Wired Safety, an Internet Safety and Educational charity, has produced, as testimony
before the House Financial Services Committee in Washington DC, a study which
examines a range of harms potentially associated with online gambling, and alternative
methods for mitigating or minimizing them.
The study, led by Harvard Professor Malcolm Sparrow, and published by Wired
Safety Executive Director Dr. Parry Aftab, recognizes that the current US prohibitionist
regime with respect to online gambling is largely ineffective in achieving its
aims, and provides no platform or opportunity for the implementation of most
of the relevant harm-reduction strategies, concluding that an alternative regime
of legalization and regulation of online gambling should improve consumer welfare
The study acknowledges that millions of US residents gamble online through
offshore gambling sites, causing all the uncontrolled gambling-related social
costs. Nearly all US states permit some form of commercial gambling, and the
industry is large and well-established. Clearly, policymakers have extensive
precedent from which to draw strategies to mitigate the potential social harms
According to the study, some controls used in bricks-and-mortar casinos may
not translate well to online gambling, but several of the risks examined become
more amenable to control online. New technologies can be effective, even for
those risks that are more difficult to address online. For example, geolocation
and age verification technologies can help turn potentially significant risks
into manageable ones.
The study analyzes 10 specific risks that are associated with online gambling:
- Gambling by minors,
- Fraud by operators,
- Fraud by players,
- Organized crime,
- Money laundering by players,
- Money laundering by operators,
- Violation of jurisdictional prohibitions,
- Breaches of data confidentiality,
- Lack of site security, and
- Problem gambling.
The study considers it important that regulators treat each of these potential
risks differently. For some risks (such as players cheating other players),
the public interest and the interests of the gaming industry align, making a
cooperative regulatory relationship natural.
For others (such as those involving potentially criminal conduct by operators),
the study thinks a strict enforcement regime would be more appropriate. Still
other potential risks (such as underage and problem gambling) call for a more
nuanced regulatory approach involving a mixture of strict enforcement, effective
nonprofit support, community education, and cooperation, in keeping with the
more complex motivations and incentives facing site operators.
For each of the 10 risks, the study examined a set of regulatory methods and
technologies that would provide a reasonable degree of risk management in a
According to the study, most of these methods have already been implemented
in some form in other jurisdictions. The United Kingdom, Alderney, Gibraltar,
and others have successfully implemented regulation, and nearly all of the well-regulated
jurisdictions studied address the 10 risks to some degree.
The study believes that the establishment of a well-regulated industry under
US jurisdiction would offer far better protection against online gambling‘s
potential social harms than outright prohibition. Combining a thoughtful regulatory
scheme with education, technology tools, and support is regarded by the study
to be the most effective means of handling the realities and risks of online
gambling in the United States.
The study recommends that plans for regulating online gambling include the
design and use of different risk-management strategies tailored to the different
classes of risk that are associated with Internet gambling.