Speaking to industry executives in London, Philip Graf, chairman of the UK Gambling Commission, expressed a desire to monitor the burgeoning social gambling sphere and its potential for addiction and corruption.
Graf is concerned that social gambling may "pose the same sort of risks that have caused governments all over the world to regulate traditional gambling—plus some different ones, resulting from the changing patterns of leisure activities and 24/7 access online and to social media."
The Commission is expected to publish a review of social gambling, which offers poker, casino and other games for free, rewarding players with virtual money. The areas of concern: the risk of the development of "problem gambling characteristics," and the potential for consumers to be exploited "by rigged games or unscrupulous or incompetent operators."
While Graf hopes the industry can police itself so that "risks are being properly managed and mitigated," he won’t hesitate to intervene if self-regulation is too lax. "We have absolutely no desire to widen our regulatory scope, but we will continue to assess the nature and size of these risks," Graf commented.
The industry is undergoing a systemic shift as operators like Zygna begin to transition from play-money games to real-money gambling. The company now has an active player database of more than 60 million, with seven million daily active users on its poker platform alone. Zygna is set to launch gambling operations in the UK in partnership with bwin.party in the first quarter of 2013.
In August 2012, Facebook released Bingo Friendzy, a real-money bingo app, in the UK, while last month the company penned a deal with 888 Holdings to offer real-money gambling on the social network.
The consolidation between the real-money and social spheres is well underway. In a report on social gambling, Morgan Stanley forecasts revenues of $2.5 billion by 2015, up 47% from $1.7 billion today. As PokerUpdate reported last autumn, the blue paper predicts regulation to spur convergence and consolidation between the real-money and social gambling markets.
"The 170 million social gambling player base is over triple that of online gambling and is opening up gambling to a new pool of customers," said lead analyst Lewis Vaughn. The big question, though: will operators be able to convert social gamers to real-money gamblers?
The answer, most likely, is no. Barely 2% spend money on real-money games, according to research firm SuperData, which expects that most social gamblers will not transition to real-money play. However, even if only 10% make the switch, it could boost online gambling revenues by up to 30%, according to Morgan Stanley.
Click here to read the Morgan Stanley report.