Gambling vs. Gaming: Analysing The Drift By Luke Haward, CDC Gaming Reports September 6, 2018 at 3:27 pm Kansspelautoriteit, the gaming regulator for the Netherlands (“KSA”, for short), might have a name to tie your tongue in knots, but their finger is on the pulse of the challenges facing the gambling industry. They recently announced a meeting with members of the industry to discuss “the risks of the increasing mix of gaming and gambling”, a fascinating topic indeed. As with anything affected by the pace of technological change, the factors influencing the issue are guaranteed to multiply and diverge or converge with bewildering speed in the years ahead. Regulators and even analysts often struggle to keep pace with a technological marketplace which is developing at an exponential pace – understandably, since without infinite resources it’s hard to keep pace, let alone predict what the future will hold. As we’ve seen with the ongoing case of loot boxes, a phenomenon can emerge, gain traction, and become a commonplace aspect of gaming before regulators even get a chance to bring their weight to bear. Many nations are still deciding what they make of loot boxes, and we’ve seen a wide range of responses across just Europe, with some jurisdictions declaring them as gambling (as in Belgium) and banning them; others stating that while they are troublesome, they are not illegal gambling (as in France); and yet others taking a mixed view and decreeing that some loot boxes are gambling (as in the Netherlands). It’s an indicator of the complexity of the topic that three jurisdictions so close geographically, culturally, and of course part of the European Union could come to such differing conclusions. For each jurisdiction the key is deciding how much chance is involved in the game.The UK has just tightened regulations concerning advertising, marking out a clear relation between license-holders retaining their licenses and their abiding by codes governing the avoidance of creating adverts which are appealing to children. What about games which are directly marketed to children while containing elements of chance? For that matter, what about the rise in esports, which is seeing traditional video gaming transformed, with huge cash prize competitions on the rise and a rapidly-growing audience willing to watch on Twitch or even attend in person to see the action go down? Consider that Team Liquid, who won the 2017 International Dota 2 Championships, were awarded the top prize of $10.8 million. This is big money now, to rival even that won in the world’s largest poker tournaments. Debates exist within the Dota 2 community over how much of a role luck plays in the game as a whole. Even expert gamers don’t agree on this entirely, so how are analysts supposed to assess it, especially with the pace of the emergence of new games? The question comes down, in each jurisdiction, not to whether there is a combination of skill and chance in a game, but to the question of how much chance is deemed to be present. This can be tough to determine with any complex game, let alone a new and complex game.The much-misunderstood millennial generation are often said to be less interested in games of chance, and more interested in games of skill; major casinos and online operators are struggling to come to terms with what this might mean for the long-term picture. We’re likely to see a boom in skill-based gaming, with elements of chance retained as part of the game, just as in poker, where both are present. Personally I feel we will at some stage reach a point where audiences are much more active in creating games and game formats, which will bring its own complexities, as will widespread uptake of tech such as VR. As for KSA, that regulator is advocating several changes, including a very welcome initiative to better inform schools and parents about possible overlap between gambling and gaming. They also advocate the “strict separation of the digital offer of games and games of chance”, but this might be an impossibility, given what is emerging in the market. I expect what we’ll see instead is an inexorable rise in esports, with far more games going live with big international competitions for real prizes, and efforts to distinguish “adult” games (whether of skill, chance, or a hybrid) from those suitable for children.