Analysis | Gambling’s Global Coming Out Party in Qatar

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The World Cup in Qatar got off to an unfortunate start this week: a defeat for the host country, a ban on beer drinking and the threat of a yellow card for players wearing anti-discrimination bracelets.

And for a gaming industry trying to capitalize on the potential tentpole football event worth over $160 billion, the own-goal of a share price slump at sports betting firm DraftKings Inc. after customers reported their accounts were compromised and cash withdrawn became.

DraftKings says it has identified less than $300,000 in customer funds that were affected and intends to recover customers. But it’s the tip of an iceberg of potentially dire unintended consequences that the post-pandemic betting boom will bring to society, including addiction, corruption and money laundering risks, as cash-strapped governments and sports leagues push to liberalize previously illegal or frowned upon businesses . on the business to increase their bottom line.

Global forces are at work here: Technology has increased the desirability and accessibility of sporting events via the smartphone in our pocket – and also unlocked the ability of gaming companies to attract gamblers 24/7. Covid-19 has accelerated legalization efforts from the US to Brazil to Thailand as governments seek new tax revenue and the industry spends on new growth drivers post-lockdown.

As such, DraftKings has dubbed the World Cup “the big one”: the convergence of a major sporting event and a newly legalized US market that UBS says could be worth $19 billion by 2025. Americans are by no means crazy about football; Bloomberg Intelligence’s Brian Egger estimates US stakes on the World Cup at $1.7 billion, a fraction of that of the Super Bowl. But it’s a test case for a marketing blitz that saw DraftKings alone spend nearly $1 billion last year to acquire new customers.

Defenders of the betting boom argue that this is a virtuous pattern of shady offshore deals being pulled ashore. But we don’t know if the celebrity-bombing of gambling ads will create its own crisis of problem gambling – with hotlines already awash with calls – or esports corruption as suspicions of match-fixing mount. Or whether regulators are up to the task of keeping up with the churn of digital dollars and the associated hacking attacks, privacy breaches, and criminal activities.

Worryingly, policymakers seem more focused on the money they hope to rake in from an industry whose margins have historically been high, in line with other such old-school “vice” companies. New York state expects $615 million in tax revenue from online sports betting next year. “Whatever New York gets is gravy because we’ve never had it before,” said one senator.

This is a dangerous game and comes close to assuming that what is good for gambling is also good for the state – leading to conflicts of interest. The New York Times’ reporting suggests that current regulation is arbitrary and lax, with some gaming companies flouting state restrictions on the use of credit cards. The UK experience is that the social cost of gambling is around £1.3 billion ($1.5 billion) annually. The failure of cannabis legalization, which has neither eradicated the black market nor promised all of its tax revenues, could be repeated.

Countries more experienced with problem gambling are trying to put bits of the proverbial genie back in the bottle, and the UK – for all its past mistakes – deserves credit for cracking down on advertising and sponsorships affecting theirs Getting hooked on youngsters early, even when social media is a whole other swamp that needs draining. Streaming platform Amazon.com Inc. Twitch recently imposed a ban on unlicensed gambling live streams, with one streamer claiming he received $360 million from Casino Stake, which sponsors Everton football team.

Ironically, DraftKings’ price decline offers a small bright spot here. Capital market accusations regarding the company’s aggressive spending campaigns and apparent compromise of customer accounts will likely lead to more marketing reluctance.

But the post-Covid world has yet to fully understand or respond to the risks posed by gambling and “gambling.” This World Cup is already a symbol of corruption in sport, with ongoing investigations into how Qatar won the tournament. The head-scratching hypocrisy of a beer-free stadium littered with signs promoting cryptocurrency trading is one of many warning signs that the sports business is down a very difficult path. Without more regulation and enforcement of rules and less promotion and normalization of gambling, more own goals will be scored.

More from the Bloomberg Opinion:

• The sports gambling gold rush is absolutely off the charts: Timothy L. O’Brien

• The World Cup in Qatar will be great football but an ugly game: Martin Ivens

• The crypto Wild West claims another victim: Lionel Laurent

–Assisted by Elaine He and Samuel Dodge.

This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering digital currencies, the European Union and France. He was previously a reporter for Reuters and Forbes.

For more stories like this, visit bloomberg.com/opinion

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