Again on the disconnect: The unresolved relation between regulators and industry

Again on the disconnect: The unresolved relation between regulators and industry

In the latest blog on the theme of the ‘disconnect’ between regulator and operator in the gambling industry, former AAMS director Francesco Rodano, now Playtech’s Chief Policy Officer, reflects on his experience from both sides of the discussion.

When invited to join this ongoing (and potentially endless) debate, I was immediately intrigued. This is a topic I am really sensitive to, having been a regulator for nine years and now standing on the other side of the (disconnected) fence.

When my regulatory journey came to a natural conclusion a few months ago, I was left with the strong feeling that the relationship between the two worlds had not yet been resolved. Although I felt this was maturing, there still seemed to be some friction; a background noise preventing both parts from having a fair, serene and transparent dialogue. Therefore, this was making the evolution of the relationship much more turbulent than necessary.

First, allow me to very briefly (and perhaps bluntly) recap the previous episodes to illustrate my point – and then build on them.

Ewa (igniting the debate): regulators and the industry do not understand one another; do regulators really listen to operators? Are operators aware of regulators’ challenges (given also the negative public perception)? Do industry associations meet the need for a unified voice?

Christina (dismissing the issue): operators and regulators must not talk, since they work to non-overlapping agendas; dialogue is perceived as bad by the public opinion, is driven by the loudest shouting operators, and can lead to collusion.

Al (building a bridge): regulators focus on compliance with laws established by others and on the integrity of the business; transparent communication between regulators and (the entire) industry is key to saving time and money while also achieving the respective objectives.

Richard (blaming the unrevolving doors): the biggest issue is the lack of former industry people (considered tainted) among regulators, so the latter are short-sighted, fear-driven, ivory tower-living people and the reason why they are spreading bad regulation around.

Those are seemingly conflicting views, but they highlight several valid points: there is no unified industry voice; regulators are implementing laws decided by others – this is often forgotten; they lack specific experience; and their roles vary greatly.

In my opinion, the underlying common and critical factor is that gambling is an extremely controversial activity. The public perception issue is almost as old as the history of humanity. The “Gambler's lament” is found in the Rigveda, the ancient Indian collection of Vedic Sanskrit hymns (II millennium BC). Hence the tendency to consider people who work in gambling as tainted (not only on the industry side, though, as my wife and my parents have often given me strange looks ever since I became a regulator).

Indeed, cultural and social influences can lead regulators to be wary of industry professionals, however, there is prejudice on both sides. Operators tend to consider regulators as ignorant bureaucrats who are blind to commercial realities. Further, some believe a regulator’s sole purpose is to make their life miserable. I can recall many situations where I was addressed by industry representatives with anger. Even before I could say a word, I would hear: “You regulators don’t understand a thing. We know this stuff, so just do what we tell you to do!”

So, maybe regulators do not (want to) understand operators, who are “culturally” tainted.

At the same time, as Ewa pointed out, operators are often not aware of the challenges regulators face. Here are just a few examples:

  • Laws are set by Parliaments, sometimes in conflict with a regulator’s opinion
  • Operators tend to lobby on a double track, both the regulators and the politicians, even with different agendas
  • Regulators have to deal with an endless number of people: the entire industry supply chain, consumer associations, politicians, police forces, other agencies, EU institutions, foreign regulators and so on
  • Regulators have to deal with day-to-day administration, mind-numbing but essential to ensuring that the entire system runs smoothly

The first point explains why regulators sometimes listen but often appear to ignore concerns raised by industry. The second point could explain why regulators can be mistrustful of industry. The third and fourth points refer to a serious and underestimated issue: time constraints, often confused with unwillingness to establish a dialogue.

Unifying operators’ voices through industry association should help save time. But Ewa correctly says that their members’ interests could not be aligned. And right here comes what I found to be the most problematic and challenging issue of all: the disconnect among operators themselves.

They are not disconnected solely because of competition; it can also be simply a matter of principle: “I want X, but if my competitor wants X, too, then I want Y”. Or, when asked to draft a common proposal on specific regulatory issues (e.g. self-limitation requirements, anti-fraud criteria, etc.) the internal debate leads them to compromise so much that the final document is so vague that it is deemed unusable.

The situation, however, at last seems to be improving. Regulators, who were used to the one-to-one relationship model typical of the lottery industry of years gone by, are now adapting to the one-to-many kind of dialogue. They are also meeting each other, and eventually imitating those behaviours that prove to be more effective, including an openness to a transparent and constructive communication with the industry.

Operators, on the other hand, are more inclined to see regulators as “human beings” and not ignorant, bureaucratic machines. They also appear to cooperate more closely with each other, despite competition issues.

But I believe that something crucial is still missing from the industry side. Operators have a great responsibility and opportunity: use their resources, skills and experience to help regulators instead of opposing them; fill those regulatory gaps that regulators could not manage to fill themselves.

Let’s take the case of responsible gambling (but the same would apply to many other regulatory practices). I am under the impression that operators (with a few exceptions) tend to just do their homework in this field. They comply with the local regulations but not try to raise the bar, by adopting technical and organisational practices aimed to improve the level of regulation. They do what is legally required, nothing more (sometimes less). Their concern? Doing more could perhaps eat into a small portion of their profits in the short term. However, if one takes the not-so-long view, there is an opportunity, maybe a necessity, to help the sustainability of the entire sector for the future.

The dialogue, the connection, cannot focus only on those changes that might imply an immediate return (such as a call for a lower or different taxation). The primary goal should be to make the player experience safer, fairer and more transparent while discouraging the participation by those who are (or could become) at risk.

When regulators and operators go beyond the respective (legacy) misconceptions and recognise they can help each other fill the respective gaps, then the disconnect will disappear. And, most importantly, both the regulator and the industry will be able to futureproof this often controversial and challenging sector. 

Read Ewa Bakun's lead blog post "It's good to talk!" on the disconnect between regulators and operators.  Tina Thakor-Rankin's response 'Blurred Lines: Regulators and Operators – the balance between interaction and independence', “Ensuring Integrity” the follow up by Al Baldoz of Mashantucket Pequot Gaming Commission and “Just to Annoy You…” the follow up by Bermuda Casino Gaming Commission Executive Director Richard Schuetz

The theme of Regulators & Industry Disconnect will be discussed at EiG in Berlin (18-20 October 2016) with Francesco Rodano, former Italian regulators, Chief Policy Officer, Playtech, Jenny Williams, former UKGC CEO, Andre Wilsenach, Executive Director, UNLV International Center for Gaming Regulation, Claire Pinson, European and International Affairs Officer, ARJEL and Wendy Zitzman, Head of Compliance Consultancy and Training, iGaming Academy, as part of the session ‘It’s good to talk’, moderated by Ewa Bakun, Head of Content, Gaming, Clarion Events. Click here for more details.

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