John Pescatore

Years ago I did a few consulting projects for the gambling industry (now called the gaming industry, since gaming is not a sin) and some of the state agencies that regulate the casinos and attempt to maintain some trustability in the people and systems used by the gambling gaming industry in their state.  The states have two interlocking motivations for making sure gambling gaming is as free from cheating as possible:

1. The states are protecting consumers as they do in many other areas.
2. The states stand to lose a lot of tax revenue if the casinos can cheat, and the casinos are quite often run by folks who have a past record of not exactly playing by the rules.

On Sunday, the Washington Post and 60 Minutes showed the results of a joint investigation into cheating by online poker gambling gaming sites. Turns out an ex-employee had compromised a server and could see every player’s cards and was winning millions of dollars. Since the online poker gambling gaming sites don’t have either (1) or (2) as motivation,  they either did not detect this cheating or just didn’t care – they get paid on their cut of the volume, not on how fair or trustable the results are.

Now you might think motivation (3) “If consumers don’t trust my site, I will lose business” would come into play, but the history of compromises of retail sites shows that even in legal industries, incidents don’t drive long term consumer behavior – though not many incidents get the full Washington Post/60 Minutes treatment… It is really just another “risk of consumerization” kind of thing – if you leave it up to individuals to recognize fraudulent and malicious sites, we know that the majority of users will fall for scams and malware downloads.

I live in Maryland, where a referendum in November resulted in gambling gaming being legalized in Maryland for the first time in many years. That is supposed to mean a big inflow in tax revenue, as gamblers gamers gamble game in Maryland vs. driving to West Virginia or Delaware. But of course it will also mean setting up a state gambling gaming regulatory body and funding an industry around it to fight cheating.  Some fairly large percentage of that new revenue will be eaten up trying to make sure all those gambling gaming losses flow in the right direction. That is one of the big lessons of consumerization – gambling that users will deal with it responsibly invariably ends up in big losses.

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