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In betting and gambling, the house always wins, but online, it wins big

This article is being posted here courtesy of The Wire, where it was originally published on June 17. 

By Saksham Singh

The St Petersburg paradox, described by decision-theorist Nicholas Bernoulli, suggests that individuals often overweight small probabilities of winning if the expected payout is big. For example, gamblers will often take a 1% chance of winning a million dollars. This is not just relevant for why people play similar lotteries; it could also explain enthusiastic responses to recent policy interventions like the vaccine lottery in the US.

With nearly 560 million internet users in India, young people are driving its gaming market, estimated to be worth $1 billion. Estimates from The Week suggest that nearly 40% of all internet users participate in online gambling.

Betting and gambling offer a ‘thrill’ appeal – high reward at high risk. During the pandemic alone, registrations for poker websites, betting apps and fantasy sports apps hit new highs. Fantasy sports platforms saw their revenue grow from Rs 920 crore in 2019 to Rs 2,400 crore in 2020. Investors and mascots for these services ranged from sports celebrities to youth icons. But despite the lucre, gambling can become a disorder when users become addicted to the apps’ contents. There have already been several reports of young people having resorted to criminal measures and/or self-harm to repay debts accumulated online.

Gambling decisions

A popular example of human irrationality is the gambler’s fallacy. Players believe that if a die hasn’t thrown up a 6 in the last few rolls, then its probability increases on the next roll (the probability is actually always ⅙ with a fair die). As a result, people keep placing their bets, expecting an imminent win. This is somewhat akin to people betting on cricket matches, expecting a batsman to score a century right after a series of low scores.

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Behavioural science tries to understand how people make decisions. An October 2018 report by behavioural scientists in the UK highlighted how betting websites’ designs enable players to place more bets. To begin with, spending money online rarely feels like spending it offline, in the ‘brick and mortar’ world, and gambling platforms can take advantage of this difference to clear a path to addiction. Therefore regulating these apps, platforms, etc. is important in terms of public health.

A common strategy that brands often use is to ‘nudge’ people to make certain choices. One example is a priming norm: “Most people near you purchased this product.” On gambling platforms, the principal product that people purchase is bets – and they are often primed by stories of winners (e.g. “Shankar won Rs 4.5 lakh playing Ludo”).

But while nudges are meant to facilitate decision-making in the decision-makers’ interest, the more sinister sludges are designed to impede decision-making, even if doing so could harm the decision-maker. They manifest in the form of user interfaces with prompts, messages and flows picked to trick consumers into certain actions, ultimately trading consumer welfare for profit.

For example, online gambling platforms make it very easy for a new user to sign-up using just a phone number. To the best of our knowledge, there are little to no in-app disclosures or verification messages that inform users about the risk of gambling or losing their money; this is true of fantasy sports platforms as well. The process is completely frictionless.

Second, these platforms use designs that often mimic a casino’s bright lights and colours. The user experience is loaded with attractive offers and graphics, and highlights ‘early bird discounts’ and even big prize pots. Such interfaces are engineered to ‘trick’ the brain in a manner similar to the rush we get when our posts or tweets receive ‘likes’ on the social media.

Third, several platforms make gambling a social affair, encouraging users to play with their friends or other people. Some platforms send notifications like “Play with friends, play to win”. They also highlight the number of users online at a given moment, together with options to video-call and chat. Such sludges act to motivate a user while instilling a ‘fear of missing out’ (a.k.a. FOMO).

Fourth, platforms make it a point to send timely reminders through text and email for users to continue “placing bets”, “winning big”, etc. For example, platforms regularly highlight the time remaining for a betting offer, and create a sense of urgency: “Only two seats left for the chance to win 2 lakh!” When an account becomes inactive, companies ‘poke’ the user to come back.

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Some prompts also include options to mask betting payments in bank statements and ensure the returns are discreet. To young people vulnerable to gambling addiction, such dark patterns can be like attaching roller blades on a slippery slope.

Need for regulations

In India, gambling laws are labyrinthine, even if they have recently assumed centrestage following the rapid increase in popularity of online games. The mix of Central and state regulations is so complicated that online poker sites often refer to them as such. Several states and agencies have also issued white papers and rules, but progress has been slow and chaotic.

With a large number of players, platforms have a strong incentive to increase profits and make the user experience as frictionless as possible. In this situation, the only way to ensure consumers will be protected is a strong regulatory mechanism with legal clarity.

A critical first step is to understand how online gambling platforms work, based on user surveys. 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 and behaviour profiles. This could begin by registering online gambling and betting platforms, and then regularly auditing them.

Such an approach will also need to couple consumer protection and concerns around public health vis-à-vis gambling addiction. For starters, targeted consumer awareness and education campaigns can focus on this issue.

From a behavioural perspective, platform owners can use commitment devices that dissuade users from risky actions. For example, they could use circuit-breakers: like stock markets take measures to stall or prevent panic-selling, a platform can lock a user’s account for a few minutes following heavy losses. Or they could impose ‘speed bumps’ like betting limits.

Behavioural insights can guide consumer protection measures – but we still need strong regulation, either through a commission or through legal instruments. And with rising economic vulnerability, and platform users coming from both rural and urban areas, we don’t have enough data to understand the nature of online betting nor its links to addiction and impact on other aspects of mental health.

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Saksham Singh is a researcher with the Centre for Social and Behaviour Change, Ashoka University. Anirudh Tagat is a research author at the department of economics, Monk Prayogshala, Mumbai.

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