Editorial – Unraveling the gambling prohibition paradox
by Ben Blaschke
I can’t help but notice the sudden and rapid emergence of the term “channelization” across the Asia-Pacific regulatory gaming space this year, seemingly reflective of a new approach by industry as it seeks to effectively highlight the dangers of blanket bans and over-regulation.
The term is not new in and of itself, having been bandied about in Europe to varying degrees – and with differing levels of success – for many years. But in APAC, channelization is only now emerging as a means of communicating a key concern, and one that could prove more effective than previous educational tools because it provides a clear and simple view of how prolific a specific black market is within any given jurisdiction.
This is important given that, be it through naivety or sheer political will, it has become all too easy to pretend black markets don’t exist when setting policy that on the surface sounds like “getting tough on gambling.”
Credit here must go to New Zealand’s gaming regulator, the Department of Internal Affairs (DIA), which has cited channelization as a core driver of the government’s decision to legalize and regulate online casino gaming.
At the Regulating the Game conference in Sydney in March, the DIA chief Paul James explicitly stated that the goal was to encourage people to steer clear of black-market operators.
“The reality is online casino gambling is part of New Zealanders’ life already today, but without protections,” he said. “The [Online Casino Gambling Bill] will close the regulatory gap. It will make it legal.
“We’re not introducing online casino gambling, but we are making it above board. No longer gray but clear, full of integrity and transparency.
“What we’re trying to do is nudge or channel people away from unregulated, unlicensed, to regulated and licensed,” James explained.
In a recent research paper penned by Regulating the Game founder Paul Newson, the discussion went one step further, with Newson – a former regulator himself – arguing that channelization should be a central tenant upon which the success of any gambling regulatory system must be judged.
As an example, he pointed to Australia’s illicit tobacco industry and evidence that suggests illegal cigarettes now account for 80% of all tobacco products sold due to the massive amount of tax charged on the legal product. It is notable that the conversation around cigarette tax in Australia has started to turn, with the opposition party confirming that slashing cigarette taxes will be a core policy position heading into the next election.
Now it’s the Philippines pointing to channelization as a focal point amid reports that regulator PAGCOR’s efforts to lower barriers for entry into the regulated market had seen channelization reach 75%, only to drop back to around 50% after the central bank last year ordered e-wallets to remove direct links to licensed gambling sites.
In a paper, specialist Philippine gambling law firm Arden Consult described channelization as “the more important measure” in evaluating the country’s gambling reform, noting that “demand for gambling does not disappear when rules tighten, so the real question is which channel that demand flows through – platforms that are licensed, supervised and taxed by the State, or illegal sites that are none of those things.
“If tougher rules merely move players from a supervised site to an offshore one with no age checks, self-exclusion, local dispute process or Philippine accountability, the State has made the legal market smaller without making gambling safer.”
At the end of the day, that’s the real point, so let’s be clear: anyone who publicly backs safer gambling while simultaneously advocating prohibition or uncompetitive tax rates is doing more harm than good and doesn’t deserve to be taken seriously.
