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Online Gambling Games May Be Subdued to Strict Regulations

The Association of Young Financiers and Businessmen (AYFB) has reacted to the recent initiative proposed by Georgian Prime Minister Giorgi Kvirikashvili on expected introduction of gambling game regulations.

Gambling games remain problematic in terms of not only social or emotional aspects, but also economic aspects, AYFB analyst Zura Kukuladze noted. Strict regulations should be set on the online games, first of all. Along with internet access expansion, online games gain more and more popularity, the AYFB says.

Official reports on increased turnover in the gambling business prove the mentioned assertion: 366 million GEL in 2011, 996 million GEL in 2012, 1.213 billion GEL in 2013, 2.032 billion GEL in 2014 and 1.353 billion GEL in the January to September period of 2015.

According to the AYFB reports, more than 400 000 citizens of Georgia are involved in only online games every day.

“In general, gambling games are part of the entertainment and service field. Maximum promotion and expanded access to online games generates incorrect and distorted perception of gambling games. The economic segment, where there is no real economic demand, uses this product. This signifies our society perceives this product as an instrument of making money and a source of revenues, not as a mechanism of entertainment, in which citizens usually pay money. This signifies the service that is not in demand, is promoted. Similar approaches and perception generate both economic and social problems.

The fundamental problem consists in the fact that gamers are not thoroughly and valuably identified. Incomes of the gamers are not analyzed, the turnover of the gambling business is not valuably analyzed. There are no perfect mechanisms for calculating the turnovers.

Economic expediency and substantiation is not carried out for the field development. Social sharpness of the problem is not essentially considered”, Zurab Kukuladze said.

The AYFB has introduced its visions about what are the fiscal and economic effects from promotion of this business in the economy. The effect is zero, the AYFB analyst noted.

“Special taxation regime runs for the gambling business. This signifies this business pays only duties to the state budget (every 5 years), while no additional taxes are charged on organizing online gambling games. This signifies online games add no fiscal effect to the state economy and the state budget receives no penny from this business.

Since gambling games were maximally adapted into the online space, its accessibility has also grown. This signifies this sector attracts such financial resources that in ordinary cases would go to other sectors of the business. In its essence, gambling games belong to the entertainment business. Promotion and expansion of its attainability attracts the money that would never go to the entertainment business in terms of economic logic. Consequently, the economic circuit model is violated, because the money that was to go to the ordinary consumer market, is ejected from the economy and is deposited on accounts of business bodies of unclear origins”, the AYFB statement reads.

“Since young people, who are adapted to the internet space, are widely engaged in online games and this category spends a major time on online games, I believe that these people lose the interest in education, in improving skills and development, in general. Consequently, these people are ejected from the economic development cycle. They lose chances for development and growth and a social group oriented on unreal future is being shaped. The big scales of this problem, existence of similar multiple groups in the economy and in the country, in general, aggravates the heavy social situation in the country.

It is widely recognized fact that gambling games are widespread in low social strata. This signifies this category considers gambling games as an instrument for making money, not for entertainment. Therefore, offering losing games to this category of people aggravates their condition and worsens the existing heavy social background.

The special nature of online games shows that the underage category is widely involved in the gambling games. First of all, the special regard should be paid to the Advertising Legislation that does not ban free demonstration of promo video clips  and other commercials to the underage category, especially in the online space. Moreover, simplest registration conditions are applied in online games and underage gamers are not prevented from playing online gambling games”.

Online games comprise other additional risks, the AYFB analyst Zura Kukuladze said. I mean money laundering and criminal use of the existing accounts in the online casinos. It should be noted this gap has been multiply highlighted by several influential international organizations.

Recommendations by FATF (the Financial Action Task Force on Money Laundering) and MONEYVAL (the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism also prove this consideration. These recommendations call for improving personal registration procedures in the online games space.

“Today personal registration in online casinos is available without any exploration of personal information. This practice enables to register false data or information of other persons.

FATF and MONEYVAL recommendations serve the eradication of this problem, because similar practice comprises risks of money laundering, financial support of terrorism and other illegal activities. Today, online casino accounts represent channels for illegal money turnover, in practice”, Kukuladze noted. The AYFB is developing a gambling games regulatory concept and specific proposals will be introduced to the society in about 20 days. The full concept will be definitely transformed into a legislative initiative and bill.

“At this stage, our main principles refer to strict identification of gamers, limitation of money losses, creating a transparent system of a joint database of gamers and money turnover in the system”, Kukuladze noted.