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Wednesday, August 04, 2021

‘The House Always Wins’, but it wins big online: A behavioural perspective to online gambling

With inconsistencies regulatory or legal framework, online gambling poses danger to users from the perspective of consumer protection and public health.

June 15, 2021 11:33:29 am
Online gambling, Online gambling rules in India, Fantasy sports rules in India, Fantasy Cricket India rules, Online gambling India, Gambling India lawsRepresentational Image. (Image by besteonlinecasinos from Pixabay)

Written by Saksham and Anirudh Tagat

What do we know about how humans assess small chances of winning? The St Petersburg paradox (coined by decision theorist Nicholas Bernoulli) suggests that individuals often overweigh small probabilities of winning (e.g. a 1 per cent chance of winning 1 million dollars). This is not just relevant for why people play similar lotteries, but also could explain enthusiastic responses to recent policy interventions such as the vaccine lottery in the United States.

With nearly 560 million internet users in India, youth are driving the gaming market estimated at $1 billion. Estimates from The Week suggest that nearly 40 per cent of all internet users participate in online gambling.

Compared to more overt forms of online gambling (such as games of chance, an issue currently being debated in the Bombay High Court), betting on fantasy sports is far more distinct in terms of format, as well as a clear link to real world activities. With inconsistencies regulatory or legal framework, it poses danger to users from the perspective of consumer protection and public health.

Betting and gambling offer an exclusive thrill appeal — high reward at a high risk. During the pandemic alone, registrations for online outlets, such as poker websites and betting apps, including fantasy sports hit new records. Fantasy sports platforms saw revenue grow from Rs 920 crores in 2019 to Rs 2400 crores in 2020.

Investors and mascots for these services ranged from sports celebrities to youth icons. Such ‘games’, especially gambling can become a disorder when habits become addictive, similar to alcohol addiction. There have been several reports of youths having died by suicide or taken criminal measures to repay debts accumulated gambling online. We try to lay out how online gambling platforms can potentially enable risky behaviours and why regulations are the need of the hour.

How do people make gambling decisions?

One of the most popular examples of human irrationality is the ‘Gambler’s Fallacy’. Players believe that if a dice has not thrown up ‘6’ in the last few rolls, then its probability increases in the next roll, when in fact, it continues to be random. The impact? People keep placing bets waiting for a win. Somewhat similar to how people betting on cricket matches might expect a batsman to score a century, right after a series of ducks.

Behavioural science tries to understand how people make decisions. A report by behavioural scientists in the UK , highlights how the persuasive design of betting websites continuously enables players to place more bets. For starters, money spent online rarely feels like spending in the real world. Gambling platforms can offer a slippery slope to addiction, and therefore their regulation becomes important in terms of public health as well.

A common strategy used by brands often lean on using ‘nudges’ to motivate people. This includes priming social norms, for example, ‘Most people near you purchased this product’. On gambling platforms, the main product that people purchase is bets – and are often primed by stories of winners (example, “Atul won Rs 4.5 lakh playing Ludo”) as well.

Online gambling and fantasy sports apps also make use of such ‘nudges’ bordering on dark patterns. Where ‘nudges’ are meant to facilitate decision-making in the best interest of decision-makers, the more sinister sludges are meant to impede decision-making that could harm the decision-maker. These are cleverly designed user interfaces which ‘trick’ consumers into actions, trading consumer welfare to give online businesses a power advantage.

First, online gambling platforms such as poker, which are a rage with youth, make it very easy to sign-up using just a phone number. To the best of our knowledge, there are little to none in-app disclosures or verification messages which prompt users about the risk of gambling or loss of money (this is true of sports betting platforms as well) — the process is completely frictionless.

Second, these platforms come with attractive and well-designed layouts, which mimic a casino’s bright lights and colours. The user experience is filled with attractive offers and graphics, and highlight ‘early bird discounts’ or even big million rupees prize pots. Such user interfaces are engineered to ‘tricks’ the brain in a manner similar to the dopamine hit we get by ‘likes’ on social media.

Third, several platforms make gambling to be social and played with friends. Platforms send socially framed notifications to play with friends, ‘Play with friends, play to win’. These highlight the number of users online, and allow video calls and chatting. Simply put, such ‘nudges’ directly act to increase motivation with a fear of missing out or FOMO.

Lastly, platforms make it a point to send timely reminders through text and email to continue ‘placing bets and winning big’. For instance, platforms regularly highlight the time remaining for a betting offer, creating urgency, ‘Only 2 seats left for golden offer to win 2 Lakhs’. Upon account inactivity, they regularly ‘poke’ inactive users too!

Some nudges also include options to mask betting payments in bank statements to ensure that returns are discreet. With groups of people, especially youth vulnerable to gambling addiction, such dark patterns serve as roller blades on the slippery slope.

Need for regulations

In India, gambling laws are a labyrinth and have recently become centre-stage following the rapid increase in popularity in these online ‘games’. A mix of Central and State regulations rendered toothless online. They are so complicated that online poker sites operational across India call them out as so, leaving them for players to interpret.

Several states and agencies are putting out white papers and rules but progress is slow and chaotic. The UK gambling commission mandates various kinds of information to be collected by online betting platforms for consumer protection. These include age and address verification, to prevent harm to children.

With a record number of players, platforms would always choose to increase profits and reduce friction, making it easier to place bets — a clear paradox. In such a strategic interaction, strong regulatory mechanisms with legal clarity is the only way to ensure consumer protection.

Understanding how online gambling platforms work from user surveys is a critical first step. On the basis of this data, the government (via the Reserve Bank of India, or the Ministry of Electronics and Information Technology) can partner with existing platforms to develop, implement, and triangulate user profiles and behaviour profiles. This could begin with registration of online gambling and betting platforms followed by regular audits, disclosures and monitoring.

Any such approach needs to couple consumer protection and concerns around public health for gambling addiction. For starters, targeted consumer awareness and education campaigns can focus on this issue.

From a behavioural perspective, commitment devices can be used which dissuade users from risky gambling actions online. Such initiatives can include mandatory ‘daily circuit-breakers’ or betting limits, that are also popular interventions of choice in curbing other addictive behaviours such as smoking. Combining disclaimers and ‘speed-bumps’ could be one effective way. Such nudges can warn players of financial risk at key decision making stages and make the account inactive for a few minutes in case of heavy losses.

Consumers need to be protected

While behavioural insights can guide consumer protection measures, we need strong regulatory mechanisms, either as a commission or through legal instruments. If our experience with data protection measures in India is anything to go with, our ability to keep pace with technology is already vastly out of pace. With rising economic vulnerability, and platform users coming from both rural and urban areas, we do not have enough data to understand the nature of online betting and nor its links with addiction or impact on other aspects of mental health.

Saksham is a researcher with interest in behavioural economics and works with the Centre for Social and Behaviour Change, Ashoka University. Anirudh is Research Author at the Department of Economics at Monk Prayogshala, Mumbai.

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