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Are Social Casinos a Fad or the Future?

For those of us interested in the iGaming sphere, social casinos were among the most talked about items at G2E.

Despite the attention and chatter, it was abundantly clear that there is little consensus as to where this nascent industry is heading — the industry pretty much took off just a couple years ago– as nearly every aspect of social casinos appears a bit hazy, even to the experts.

During a panel discussion at G2E that included, among others, Monty Kerr, the Chief Product Officer and Co-Founder of PlayStudios; Rory Shanahan, the Head of Marketing & B2B Social Product at Williams Interactive; and Mario Maesano, the Senior Vice President of Marketing at Maryland Live! Casino; the panel was not just completely split as to how Social Casinos could be utilized and monetized, but over the very definition of social casinos themselves.

The one point the panel seemed to be in agreement on also happened to be the most self-serving one, which was whether social casinos were gambling; something they all emphatically disagreed with. Monty Kerr called it (social casinos) an oxymoron, even though the goal is to sell chips and/or convert players to real-money gamblers.

Whether it is gambling will be decided by people far smarter than myself, but there are several noticeable problems with the argument that social casinos are not a form of gambling.

If it’s not gambling, than why…

… Does Kerr’s company go so far as to offer redeemable rewards to partnered land-based casinos?

Despite these connections to land-based casinos, the monetization aspect, and the sometimes issuance of real world prizes beyond virtual chips and a higher level, the panel all but dismissed the possibility of regulation down the road. This unconcerned stance seems far too hopeful (in my view) considering the paradoxical dynamics of social casinos.

For one thing, social casino games have the look and feel of online and land-based casino games, and while players cannot technically win anything, they can (depending on the company supplying the game) win things by completing preset missions, and they can certainly lose things, namely money.

How much money can they lose? At the USOG Conference just a few weeks ago, it was reported by Chris Grove that “the top customer at PurePlay has spent over $250,000 on play chips. Chips with no redemption value.”

Kerr himself said, of the 3% of players that monetize, 80% are still active at least two years later. If he doesn’t think problem gambling organizations are going to start investigating this, he’s quite delusional, as those stats fall right in line with the historical percentage of problem gamblers.

Additionally, this seminar was held at G2E, the largest gambling conference in the world. If you really believe your product is not a form of gambling or connected to gambling, you should have declined the invite.

Even if it’s not gambling, regulations may be needed

There is also the not so minor problem of minors.

As Kerr explained, there is no age requirement set forth at social casinos; the age requirement comes from the provider, which for Facebook is 13 years old, and as if this didn’t already present some very poor optics, there are usually very little safeguards in place to insure the person is even 13.

Furthermore, there are no regulations governing the fairness of the games, so a site looking to convert players to real-money gamblers could payout their social slots players 105% or even 140% and make them think the game is beatable, or they are simply lucky.

A site that monetizes through the purchase of virtual chips could send a player on a cold streak just as they are about to complete some mission to level up, or collect a small real-world prize, likely increasing the chances they purchase more chips.

Even if it’s not gambling, it would seem that regulations may be needed to protect the consumer considering money is on the line and the association with land-based casinos.

A lot of similarities to online poker pre-UIGEA

Social Casinos currently occupy a legal space not unlike online poker found itself during the first half of the 2000’s, along with all the questions that go along with it.

Is it legal?

What laws and regulations if any does it fall under?

Will governments step in and regulate it?

Poker, a proven game of skill, still has an issue differentiating itself from games of pure chance. So I find the social casino creators’ and operators’ assertion that regulation won’t happen, and their games are not gambling, a bit expedient.

Basically, social casinos’ place in the gaming world is quite unclear. And despite what the G2E panel believes, it’s fairly obvious to me that they occupy a very confused space (and I’m someone with pretty extensive knowledge of the gaming and gambling world), and that social casinos look like a duck and quack like a duck.

If I see it this way, it’s quite likely that when social casinos land on the radar of politicians and regulators, they will also have some reservations about these games. When that will happen is unclear, but at some point these companies are going to have to clearly explain why the animal with feathers, wings, and a bill, that goes “quack quack” is not a duck.

They didn’t accomplish this during their hour-long talk at G2E.



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Steve Ruddock

Steve is veteran of the the poker industry, first as a player and now as a writer focusing mainly on the regulated U.S. markets and the politics of poker. Follow Steve on Twitter @SteveRuddock and at Google+.