Goals vs. Rules - What we want from gambling regulation
Can you remember the times when industry press headlines were dominated by acquisition news or speculation on new markets opening up, not by new fines being administered, advertising bans discussed in national parliaments or license suspended?
Well, those times are gone.
As enforcement intensifies and has significant financial ramifications, even business closures in the most extreme cases, the tensions between the industry and the regulators grow. Regulators, often operating in a climate of a political and consumer pressure, take decisions that are deemed as incomprehensible to businesses, provoking those businesses to request more clarity and guidance in order to avoid further regulatory action.
Is the industry calling for more rules-based regulatory approach?
I posed that question in a form of a survey to 2000-strong Clarion Ampersand group and, to my surprise, the answer to the above question seems to indicate that. While goals-based approach is generally seen as preferred due to its flexibility that also enables more innovation, when applied to the current context, it is exactly its flexibility that causes imprecision, not welcome by most respondents.
- Andy Coyne, Operations Director, Hexopay
That imprecision leaves the regulatory framework also open to interpretation and therefore, in some cases, in particular in highly saturated markets with both big and small companies operating, can lead to abuse. Indeed, the view that the industry as a whole has proven itself unfit to adopt and comply with a goals-based approach was shared amongst quite a few Ampersand members.
- Francesco Rodano, Chief Policy Officer, Playtech
Markets with large number of licensees, such as above-mentioned UK and Italy, and most recently Sweden, in particular have seen more open interpretation of the regulatory goals which led to what’s been judged by regulators as rule-bending, followed by sanctions or by even more drastic measures, such as the advertising ban in Italy. Therefore, the regulators in these jurisdictions are now finding themselves in a need to backtrack on their original regulatory model and to redefine the rules, with the industry inviting more prescriptive approach to gain clarity.
- Annemarie Furtschegger, Public Affairs Consultant
No doubt, it is easier to implement and manage a goals-based regulation with fewer market participants who don’t have to push the boundaries to win the fierce competition for the customer. It is easier for the operator who indeed is not pressured to revert to questionable practices that exploit loopholes to which a flexible goals-based regulation is more susceptible. It is also easier for the regulator who has fewer licensees to assess. Additionally, the goals-based approach also shifts a lot of responsibility onto the regulatees who have to find ways to achieve the goals set in the regulation and are assessed by that outcome, leaving also some space for regulatory discretion as each case needs to be assessed separately. While regulatory discretion means that each case can be viewed individually, thus a tick-box approach is less likely, it also means that the decisions are more likely to be questioned or contested.
- Fiona Palmer, CEO, Gamstop
Wherever there is discretion involved, a trust-based relationship and frequent dialogue are needed. It’s fair to say, in the current regulatory climate in many jurisdictions, in particular the European ones, the relationship between operators and regulators is verging on adversarial rather than co-operative. Dialogue provides confidence in the expertise and abilities to achieve goals, when it comes to regulatees, and evaluate them, which is the responsibility of the regulators in the goals-based regulation. How often, however, are regulators coming from outside the industry and therefore lacking knowledge of the gambling sector?
- Richard Schuetz, Consultant and Former Regulator
Expertise and abilities of the regulatees, combined with the flexibility that goals-based approach offers, can sometimes result in, as discussed, too much creativity and rule-bending. But the requirement to be creative can also be put to a good use. A significant benefit of the goals-based approach is indeed its ability to encourage and enable innovation as regulatees are left with space to look for potentially more effective ways to achieve the ultimate goals set by the regulation. In a highly technology-driven and dynamic industry that is gambling, freedom to innovate is critical and can actually benefit the effectiveness of regulation too.
- Keith McDonnell, CEO, KMigaming
It is common knowledge that regulation lags behind technology developments; prescriptive approach typical of rules-based regulation risks becoming obsolete and can only really work if the rules can be reviewed frequently – a challenging task, in particular if it involves a political process.
- Christopher Hebert, Director, Gaming Division, Louisiana Office of Attorney General
As usual the answer is somewhere in the middle between a pure goals-based and a pure rules-based approach, has been the comment many survey respondents shared. A hybrid solution that imposes prescriptive rules on regulatory areas such AML or responsible gambling, but leaves more leeway with precise goals for areas such advertising has been suggested. The fact however that not one country mentioned was consistently defined as either suggests that probably that most regulatory frameworks already combine elements of both.
The article quotes members of Ampersand who contributed to the survey on goals-based vs. rules-based regulation that was conducted in the period between 11 and 20 September.
Ampersand is Clarion Gaming’s global think-tank initiative. Over 2000 industry professionals are part of it to participate in regular online surveys and meetings, share best practice and learn from one another. To learn more about Ampersand, please go to www.clariongaming.com/ampersand.