By Philippe Vlaemminck managing partner & Dawid Muller advocate – Pharumlegal 

The article has first been published in Public Gaming Magazine, http://www.publicgaming.com/index.php/covid-19/6025-lotteries-in-the-covid-19-crisis

For many years we have been advocating for a regulatory approach that will allow Lottery operators to react swiftly when confronted with disruptive market developments. Unlike illegal operators, who can embrace new technologies and strategies without regard to regulatory constraints, lottery operators must comply with costly and time-consuming processes to ensure compliance with regulatory regimes.  And when a new technology or marketing strategy is not directly covered by existing regulations, lottery operators must wait for regulators to catch up to the market while illegal operators use whatever tools and methods are available until they are explicitly outlawed. This puts illegal operators in the position where they are causing serious harm to regulated markets.  

Robust mitigation and preventative measures to protect the consumer and ensure security and integrity have become part of our daily existence. These measures have inevitably caused commercial disruptions that make it very difficult for lotteries to operate effectively within prevailing regulatory infrastructures. Legal lottery activities have slowed down significantly.  This diminished role has created a void, an opening for illegal operators to increase their market share even further. Sales channel solutions of the Lottery operator are shackled and consumers are left without a strongly controlled, acceptable and legal alternative. In an article for Public Gaming Magazine (“Protecting the Future of Lotteries”) we mentioned the need to address new gaming developments and digital challenges to enable “the lottery operator to actively channel the gaming desire into a fair, low risk and attractive offer that is properly advertised and benefits society.” 

Today the lottery operator is faced with the closure of POS (pandemic lockdown measures), the suspension of sport betting activities (cancellation of sport events), an inability to conduct lottery draws in accordance with existing regulatory frameworks (lockdown and social distancing), and the difficulty to publicize draw results. It faces real problems to address customer demands and to respond to prize pay-out issues. And its ability to respond to these challenges is further impaired by regulatory frameworks which inhibit the introduction of new games or alternative systems that may address these problems.

Illegal operators are flourishing in this environment of regulatory uncertainty and confusion.   And the anonymity of the Internet gambling world provides the perfect cover for their activities.  Illegal operators  do not contribute to good causes, do not embrace measures to promote responsible gaming and have no appetite to employ industry best-standards like the World Lottery Association’s Security Control or Responsible Gaming Standards.  

Turbulent and uncertain times give rise to re-purposing of manufacturing resources to meet the pressing and immediate demands – in the current case to produce essential medical tools, devices, and other products.  Researchers across the world are joining forces to jointly search for solutions to detect, cure, and prevent the serious problems caused by the COVID-19 pandemic. Today, whilst respecting precautionary principles, regulatory authorities in the medical sector are providing expedited approvals, and trade and competition authorities understand that relaxation of strict compliance rules will benefit society and consumers. Solidarity, trust, transparency, integrity and support have in most sectors become essential tools to fight the devasting consequences of the pandemic. Values that focus first on the welfare of society have always been embraced and promoted by lottery regulators and operators. Now they have become very relevant in all spheres of life as we live it today. Yet, as I write this blog, the disruption of the pandemic is serving the interests of illegal operators while impairing the efforts of authorized lotteries to channel the demand to safe and secure gaming outlets. The result is potentially a crippling blow to government-lotteries as illegal operators increase their share of the market-place. 

Regulators and shapers of public policy know that the time will soon come to rebuild the economy. They need to be informed of the pressing need to reverse the advances made by illegal operators, and the need to restore the important role performed by authorized lottery operators.  Regulators and shapers of public policy will likely protest that they face a multitude of pressing problems and that Lottery is not necessarily a priority in this time of crisis.  We need to encourage them to appreciate that it is not just about preserving the funds being channeled to support good causes (though there is that of course).  It is also about protecting the consumer, countless millions of players, and stopping the expansion of criminality in the world of lottery and gambling.  Preserving the funding for good causes, protecting the consumer, and preventing the expansion of criminality is a priority.  We not only need to rebuild the economy but also the societal infrastructure where sports, culture, education, social cohesion and R&D can thrive again. And the later we start, the more we will lose to illegal competitors and the harder it will be to reclaim all that has been lost. We can’t wait until we are out of crisis management mode to begin the dialogue with all of our stakeholders on how we can rebuild and come back stronger than ever.  The priorities and strategies will vary across jurisdictions, but they will hopefully all include ambitious goals to invest in and implement new technologies and distributional methods.  Government-lotteries need to again assume the important societal role of providing the necessary funds to rebuild the non-economic parts of our society. This whilst offering a wide variety of modern, integrity-rich, consumer-friendly, and entertaining games-of-chance.

Last weekend we witnessed an amazing solution to address the void in our cultural lives caused by the cancellation of a major cycling event in Belgium (https://www.bbc.com/sport/cycling/52175417: Virtual Tour of Flanders: Greg van Avermaet wins online ‘race’ [4]). Several professional cyclists raced in the one-day event (Tour of Flanders) on training bikes in their homes. More than 600,000 people watched it online. This new hybrid form of sport proves that we can find alternatives for cancelled sports events. To date, betting on E-sports and virtual betting have not been fully embraced by lottery operators mainly due to regulatory constraints. These constraints need to be relaxed to avoid a situation where the sport betting market slips from the hands of lottery operators and into the commercial sector.

The lottery market must be allowed to find new solutions, like E-sports and virtual betting and innovations in distribution, to address the demands and needs of consumers. Interactive scratch tickets may not have been fully embraced by the offline market in the past. But we need to recognize that the consumer gaming market will be quite changed when we emerge on the other side of the pandemic. Innovations that looked “promising” before are no longer ahead of their time.  The crisis will reshape the ability of everyone to adapt to the new and different.  I would respectfully submit that the ability to adapt will in fact intensify the desire for new and different.  For instance, during the WLA/EL marketing seminar, the Polish Totalizator Sportowy (TS’ Pay-out Direct) demonstrated a solution to pay out winnings directly to payment cards. These types of solutions, as well as player cards, tablets, smart phones, connections (plug-ins) to cashier systems and other cashless payment solutions may afford new opportunities for play and prize pay-outs without affecting RG and security perspectives.

In the past, regulators and legislators did not fully understand the need for a rapid response to market challenges. It may have been the fear of losing control of the situation or it may have been that they did not really accept that the illegal market is a very serious threat. Or maybe lottery operators need to find more effective ways to convince regulators of the need to respond quickly to market challenges. Whatever the answer is, today’s circumstances combined with the urgency of the situation must lead to change. Lottery operators and their trade associations need to forge a united front to encourage regulators and shapers of public policy to modernize regulations.  Our industry need leadership in the form of a stronger multi-disciplinary approach whereby technology suppliers, sales and marketing people, responsible gaming, security as well as legal experts gather around the table with an open mind to work on these solutions. From our side, as experts on matters of legal and regulatory importance, we are ready to take up these challenges.