Guest Blog

How Covid-19 will affect the Spanish gaming industry

How Covid-19 will affect the Spanish gaming industry

By: Mauro De Fabritiis

The world economy is currently under one of the biggest threats in recent history. The full impact of COVID-19 is still hard to estimate; and the gaming industry is, surely, among the affected sectors. Looking specifically at Spain, after several weeks of confinement, it appears that the COVID-19 figures are slowly improving and that we are entering the downward-sloping side of the curve. This means that the government is preparing a series of actions to “go back to normal” or, at least, to end the current lockdown, even if, for the moment, there is no concrete timetable.

Factors impacting the market

In this uncertain scenario, the short and medium-term evolution of the market is unclear and will depend on the following factors:

The unfolding of the ongoing COVID-19 outbreak: Countries like Spain could be “back to normal” somewhere between July-August but the problem now is what will be considered “normal” for the foreseeable future.

Future outbreaks and their severity: There is much uncertainty regarding potential future outbreaks, especially those that could occur during the next winter. We cannot discard a scenario where a new outbreak will force governments to institute confinement measures for even longer periods than we have already seen.

The measures instituted by governments: Considering the previous two points, there will be measures that will remain in place for longer periods. In fact, in some scenarios, the Spanish government might not allow sports and high-attendance events until late 2020. This will also have an effect, to varying degrees, on bars and, more especially, retail gaming venues.

Social changes: Apart from the direct impact of COVID-19 and the measures that governments will institute in response, current pandemic will also have an impact on day-to-day habits of the population. It is clear that some time will be needed before a large part of the population will again consider going to public venues, stadiums, concerts, and similar events.

The acceleration of regulatory changes and restrictions: Regulators across Europe are speeding up the introduction of restrictions on gambling advertising. In the case of Spain, the government has introduced a temporary ban – with some minor exceptions – on gambling advertising for the duration of the state of alarm.

It is too soon to provide a full estimate of the impact of the virus on the Spanish gambling market due to the uncertainty surrounding the future the development of the outbreak. It will certainly have a heavy impact on land-based operators due to the closing of all gambling venues. For online operators, future developments will be affected, apart from the COVID-19 outbreak itself, by the advertising restrictions that were introduced by the Spanish Government for the duration of the emergency.

We will see an inevitable decrease in sport betting due to the almost total absence of sports events, while casino and poker are expected to grow but not sufficient to compensate for the decrease in betting volume in 2020.

2020 and beyond

Apart from the short-term impact of the COVID-19 and the lockdown, we have identified some general trends for the rest of 2020 and, probably, the medium-term development of the gaming market in general:

A severe decrease in retail gaming: The tight mobility restrictions and the closure of all non-essential venues has paralyzed retail gaming operations that still need to face an important fixed-costs structure without revenues. This is likely to have a significant impact, especially on small/medium operators that may not be able to reopen their business. Big operators and companies that somehow managed to prepare for the crisis will survive, even though their annual revenues for 2020 will be severely impacted. Additionally, they will face an uncertain future, as new outbreaks may occur again.

The short-term uncertainty for betting: As betting is obviously dependent on the quantity and quality of sport events, the current lack of relevant events is having a huge impact on the betting industry. There is a much uncertainty regarding the resumption of canceled events and competitions in the short-term; and even if events will resume, it remains to be seen whether public attendance will be allowed. Across Europe, authorities are considering normalization scenarios with severe attendance restrictions for big events, which will have an unpredictable impact.

Accelerated growth of online gaming: As a matter of fact, online gaming is the fastest growing segment in the gaming industry and COVID-19 will most likely accelerate this trend. In the online segment, we predict the following developments:

  • The prevalence of mobile: Even under current circumstances, with people confined at home, mobile is still the preferred channel to access the online offer; and, in general, consume any kind of online content and entertainment. For certain operators, mobile already generates more than 80% of their total turnover. This trend is expected to further accelerate in the coming years.
  • The (possible) surge of esports betting: For several years now, esports has been one of the promises for the industry, but the reality is that betting figures are still very low compared to offline sports. In this sense, the current situation of lack of relevant sports events offers an opportunity to operators to promote esports events, a category that is growing by double digits every year and that currently appeals to one of the broadest and most attractive audiences.
  • The increase of virtual betting: Traditionally a niche product, virtual betting is now an established vertical that is very attractive to certain customers under current conditions. In recent weeks, there has been a significant interest from operators in launching or improving their virtual betting offer.
  • The (temporary) resurge of poker: With most people now staying at home, poker is among the products that benefited most. In fact, some poker operators are now seeing record figures in active players. It is still too soon to say whether this will only be a temporary resurgence for a product that was facing a global decrease or that this will herald a new rebirth for poker.
  • The continuing growth of casino: The casino vertical continues to grow, in particular due to the good performance of live gaming products. Speaking specifically of Spain, we expect that, in the short term, the regulator will start allowing the offering of live black jack, a product that certain customers are eager to enjoy.

Conclusions

Even in this uncertain landscape, we are optimistic about the prospects of the online gaming industry. We think it will ultimately benefit from the COVID-19 outbreak, even if there are important short-term threats that will have a permanent effect on the industry.

Given the predicted trends, the assumed return to “normal” requires a rethinking of the business models to face the emergency.

For land-based operators, redefining of the layout of the shops to be “COVID-19-proof” and identifying technological solutions to automate the sales processes and optimize management costs, will be the main drivers of future investments. In general, sustainable gaming, favored by a digitalization of the physical offer, will become the new paradigm for businesses that will allow the traditional channels to survive and succeed with an omnichannel (and safe) experience.

For retail operators that already have an effective online presence, a specific effort is required to redirect a relevant part of their resources to stimulate the growth of their online channel. In most cases this was already being done, but this effort now needs to be accelerated to strengthen the business in the short term, while not losing sight of the medium-long term vision.

For online operators, the need will arise to respond to regulatory restrictions by adapting strategies and business models. For some companies, it will be necessary to re-evaluate hypotheses of internationalization in order to obtain the necessary economy of scale for the recovery of investments.

The increase in regulatory costs and regulatory constraints on advertising are creating the basis for a concentration of the market in the hands of a few medium-large operators and the exit of medium-small ones with unclear positioning. A significant increase in M&A operations is expected during the next 2-3 years. Speaking specifically of Spain where there are more than 80 licensed operators (of which more than 30 received their license in 2019 as part of the last tender), we expect a very active 2020 and 2021 in terms of M&A activities.

There is room for the Spanish gaming industry to surf the wave of the ongoing COVID-19 emergency, but concrete support from the Spanish government is urgently needed or, at the very least, the government should refrain from implementing unnecessary measures that will harm the licensed industry and will only benefit illegal operators. This means that reasonable, as well as effective advertising rules should be implemented that allow customers to identify the legal offering, while at the same time stimulating operators to promote responsible gaming behaviors in a controlled and safe-guarded environment. This is the only way to allow the restart of the market, avoid a collapse, and, in the medium term, ensure that a sustainable gaming industry is built in Spain.

Mauro De Fabritiis
Founder of MDF Partners
mauro@mdfpartners.com

The six steps of acquiring a Spanish-licensed online gambling operator

By: Xavi Muñoz & Mònica Ferrer; Partner & Associate at ECIJA

Spanish online gambling regulation is built around a closed licensing system. Remote gambling licenses may only be acquired during so-called “licensing windows.” The last licensing window opened in 2017-2018; and it is unclear when (or whether) a new licensing window will be announced.

As the direct transfer of gambling licenses is prohibited under Spanish law (section 9 of Law 13/2011, of 27 May, on Gambling Regulation), the only way to receive a Spanish remote gaming license is to acquire the shares of a company already holding such a license through a M&A transaction.

We believe that – due to the large number of operators in the market – there will be some operators who will not be able to profitably operate their business, while other operators will still see opportunities to stand out in a crowded market; and thus wish to acquire a Spanish online gambling license.

At present, the only way to do so will be through an acquisition process.

The acquisition of a Spanish online gambling operator will entail all the normal steps of any corporate M&A process. Nonetheless, due to the specific regulations online gambling operators are subject to, several additional issues will have to be taken into account.

Overall, the process can be divided into the following steps:

STEP 1: Identifying a suitable target company

The target company will be among the ca. 80 firms holding a Spanish online gambling license. Only a few of those companies, however, would be interested in selling or accepting an investment. Consequently, research must be undertaken to draw up a suitable shortlist.

From among the feasible targets the buyer will have to select a company that holds the specific licenses (betting, casino, contests) he or she is interested in. Other considerations include price, technology, team, etc. Likewise, potential sellers will have to consider these elements in order to maximize their attractiveness to prospective buyers.

STEP 2: Valuation of the target company

Once the desired target company has been identified, the seller will have to execute a business valuation process which will have to take into consideration issues regarding the business operations, productive assets, historical performance, evolution of its Gross Gaming Revenue (GGR), number of active players accounts, etc.

In order to obtain some of this information, it might be necessary to directly contact the target company. In doing so, the parties shall sign a NDA and later, if talks progress, a Term Sheet, Letter of Intent, or Memorandum of Understanding.

STEP 3: Signing of a Term Sheet, Letter of Intent, or Memorandum of Understanding

Depending on the amount of information waiting to be confirmed and stipulations still to be agreed upon regarding the conditions for the transaction (e.g., total or partial acquisition; conditioned or fixed price; time schedule for the execution of the agreement; etc.), the parties shall sign and execute a Term Sheet, Letter of Intent, or Memorandum of Understanding broadly detailing the main aspects already agreed upon between the parties.

STEP 4: Due diligence process

The investigation and verification process to ensure that the transaction meets all desired goals and fulfills all agreed conditions, will have to take into account issues that are specific to the gambling sector. Such issues shall include, but not be limited to:

  • Date of issuance and renewal of the licenses, as well as any potential regulatory risk related to said licenses.
  • Software agreements with the suppliers of the gambling platform, the games, the CPD, and any other necessary element.
  • Corporate compliance level of the company. Online gambling operators are subject to a high level of corporate compliance obligations (i.e. specific AML obligations, need for DPO in personal data protection, etc.). Ensuring that all necessary obligations under Spanish law have been met, will thus be of utmost importance.
  • Gambling-specific regulatory compliance. The commission of two serious breaches within a period of two years entails what is considered a very serious breach under Spanish law. Such a “very serious” breach may lead to an economic sanction of between €1m and €50m, in addition to the potential loss of the gambling license. Therefore, the number and amount of any previous fines issued by the gambling regulator will have to be carefully checked.

STEP 5: Signing and closing of the Sale and Purchase Agreement (“SPA”)

The clauses of the SPA that will have to be most vigilantly negotiated are:

  • Representations and warranties of the seller. The findings of the due diligence process will have to be duly analyzed and included in the representations and warranties of the SPA.
  • Limitations of responsibility. Taking into account that the buyer will be assuming any contingency or liability that may arise in the future, the limitations of the liability for the R&W made by the seller will play a key issue in the negotiation of the SPA.
  • Price and payment structure. The operation may be structured in a wide variety of ways. The acquisition may be total (100% of the shares of the company) or partial (51% of the shares of the company). Additionally, the parties may be interested in deferring or conditioning the payment of the price to the obtainment of specific results (i.e. partially conditioning the payment of the agreed price to the maintaining or increasing of the company’s results or to the performance of key personnel). Likewise, the potential granting of stock options or vesting plans for key employees, the establishment of call options for the investor to buy the shares not acquired in the initial equity investment and any other mechanisms shall be duly established in the SPA.

STEP 6: Notification to the Directorate General for the Regulation of Gambling (“DGOJ”)

The transfer of shares will have to be notified to the Spanish gambling regulator (DGOJ) once executed, together with all the relevant information on the new owner of the gambling license (related parties; ultimate beneficial owner; etc.).

Finally, it shall be noticed that corporate restructuring operations such as mergers, splits or spin-offs of branches of activity are subject to the obtainment of prior authorization by the DGOJ, which will depend on the following factors:

  • that the company fulfills all necessary requirements to hold a gaming license under Spanish law (this is in accordance to article 13 of the Law 13/2011);
  • that the corporate restructuring operation is duly executed in accordance with applicable laws and regulations;
  • in which case, the DGOJ shall grant a “pre-approval” of such corporate operation, which will be valid for three months; and
  • that the new company acquiring the gaming license shall assume any responsibility for any issue regarding the gambling activities developed by the gaming operator.

At this point, the execution of the operation will become much more complicated as obtaining the regulator’s prior authorization is compulsory and its approval has to be received prior to the execution of the deal.

Spanish state of alert: effects on the gambling and betting industry

Spanish state of alert: effects on the gambling and betting industry

Xavi Muñoz Bellvehí, Gambling and Betting Partner at ECIJA.

Note on the consequences of the state of alert for the land-based and online gambling sectors

The gambling & betting industry is among the sectors affected by the state of alert ordered to deal with the ongoing Covid-19 outbreak.

The effect on land-based gambling companies has been absolute and direct, with all gambling and betting shops being forced to close. Clearly, the activities of these companies are completely paralyzed.

The situation is much different for online gambling. Although sports betting is almost completely paralyzed as well due to the suspension of nearly every sports competition, part of the product offering (i.e. casino games, slots, and bingo) can be maintained.

We highlight below the legal issues that gambling operators will have to deal with during this public health crisis:

1. Employment

Among the labor measures approved by the government, the most significant is the procedural simplification of the Record of Temporary Employment Regulation (ERTE), which allows employers to temporarily suspend employment contracts or reduce working hours. Employers can carry out two kinds of ERTE:

  • Force majeure ERTE: only in those cases in which the suspension of employment contracts or reduction of working hours is directly caused by the direct impact of Covid-19 on the profitability of the company.
  • Ordinary ERTE: for those cases in which the suspension of employment contracts or the reduction of working hours is not directly caused by Covid-19’s impact. It is worth mentioning that even in this case, the procedure has also been simplified.

Gambling and betting operators, who: (i) are land-based; or (ii) whose activities are exclusively or partly based on sports betting may carry out force majeure ERTEs, as their activities have been directly affected by Covid-19. In the first case, due to the closure of the betting shops and premises to the public, and in the second case, due to the cancellation of most sports events.

On the other hand, those online operators that do not offer sports bets should, in case they consider it appropriate and necessary to carry out an ERTE, comply with the requirements of the ordinary procedure, since the effect suffered in their activity is not directly linked to Covid-19.

2. Contracts

Considering the current situation, gambling operators, both land-based and online, should try to lower their fixed costs. This may include rental fees and licensing costs, as well as allocated budgets for marketing or other services that can no longer be (fully) carried out under the current circumstances.

Notwithstanding the provisions established in each contract and/or in the coverage of the applicable insurance policies, under Spanish law, this situation may be covered by the regulation of force majeure and the “rebus sic stantibus” clause, which consist of the following:

  • Regarding force majeure, provided by art. 1.105 of the Spanish Civil Code, “no one shall be liable for those events which could not have been foreseen, or which, if foreseen, were unavoidable”, which can eliminate or limit all liability of one or both parties, without prejudice to the survival or termination of the contract in accordance with its object, duration and what has been agreed between the parties.
  • Regarding the “rebus sic stantibus” clause (“things being as they are” – which refers to the “circumstances” under which an agreement was signed, which have now changed), it is a doctrine shaped by Spanish Courts. On the basis of “rebus sic stantibus”, termination, review or suspension of contracts may be allowed in the event of disproportionate performance between the parties, resulting from a sudden and unforeseeable change in the circumstances existing at the time the contract was signed; this basically applies to contracts of a successive nature (ongoing).

Hence, depending on the actual context, operators or other firms in the sector may use these two options to rebalance their contractual position with their suppliers (mainly regarding the previously agreed price for temporarily unavailable or irrelevant products and services).

3. Gambling & betting specific regulation

At this time, the Directorate General for the Regulation of Gambling (“DGOJ”) has not issued an opinion on the current Covid-19 crisis, nor has it stated whether there will be any changes with regard to the obligations of online gaming operators (for instance, a moratorium on compliance deadlines, some extra months for those operators who have recently obtained their licenses and must launch their operations within one year, speeding up the approval of new games that could be substitutes for sports bets, etc.). We are following up with the DGOJ to see if they are considering new measures.

4. Taxes

Land-based and online operators can benefit from the nationwide special measures adopted by the government, such as easing of deferrals of up to 30,000 euros for SMEs or the extension of certain deadlines within the framework of tax procedures.

5. Regional measures

In addition, some of Spain’s Autonomic Regions have taken measures to assist firms in the current emergency situation:

  • In Catalonia, the filing and payment of the first quarter’s gaming fee for type B slot machines has been suspended until the state of alert is lifted (Decree Law 7/2020 of 17 March).
  • In Andalusia a reduction in slot machines tax has been approved, and establishes a 50% discount on the fees accrued in Q2 2020 (Decree-Law 3/2020, of 16 March).
  • In the Basque Country and Aragon, the deadlines for gambling tax payment have been extended.

However, these measures have not been extended to the Balearic Islands, where the regional tax office has decided not to extend deadlines or apply moratoriums on gambling tax payments. In this regard, it will be necessary to follow up closely how other regions react to the situation and whether they adopt measures in relation to this sector.

In conclusion, we consider that the main uncertainties that the gambling market in Spain is currently facing are the following:

  • When will sports competitions be resumed?
  • When will it be possible to reopen the land-based premises?
  • Will the schedule for the approval of the Royal Decree for Gambling Advertising Regulation be maintained?
  • Will the timings for the approval of the autonomic regulations for land-based and online gambling (i.e. regulation of the Valencian Community whose approval was foreseen for April) be maintained?
  • Will possible moratoriums be granted for gambling taxes both at regional level (in those regions that have not yet made a decision) and at national level?

In addition to this general overview, we have specific notes available on the employment and tax implications of the current Covid-19 crisis. Please contact Xavi Muñoz Bellvehí for more information.

How to prepare for M&A activity in the Spanish online gaming market

How to prepare for M&A activity in the Spanish online gaming market

By: Xavi Muñoz & Mònica Ferrer; Partner & Associate at ECIJA

The third licensing window for the Spanish iGaming market closed over a year ago, leaving the regulated Spanish online gaming market divided among 80 operators. Since a new licensing window is not expected any time soon and gaming licenses are non-transferable, online gambling licenses can only be acquired (or sold) within the framework of an M&A transaction. Therefore, any company wishing to enter the Spanish gaming market can only obtain a Spanish iGaming license by acquiring an already licensed operator. Conversely, any operator wishing to sell all or part of his business should prepare for dealing with prospective new market entrants.

In order to acquire a Spanish gaming license, the interested buyer needs to gain full ownership of the company holding the gaming license. By doing so, the change of ownership of the license shall not be subject to prior authorization by the Spanish gambling regulator. In such a case, the new owner will only need to file a notification with the regulator once the transaction has been completed (although we would always recommend to confirm the transaction with the regulator beforehand).

As part of the acquisition, all relevant business aspects will need to be brought in line with the new ownership situation. This includes the revision of the contracts with software suppliers, the bank guarantee, the policies in place regarding all compliance and reporting matters, and – if applicable – any ongoing enforcement procedure.

Licenses can only be transferred to another party through an M&A transaction at the company level. Thus, if an operator wishes to sell one of its licenses but keep another one (or sell it to a second buyer), the seller should restructure and place each license with a separate company.

Both buyer and seller should look for the right fit. The buyer should consider the reason for the acquisition of a specific operator – whether it is its licenses, its platform, its goodwill and customer database, or a combination of everything. Also, the seller should look for a buyer that values all of his assets in order to get the best price, while the buyer should look for a seller which fits his specific needs in order to pay a just price. To maximize the value of its assets, the seller could also consider selling part of his assets to different buyers by way of multiple agreements – although this should be considered and prepared for well in advance in order to be fully prepared when the time comes.

Due to the high level of compliance requirements, potential buyers should consider issues such as the track record of the seller’s compliance, potential liabilities, and other matters that could impact the requirements for the license to remain valid.

Each acquisition or sale will be different; and we consider it essential to obtain appropriate legal advice in advance in order to prepare for and manage your and your counterpart’s expectations. Additionally, there may be an added level of complexity as the selling company could be a gaming operator located in Malta, Gibraltar or Ceuta, making it essential that all corporate, regulatory and tax implications are mapped properly and incorporated into the design of the deal.

Learn more

On February 27, ECIJA will organize a one-day seminar in Madrid on “Comprehensive compliance and conducting M&A in Spain’s online gaming sector.”

Xavi Muñoz, Partner at ECIJA, Mikel López de Torre, President of trade association Jdigital, and Willem van Oort, founder of Gaming in Spain, will present their visions on the expected consolidation in the Spanish online gaming market and its implications for regulatory obligations and compliance.

Guest blog | Santiago Asensi on regulatory pressure and blurred lines

Guest blog | Santiago Asensi on regulatory pressure and blurred lines

By: Santiago Asensi, Managing Partner at Asensi Abogados

The past 17th of September, fifteen regulators from Europe and the Washington State regulator signed a declaration in which they noted their increased concern with regard to “the risks being posed by the blurring of lines between gambling and other forms of digital entertainment such as video gaming. Concerns in this area have manifested themselves in controversies relating to skin betting, loot boxes, social casino gaming and the use of gambling themed content within video games available to children.”

First and foremost, it should be noted that this declaration springs from the regulators’ desire to protect minors from exposure to gambling-like products. In an increasing number of cases, certain elements of modern video or social games share many similarities with traditional gambling products. These video games and social games, however, are not classified as gambling. Thus, it could be argued that these gambling regulators are not entitled to be part of this particular debate.

Certainly, one of the main aspects of drawing up gambling regulation is to identify those particular elements (among many others) that fall under the legal definition of “gambling.” This is absolutely crucial when it comes to drawing up the red line between gambling products that require a license and games that do not need a license. This distinction, naturally, also helps define – and limit – the particular scope of gambling regulators’ powers. Those games that fall under the definition of gambling are subject to their oversight, while those games that do not qualify as gambling are beyond their competences.

However, the real cornerstone of any given gambling regulation is the collection of public policies, defined by the legislature, that underlie the gambling regulation as developed by the regulator. The protection of minors is a common goal of all the jurisdictions whose gambling regulators have signed the declaration.

Second, the regulators’ initiative needs to be placed within the context of the various political debates currently taking place in relation to matters like gambling advertising, product restrictions, age verification, etc. Without question, these debates are pressuring regulators into taking up defensive positions, where any new policy, rule or provision that could be applauded by the industry requires much stronger justifications than in the past. Political and media pressure sees to that.

Hopefully, the declaration will be effective in achieving positive results with regard to the protection of minors. Furthering this laudable goal through working closely with consumer protection authorities, as well as holding discussions with other relevant stakeholders seems the right first step. These discussions, however, should not only help to accomplish the primary goal of protecting minors, these may also assist in improving the public image of the industries involved.

Santiago Asensi
Managing Partner
Asensi Abogados
santiago@asensi.es

Guest Blog: Gaming sector making the most of Spain’s strong talent market

Guest Blog: Gaming sector making the most of Spain’s strong talent market

An update on the Spanish gaming talent market from Pentasia’s Giuliano Lafirenza

Talent is fundamental to any successful gaming business. Spain remains an attractive region for the sector not only for its market, but also the quality and size of its gaming talent pool.

Gaming operators and suppliers hiring in Spain generally find a good range of strong candidates, sourced either within the region or further afield as expat candidates look to bring their experience back home. Barcelona and Madrid remain the top locations for gaming operations, and talent is clustered around these areas.

Internationally, Spain is renowned as an excellent location for digital innovation and entrepreneurship, with inflow of both talent and investment in tech. The gaming sector here largely employs specialist leadership talent, marketing functions, operations and customer service, whilst locating more substantial teams – such as tech – elsewhere in Europe.

Challenges come in the form of the sector’s own expansion – through new licenses – and closely related industries – such as ecommerce, fintech, payments – which will undoubtedly increase competition for talent. The growth of Spain’s overall tech sector is clearly good for gaming, but employers will need to remain aware of new jobs which may appeal to valuable staff.

Tax changes should also be considered from a talent perspective. Operators looking to benefit from a Ceuta or Melilla location will need to base senior leadership talent in the North African cities; a potential opportunity for many candidates, but unlikely to appeal to all. Staff across the sector will also expect to see at least some benefit from the more favourable conditions.

 

Pentasia is the world’s leading iGaming Recruitment agency, with offices in Barcelona, London, Malta, Las Vegas, New York and Singapore. Pentasia.com 

How AI (Artificial Intelligence) can be used for Responsible Gaming – Guestblog by Dennis Hvam

How AI (Artificial Intelligence) can be used for Responsible Gaming – Guestblog by Dennis Hvam

Award-winning AI technology for early detection of problematic gambling behavior and individualized customer approach.

With increasing availability of online gambling, more people are at risk of developing problem gambling behavior. They often neglect their problem and are unsusceptible to preventive measures offered by operators, including general information, prevention programs, voluntary self-exclusion and limit-setting. Some operators use machine learning to predict later self-exclusion, but only a minority of at-risk or compulsory gamblers self-exclude which negatively affects such predictive algorithms.

At Mindway AI, we take an innovative approach to solve these limitations.

With onset in neuroscience and clinical psychology, we use artificial intelligence which relies on human expert evaluations of thousands of gambling trajectories. A board of clinicians and pathological gambling researchers have meticulously analyzed a large volume of online gambling trajectories, considering the compound gambling behavior over hundreds of thousands of single bets. Applying their expertise, they have scrutinized the underlying gambling behaviors for any signs of developing risky behavior. The result is a completely objective assessment of individual customer’s gambling behavior.

We have developed a fast AI approach to ’digitize’ this evaluation process and we have demonstrated that we are able to evaluate online behavior just like the experts, with accuracy close to 90%.

Moreover, we identify different types of problematic behavior which allows us to generate targeted and individualized conversation guides that can be used in reaching out to customers either online or by an operator’s help-line staff.

The system has already been in use with a major operator for almost two years and has been very well received by customers. We believe this is due to a combination of early detection, where dialogue is efficient, and the highly individualized dialogue due to the tailored speaking guide generated by the AI and expert based system.

Our approach sets a new standard for responsible gambling operation as well as opportunities for operators to keep customers in a long and healthy relationship.