sale of loot box items known as player packs.

For now, the issue is more of a nuisance than a problem for game publishers, but it could get worse if other regulators decide to follow Belgium’s lead. “I think the significant part about these bans isn’t so much theNetherlands and Belgium banning loot boxes, but rather the messagethis sends to regulatory institutions for gambling worldwide,”Wijman added. Should other countries issue similar bans, the attack on loot boxes could prove costly for developers.

For more information on the dangers of gambling, please visit CASINO WATCH & CASINO WATCH FOUNDATION


Hawaii Proposes 4 New Anti-Gambling Bills against Video Game Loot Boxes and US Senator Pressures ESRB for Industry Ratings and Regulation

Casino Watch Focus has reported on the discovery and evolution of gambling-esque loot boxes in video games and the legislative response to such predatory practices. Loot boxes are a type of micro-transaction where a video game player spends real money to open a box or chest in a video game, and hopefully win a valuable prize. If this sounds an awful lot like slot machines, then you’re thinking the same as countless fans, journalists and now legislators that are worried about he addictive and predatory nature of such a mechanic, especially when kids freely play these games. Hawaii legislator Chris Lee has lead the charge to hold the video game accountable and many others have taken note. As promised, Hawaii has now released 4 new bills that seek to regulate these predatory micro-transactions. An online source reports: 

Four new bills have been introduced in the past month that target the sale of games that sell loot boxes for real money. Two of the bills would prohibit developers from selling games with randomized loot box reward systems to anyone under the age of 21. The other two would require developers to label games that use randomized loot box systems /and/ to disclose loot box drop rates.

Developers would be forced to label games should they include “in-game purchases and gambling-like mechanisms which may be harmful or addictive,” according to the bill. A game purchased online would have to include this information on the game’s art. 

“Whistle-blowers have revealed that psychologists are employed to create these mechanisms,” Lee told the Hawaii Tribune. “If enough of the market reacts, the industry would have to respond and change its practices.” Lee said that more than half of the states in the United States are looking intro legislation regarding the sale of loot boxes in video games. Loot box regulation has already begun overseas as well. In 2016, China passed legislation that requires all developers to publish its loot box odds. Likewise, the Belgium Gaming Commission has deemed loot boxes “dangerous.”

Lee has been pushing the industry to impose its own common sense legislation. The ESRB is the rating system used within the industry and as of now, they are unwilling to view loot boxes as gambling and thus, they haven’t been willing to take the matter seriously or regulate from within. During a normal public meeting about the bills, lobbyist from the Entertainment Software Association, the industries trade group and regulators of the ESRB rating system, flew out to participate in the Q&A. They were unable to answer, justify or address some of the most basic concerns raised by Lee. It was objectively a very terrible showing for the industry. You can find the full video and update on Lee’s direct YouTube channel HERE (Loot box update begins at 2:37 and the questioning begins at 7:00).

Moreover, in addition to large number of states that are looking into similar legislation, these predatory gambling practices have now caught the attention of the US Senate, specifically Senator Maggie Hassan. She has questioned the FTC and wrote a letter directly to the ESRB. Forbes reports: 

This week, Hassan asked four FTC nominees the question: “That children being addicted to gaming — and activities like loot boxes that might make them more susceptible to addiction — is a problem that merits attention?” To which all four responded yes, it was something they would look into. But past that, Hassan wrote a lengthy letter to Patricia Vance, president of the ESRB citing that the issue of loot boxes was brought to her attention by a constituent. 

“While there is robust debate over whether loot boxes should be considered gambling, the fact that they are both expensive habits and use similar psychological principles suggest loot boxes should be treated with extra scrutiny,” Hassan’s letter says. “At minimum, the rating system should denote when loot boxes are utilized in physical copies of electronic games.”

The fact that Hassan is a US Senator, not a state senator, is important, as this could end up leading to her proposing federal legislation about this issue, rather than individual states doing it.

The powerful letter can be read in its entirety at Forbes HERE 

For more information on the dangers of gambling, please visit CASINO WATCH & CASINO WATCH FOUNDATION


UPDATE: Washington State joins Hawaii in pushing investigation and legislation around gambling-esque loot boxes in video games.

Casino Watch Focus has reported on the ongoing revelation that video game publishers are pushing what many have called predatory gambling mechanics into recent video games. These loot boxes that are purchased by a gamer dispense in-game items by chance. The players don’t know what items they are actually purchasing and thus they chase after the change of getting the good loot much like a gambler chases after the right combination in a slot machine. What’s worse, publisher EA used these gambling boxes as the primary way to advance through their latest Star Wars video game, Battlefront 2. Naturally, this not only caught the eye of the media, but Disney themselves had to step in. Then governmental agencies started investigating and expressing concern for such psychologically manipulative mechanisms in video games that are available to children. Chris Lee, a Hawaiian legislature pulled no punches when he categorized the game and loot boxes as simply an Star Wars themed online casino aimed at taking kids money. Apple called for companies to disclose the odds of obtaining various loot in any games sold in there app store, but the industry as a whole decided not to regulate loot boxes through the ESRB system. Given the lack of sell governance, yet another state has pushed forward to investigate the issue. The Rolling Stone reports:

As the debate surrounding loot boxes and microtransactions as a form of gambling targeted at children continues, a new bill proposed in Washington is looking to force the game industry to regulate these mechanics, The News Tribune reports.

Washington State Senator Kevin Ranker introduced a bill this month asking state officials, as well as game developers, to determine once and for all if loot boxes and similar mechanics are specifically designed to prey on children.

“What the bill says is, ‘Industry, state: sit down to figure out the best way to regulate this,’” Ranker told the outlet. “It is unacceptable to be targeting our children with predatory gambling masked in a game with dancing bunnies or something.”

Despite the controversies, the game industry seems to be fully-committed to loot boxes and microtransactions. In a recent industry survey, the Game Developer’s Conference found one in 10 developers plan to implement the mechanics in their next game.

For more information on the dangers of gambling, please visit CASINO WATCH & CASINO WATCH FOUNDATION


How is the Deadly Mass Shooting in Las Vegas Impacting the Gambling Industry?

Casino Watch Focus has reported all too often on the many crimes that take place at casinos, but none have had the impact of the most recent mass shooting by Steven Paddock from the Mandalay Bay Casino hotel that was the most deadly shooting in modern U.S. history. Nearly 60 people were killed and hundreds injured by a man who was known to the gambling community in Las Vegas and who stayed at the hotel for many days prior to acting out his horrible crime. As one online source outlined, many are questioning if gambling debt lead him to this act, or if his gambling connection should be a focus at all in this mass shooting:

The subject of Paddock’s gambling life is an understandable preoccupation in Las Vegas, in part because, four days after Sunday night’s massacre at an open-air country music festival, authorities have provided no tangible motive for an attack that clearly took a great deal of plotting. That he was staying for free on a comp in the 32nd floor corner suite at Mandalay Bay — the Associated Press first reported that and /New York/ has since confirmed it — only adds to the sense that Paddock used the enormous amount of time he spent in the casino in part to devise his murderous plans. 

The focus on Paddock’s gambling has many in Vegas nervous. The destination has spent the last three decades pushing past its stigmatized image as an underworld haven. Still, even without any evidence to support the notion that Paddock dug himself into any sort of financial distress with his play, there is speculation. CBS News offered this headline on Thursday: “Motive of Las Vegas gunman may lie in his gambling habits.”

Anti-gambling activists, too, embraced this notion. “Whether Paddock’s out-of-control addiction to electronic gambling machines was a central factor in what happened last Sunday will be determined by the FBI investigation,” wrote Les Bernal of Stop Predatory Gambling in a Thursday e-mail blast. “But news coverage and public discussion should not normalize Paddock’s single-minded obsession with gambling machines and the exploitive business practices used by the casinos to keep Paddock gambling continuously.”

Still yet, the entire situation is making everyone look at how much culpability, if any, should exist with the casinos where he gambled, and if anything can or should be done to prevent this in the future. An area of debate has been the fact that Paddock smuggled a small arsenal into the hotel to carry out his murderous plan. So its no surprise that executives were immediately engaged into talks about safety and security policies moving forward. An online publication reports:

The increased security measure has been a topic for discussion among casino operators since Paddock shot concertgoers from the 32nd floor of the Mandalay Bay Resort and Casino, a hotel complex owned by MGM Resorts International. Last year, casino magnate Steve Wynn warned that Las Vegas was a ‘target city’ and disclosed a raft of new security measures, including invisible metal detectors and specially trained guards, designed to prevent a large-scale attack.

Whether those measures would have prevented Sunday’s rampage on the strip in which 58 people were killed is unknown. But the shooting could spur casino operators to think more like Wynn, who had been dismissed as ‘obsessed’ about security before Sunday’s massacre, a rival casino executive said. ‘This could be a turning point,’ the executive said, speaking on the condition of anonymity because security measures are private. ‘Every management team is going to move this up to the top of the list.’

Some are concluding that culpability absolutely exists and the very nature of gambling addicts like Paddock leads to suicidal and other disturbing thoughts. They also suggest that the issue wont truly be examined like is should. An online source explains:

Mandalay Bay’s practices — and indeed the practices of virtually all casinos in an increasingly wealthy and powerful gambling industry — won’t get the scrutiny they deserve.

“No credible, independent person who deals with gambling in the United States and is not being paid by the gambling industry would say Stephen Paddock was a responsible gambler,” Les Bernal told me. He heads a group known as Stop Predatory Gambling.

Last December, the Atlantic did a lengthy story on the industry. Headlined, “How casinos enable gambling addicts,” it told in detail how everything from the way machines are programmed to the perks and the hostesses in casinos are designed to keep people gambling, either with their own money or with a loan from the house. Tarbert told me how this always ends with a period of self-loathing, during which the gambler often feels suicidal. 

For more information on the dangers of gambling, please visit CASINO WATCH & CASINO WATCH FOUNDATION


A New form of Gambling in Video Games? What are Loot Boxes and Why is the Gaming Community asking the ESRB to Call this Gambling Practice Out?

Casino Watch Focus has reported on the highly addictive principle of near misses and how this form of gambling forms strong addiction. Typically viewed in the context of regulated slot machines, the player pulls the lever and tries to line enough symbols up in a row to get a prize. Studies have indicated that when someone gets close but doesn’t win, what they call a near miss in the industry, the player will chase the win. A very similar phenomenon is now taking place in video games. The concept in the gaming world is known as a loot box. You pay a price to manufacture to by a box. Random items that a player would want to have in the game, say, a high powered weapon in a shooting game or a piece of defensive armor that models a coveted look and offers superior protection from other players, are generated when the loot box is opened. The key is that the items are random. Most players are looking for top end, often times called legendary gear. The odds of getting them aren’t too high and so a player tends to keep paying more and more money to open more and more loot boxes chasing after the win, or the best items in the game. This practice was identified very early as a form of gambling and a gaming mechanic that uses the same psychological techniques to addict players. The worst part, they are in games marketed toward children and no regulation exists. The highest level, state or federal laws, are completely none existent, so many in the community turned to the ESRB rating system to get these games classified as mature, so that young kids and teens aren’t the target of such gambling practices. As reported by Forbes, ESRB has erred in declining to view loot boxes as gambling, and social awareness is very much need to properly protect players:

Today, the Entertainment Software Rating Board, or ESRB, stated publicly that the hot new monetization trend in video games, loot boxes, don’t qualify as gambling. This is wrong on many levels. While it’s true that, unlike a slot machine, a loot box will always result in some form of a prize, that doesn’t change the fact that the simple act of opening loot boxes is incredibly similar to gambling, and taps into all the same parts of the brain.

“The player is basically working for reward by making a series of responses, but the rewards are delivered unpredictably,” Dr. Luke Clark, director at the Center for Gambling Research at the University of British Columbia, told PC Gamer recently “We know that the dopamine system, which is targeted by drugs of abuse, is also very interested in unpredictable rewards. Dopamine cells are most active when there is maximum uncertainty, and the dopamine system responds more to an uncertain reward than the same reward delivered on a predictable basis.”

Psychologists call this “variable rate reinforcement.” Essentially, the brain kicks into high gear when you’re opening a loot box or pulling the lever on a slot machine or opening a Christmas present because the outcome is uncertain. This is exciting and, for many people, addictive. When it comes to video games, the biggest concern is that children and adolescents will end up forming addictive behaviors early on.

At this point there are two issues/lines of thought at play. One is that the act of buying a loot box and opening it might not be technically gambling because you always get a prize. To this point, its pointed out above that the act of chasing loot boxes is exactly the same as gambling. More importantly though, some games do allow the players to sell or auction off the items received in exchange for real world money, items or game subscription, things with real world value. Eurogamer very specifically outlines the many ways in their recent article when they discuss both the US ESRB and European’s PEGI stance on loot boxes. So in that sense the player is putting real money into the game, opening the box and getting a price based on random chance not skill, and then cashing out the winnings, which is text book gambling. The Second line of thought is that regardless of whether or not this reaches the threashold for actual gambling that requires governmental oversight, it absolutely should get the ESRB’s attention and it should be disclosed to players and parents accordingly. Forbs continues:

“Look if you include these kind of mechanics in these games and you actually allow people to buy these packs for real money, these random blind packs and engage in what is essentially a form of gambling, then you should be jacking the rating of your game up to Mature.

“The fact that [Star Wars] /Battlefront II/ is going to be Teen rated and yet has an in-game real money gambling system blows my mind. How are they possibly getting away with that? Well, the answer is that the US government and legislation hasn’t caught up with it yet.”

OpenCritic co-founder and CEO Matthew Enthoven says that the ESRB’s response “kind of ducked the issue” calling it a semantic argument. “You can call it gambling, you can call it gaming addiction, you can call it whatever you want. The problem is still the same,” he tells me. 

For more information on the dangers of gambling, please visit CASINO WATCH & CASINO WATCH FOUNDATION


Update: Florida Voters in Charge Amendment Half Way to Signature Goal and more Backing from Disney

Casino Watch Focus has reported on the ongoing efforts to pass the Voters in Charge Ballot Initiative in Florida. The ballot measure seeks to add a constitutional amendment that requires a final vote of the people prior to any gambling legislation being implemented. So far the petition has passed all the normal steps on its way being on the ballot, including a look by the Supreme Court. Its now being reported that more than half the required signatures have been gathered and Disney is continuing to lend its support to this important ballot measure by contributing another $575 thousand to the efforts. Florida Politics reports:

A proposed constitutional amendment aimed at limiting gambling’s expansion in the state now has more than 600,000 signatures, its backers said Monday. Voters in Charge, the political committee behind the amendment, said it’s “over halfway towards its goal of gathering 1.1 million signatures in order to reach the required number of 766,200 valid petitions to appear on the 2018 General Election ballot.”

“Tens of thousands of Floridians are signing our petition each week and we are on track to accomplish our goal of securing enough signatures for ballot placement by year’s end,” said *John Sowinski*, chairman of Voters in Charge.

“We look forward to being on the 2018 ballot, mounting an aggressive statewide campaign and returning the ultimate authority to approve casino gambling to the people of Florida where it belongs,” Sowinski said in a statement.

For more information on the dangers of gambling, please visit CASINO WATCH & CASINO WATCH FOUNDATION