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Tuesday, October 28, 2014

2014 EIG Berlin iGaming Conference: 'Putting Up Or Taking Down European Internet Gambling Access Boundaries?"

 The European Internet Gaming(EiG) conference was held in  Berlin this year. The selection of Berlin as a host city for the conference was befitting given the proposed roll-out of legal iGambling in Germany and the continuing pressure to restrict access to iGaming content. Also, the tech focus of the conference was well suited for a burgeoning  high tech and start up culture within Berlin. The historical significance of Berlin in world and European history is also very relevant given the trend in Europe for each country  to create  virtual walls between each European country only allowing their residence to gamble online within their borders.

Venue - The venue for the conference was very "edgy" held in a former bus depot in the  East Berlin section of the city. The floor plan was completely open with no real or artificial walls. Essentially, a real tribute to the destruction of the Berlin wall and how it is against human nature to balkanize into artificial quadrants.    Essentially, no "walls" and a good reminder to everyone how tech, business, commerce and everyday life functions so much better in an open format with inevitable dialogue and interaction.  Open spaces are actually good for business! Yes, it was noisy and distracting at times. However, it was very easy to move between events and programs, mingle and network and engage is open discussions.

iGaming Balkanization Becomes The Norm - Western Europe continues on its march towards a balkanized world of "you can only" gamble on the state run or sanctioned sites that provide tax revenue for the hosting country if you are  within the boundaries of that country, and, I presume a citizen of that country. Clearly, there is no turning back at this point with all countries  jumping on the band wagon to get their piece of the revenue pie. With the exception of Germany, most of the countries such as Spain, Italy and France  have not sought clarification from Brussels concerning the obvious violation of the EU mandate that prohibits the interference of free trade and commerce between European countries.  Apparently, the EU governing body does not consider iGaming  as commerce  that should be unrestricted despite the EU overriding mandate. The EU stance was beguiling to one German official  acknowledging that the current country by country trend in iGambling is clearly against the EU pan European mandate. This is putting the lawyers and lobbyist to work trying to sort out when and if Brussels will continue on this track.

German Interstate iGambling Legislation - We have become accustomed to each country in the Euro zone creating a country by country online gambling program. In Germany the situation is a bit more complicated with each German state seeking to launch their own Internet gambling legal framework. The big question in the debate is how does this all work with the German federated government also considering a launch of Internet gambling property. 

 UK Conforms To The European Trend(kind of). The UK has a long standing history of legalized iGaming with sports wagering being legalized first then casino. In many ways they set the processes and standards for how legal iGaming could and should be conducted. Their law mandated the creation of legal gambling hosting  zones in British protectorate locations such as Alderney, Isle of Man, Malta, Gibraltar, etc. Under pressure from the other EU countries the UK is now requiring all gaming operators to be licensed within the UK with the associated fees and tax implications. However, the UK has not abandoned the protectorates allowing gaming servers to be located within these territories.  The UK has also taken a less draconian approach to auditing of game transactions. They see no need for"speciality" servers or "vaults" that capture and retain all transaction details. 

Startups And VC Funding - I sat in on a session with European venture capitalist discussing their approach to investing. It was amazing to see how their mantra was almost identical to what one would hear in the Silicon Valley. Clearly Europe is trending towards the approach to funding early stage companies as is practiced in the Bay Area.  However, as is the case in the US, investors are leery of gambling investments so the number of funds that can invest in this space are limited. The startups themselves that were pitching or roaming the floor are also no different then they are in San Francisco or Palo Alto in terms of their profile. However, high risk/reward investments, which iGaming startups fall into are a breed in and of themselves where private funding from business partnerships should be considered as a viable option. In point in fact, the iGaming industry is in dire need of an overhaul in game content, gaming  business models and more ubiquitous access to gaming content. Perhaps, these startups will lead us to a new improved and perhaps more exciting iGaming landscape. Lets grow and build the community of iGamers with novel and exciting content that attracts  wider range of players. 

New Gambling Content - The gambling industry has historically lacked innovation in the creation of gambling content. Content developers have used historical land based gaming proxies as a guide to the creation of content relying on what is familiar and culturally acceptable. However, recently we are seeing a break from tradition with the introduction of games that allow one to wager on just about anything that has chance involved. The new trend is to wager against the stock market, currency market, etc. This is a refreshing giving us all something new to think about in the context of a broader definition of legal gambling. Hopefully, we will see more of this kind of innovation.

Social Casino Regulation  - Social casino has become, perhaps, the most successful implementation of online gambling content in the history of gambling. Although it is officially not considered gambling because there is no cash out. It far exceeds the  concurrent player numbers of "real" gambling and continues to innovate at a rate far out pacing traditional Internet gambling. However, this popularity and the lack of age, identity and location tracking is raising concerns about "problem" social casino play. The primary issue is age related. A panel discussion was conducted that addressed this very issue and the consensus of the experts appears to be that some form of regulation is required and inevitable. The suggested approach is some form of "warning" about addictive play, under age participation, spending limits or transaction caps. Not sure how successful these efforts will be. However, some form of self regulation is coming.   

Europe has embraced the country by country or state within country approach to regulating iGaming allowing Internet gambling within the EU. It is a full on rush for each country to lock down their virtual borders and operate their own gambling operations. The  overriding goal of course is revenue for each country. However, this trend also results in less overall liquidity and perhaps a violation of EU cross border commerce law.  It will be interesting to see what this all looks like two or three years from now. The US is obviously following the Euro model verbatim assuming that the Europeans cross border content access restriction will work economically and politically. I could not help draw a corollary between Chinese restricted internet access and European iGaming. The Chinese population has cleverly established  a host of moving and changing VPN's that allow everyday citizens of China to break through the government's virtual walls and get to the content they want. Not sure if gambling content is worth this effort. However, one might make a bet on the resurgence of illegal gambling if restrictions are too draconian resulting in a lack of competitive content, constrained access, collusion in odds setting, low liquidity numbers and too many barriers of entry to sanctioned gambling sites.  

Kevin Flood is the CEO of Gameinlane, Inc. Kevin, has developed, launched and operated Internet gambling sites in Europe.   Kevin and Gameinlane   develop "social and real money" casino games for third parties. Kevin has worked for and with US land based casino operators helping them evaluate social casino and iGaming platforms for the purpose of joint ventures and acquisitions. Kevin can be reached at kflood@gameinlane.com.

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