The problem with Lotto’s move into online scratch cards

Online gaming is broadly illegal to operate in NZ, so how come government controlled Lotto NZ is running virtual betting with games like Texas Hold’Em and Lucky Falls, asks Branko Marcetic

Ever finished dusting off the grimy shavings of another unsuccessful Instant Kiwi scratchie and thought, “I wish I could buy another of these while sitting on the bus or the toilet?” Good news: the New Zealand Lotteries Commission has made sure you can finally live out this very specific fantasy.

Since January this year, New Zealanders have been able to play an assortment of online games marketed as the digital, animated equivalent of scratchie tickets. Ranging from 50 cents to $5 per play, the games are mostly dull fare that pad out the time between deciding to play and finding out you’ve (most likely) lost. The games can be played on a computer, or on a mobile phone through an app.

Several have helpful “automatic play” buttons that cut out the middle-man and have the game simply reveal the results for you. Some, like “Lucky Falls”, provide the illusion of human agency by having you choose where on the screen to drop a series coins, though it quickly becomes clear that no earthly form of physics governs their path on the way down.

Although the games mimic – and are marketed as similar to – scratchies, they also have the elements of pokie machines: bright colors, sounds and the the seeming involvement of the player’s own skill. It’s this unholy union that makes the arrival of the games troubling for the Problem Gambling Foundation.

“This is a particularly harmful type of gambling because they have an instant result,” says Andree Froude, communications director for the Foundation. “It has lots of features that pokie machines do but in an online environment. It’s available on an app, and in your pocket.”

While you can’t drag a pokie machine everywhere you go, Lotto’s Instant Play is available to gamblers anywhere, and almost any time – between 6:30 am and 10:10 pm to be specific. And while there’s a spending limit of $50 a week on the games, Froude says that’s not as small as it may seem to some.

“That’s a lot of money for people when that’s coming out of a weekly budget.”

Researchers have raised alarms about the effects of online gambling. A 2015 overview of existing research into online gambling in general found that “while internet gambling does not cause gambling problems in, and of, itself,” it “is more common among highly involved gamblers”, and that for some internet gamblers, it “appears to significantly contribute to gambling problems”. Research also showed that online gamblers tended to blow through more cash, because they didn’t feel like they were spending “real” money.

“The accessibility and convenience of online gambling is a risk factor for those vulnerable to experiencing gambling-related problems,” says Dr Sally Gainsbury from the Gambling Treatment Clinic at the University of Sydney’s Brain and Mind Centre, who wrote the overview.

Instant Play is a product of two companies: IWG (Instant Win Gaming) and IGT (International Game Technology), the latter of which once upon a time held 70% of the market share in the gaming machine industry and remains a market leader today. Last March, IGT signed an agreement with the Lotteries Commission to “provide interactive Instant Win games hosted by its award-winning RGS [Remote Game Server] system.”

IGT has been in the spotlight before over its innovations in gambling. Back in 2008, the Sunday Territorian (a newspaper based in Australia’s Northern Territory) reported that the company had debuted a new set of pokie machines that incorporated “Xbox-style graphics, multi-player terminals and interactive technology to target the ‘easily bored’ Generation Y of late teens and 20s”. According to the paper, anti-gambling campaigners had described the changes as “predatory”.

More recently, the company’s senior vice president Declan Harkin has said that “we must facilitate impulse purchases for retailers and work to create frictionless transactions for players.” Which certainly seems to fit the description of the kind of instant win games offered by Instant Play – and doesn’t seem the kind of thing you’d wish on, say, a friend with a gambling problem.

Another concern is that the games Lotto has unveiled in New Zealand could be especially harmful because, what with their imitation of video games, candy-colored visuals and occasional use of cartoon mascots, they’re particularly appealing to kids. My Lotto requires anyone using it to verify they’re over 18. But how hard is it for a kid to just chuck in one of their parents’ licences and credit cards and open an account – or just use mum or dad’s password?

“Young people can see these and may find them appealing and something to aspire to, either through accessing a family member’s account or payment details, or when they become adults,” says Dr Gainsbury.

Lotto NZ also allows anyone to try any of the Instant Play games without any log-in or age verification, which experts say carries risk. Dr Gainsbury points to her research, which found that 28% of young people who tried free-play versions of such games say it encouraged them to try or do more real gambling.

“This can act as the gateway to try the real pay to play games, particularly if they ‘win’ on the free to play games,” says Andree Froude. (For the record, while I had an abysmal success rate on the Instant Play games I sampled, I did win once, so it does happen.)

“Lotto NZ has not received any feedback about this policy and we do not have any plans to change the process at this stage,” said the Lotteries Commission when approached for comment by The Spinoff.

Last year, UK regulators launched a crackdown on child gambling by ordering gambling sites to stop marketing toward children. The Times carried out an investigation that revealed more than 30 examples of UK gambling companies marketing their products toward children. This wasn’t long after a report revealed 450,000 kids were gambling in England and Wales, with 6% using their parents’ accounts.

It might be for all these reasons that this type of gambling is prohibited next door in Australia. In fact, at first glance, it seems to be prohibited here, too.

According to the Department of Internal Affairs’ own website, the Gambling Act 2003 “prohibits remote interactive gambling,” defined as “gambling by a person at a distance by interaction through a communication device,” such as “computers, telephones, radios and similar devices.” The DIA’s FAQ on the law actually gives a pretty good reason for why gambling using something like Instant Play can be so much more pernicious than a regular scratchie:

“A significant difference between online ‘instant win’ and selling ‘scratch’n’win’ tickets on the street is that the internet or cellphones can be used for continuous forms of gambling that offer rapid opportunities for investment.”

Yet that law also gives what is less a loophole than a legal highway tunnel for the introduction of this exact kind of gambling: the Lotteries Commission, a publicly-owned entity, is permitted to run “approved” types of such interactive gambling.

When asked how this approval was granted, Lotto NZ replied that it went through a “thorough consultation” with the Department of Internal Affairs and the Ministry of Health to minimise any potential harm as part of the approval process.

“Lotto NZ operates within a regulated environment and has robust measures in place to minimise the risk of any harm associated with our products – including Instant Play,” a spokesperson for Lotto NZ said in a follow-up statement. “Before being introduced, all Instant Play games are assessed against a range of measures both in terms of game design and promotion to ensure they support our commitment to responsible play.”

This may well satisfy some New Zealanders. But as the concerns of experts like Andree Froude and Dr Sally Gainsbury suggest, many will remain unconvinced that New Zealand should be introducing such games – particularly when the entity doing the introducing is government owned.

What’s striking about the introduction of the Instant Play games is how little public debate there has been. Lotto NZ originally floated the idea back in 2008, when it started selling Lotto tickets online, and reportedly received some pushback toward both proposals from the government at the time. In 2015, it released a statement of intent, which mentioned its plan to look into online instant games. The issue has periodically popped up since then, each time eliciting objections from the Problem Gambling Foundation. But for the most part, the games were introduced with little public attention.

According to Froude, when Lotto NZ told them of their plans in the middle of last year, the Foundation advised them their consumer protections weren’t going to be adequate.

“More importantly we never actually saw how they would work,” she says. “We were shocked when we saw what they were like, that they worked in a similar way to pokie machines, and that they would appeal to young people.”

A Spinoff investigation last month into a foreign online casino targeting New Zealanders spurred the minister for Internal Affairs to promise a crackdown on such activity. While Instant Play is firmly within the bounds of the law, it may be time also to ask whether it’s something Kiwis broadly think to be a good idea.


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