ESSA: Online gambling creates 'whole new audience' for sport
The rapid growth of online gambling is creating "a whole new audience" for European sport, argues Khalid Ali, secretary-general of the European Sports Security Association (ESSA), in an interview with EurActiv, calling on policymakers to help create "a supportive climate" for betting companies.
Khalid Ali is secretary-general of the European Sports Security Association (ESSA), which aims to protect the integrity of sport from betting-related match fixing by providing timely, accurate advice to sports governing bodies about suspicious betting activity.
He was speaking to EurActiv's Andrew Williams.
You're the secretary-general of the European Sports Security Association, which seeks to protect the integrity of sport from betting-related match fixing by informing sports governing bodies of suspicious betting activity. How serious a problem is suspicious betting in Europe?
The first thing to say is that match fixing has existed for as long as sport has existed. Our association was created back in 2005 as a result of one of the biggest match-fixing scandals ever, which took place in Germany: the Hoyzer affair.
The Hoyzer affair concerned was about a referee called Robert Hoyzer, who was found to be fixing games for a mafia. What was interesting is that it was actually the state monopoly, Oddset, which lost millions of euros because they were unable to detect irregular betting patterns.
When the German authorities started to investigate the matter, they went to a number of online betting companies and asked them how much money they lost. Well, they said 'we didn't lose a penny' and the authorities were quite surprised, because they said 'well, how come Oddset lost x million euros and you didn't lose anything?'. They answered 'quite simply because online you have full traceability'.
This means that if you set up an account, you have to give credit card details and you have to give passport details. There are companies which they outsource to whose job it is to verify that you are the person you say you are.
So you have a lot of information about the individual who is betting with you. Of course, it's fundamental for betting companies to have a security procedure in place, because if match-fixing takes place, the first people who lose out financially are the betting operators, because people are trying to steal money from them.
Yes, there's a reputational consequence for the sports federations, but in the short term the financial hit is taken by the gaming companies. In the long term, if match-fixing is persistent in sport, what you'll find is that there's a financial consequence for sports federations and a reputational consequence for betting operators, because people will not want to bet on fixed outcomes.
This is why in 2005 a number of leading online sports betting operators got together and developed an early warning system to monitor irregular betting patterns. They created ESSA (the European Sports Security Association) specifically for this, and our mandate is to identify any irregular betting patterns, investigate whether they are suspicious or not, and if they are suspicious, to alert the sports federations so that they can then take the next steps in dealing with the situation.
More concretely then, what happens once ESSA has identified suspicious betting activity? How does the early warning system work?
If one of our members sees something irregular, for example if they find that a lot of bets are being placed on the weaker team, the team that shouldn't really win the match, if they find that people are betting on that team, and they're still betting on it even as the price is being reduced, if the bets are coming in within a short space of time or if they're all coming from a specific area – we can see all of this with geo-location, we can see whether they have new accounts, whether they are regular punters or have dormant accounts.
We can see all of this, but it doesn't necessarily mean that it's suspicious. It just means that it's irregular. Then we need to investigate why it's irregular.
Let's say it's football. Could it be that the weaker team has just gone and signed two or three new players? Could it be that the stronger team is fielding a really weak team? There are a lot of things that we have to investigate and eliminate before we can actually see that it is suspicious.
When we find that it's suspicious – when we have enough evidence to see that it's suspicious – we will then pass that information on to the relevant sports federations.
And then it's up to the sports federations themselves to decide to take it further.
Absolutely, yes. Our job is really just to alert the sports federations. We don't have any investigative powers. What we do is we use our members' resources – their track-and-trace technology – to identify anything irregular, and then pass that information on to the sports federations.
Can the sports federation then come back and ask companies to shut down operations on a particular match?
How does it work then?
What happens is that if something is identified as suspicious and we've passed that information on to the sports federations – what we and our members will do is freeze the accounts of those players who are found to possibly be involved in this. Then it's up to the sports federations to investigate.
There has to be a two-way dialogue thereafter. We have to know what's going on in their investigations, because if we pass them on information, we'd like them to do something with it.
Unfortunately one of the issues that we find is that some sports are probably not that well developed or they don't really come back to us with any feedback, which is important, because we need to have a dialogue there.
On the wider issue of the integrity of sport as a whole: if any illegal betting patterns are found to be tarnishing a sport then it's not good for the reputation of betting companies, it's not good for the reputation of the sport and it's not good for the reputations of the sportspeople themselves. Ultimately though, where does the responsibility for addressing the issue lie?
Well, there are a number of issues that we need to address and there are a number of distinctions that we need to make. First of all, there is betting-related match-fixing, which is why my association exists. Secondly, there is non-betting related match-fixing: match-fixing that has got nothing to do with the betting markets, but everything to do with sporting reasons, such as winning promotion and avoiding relegation.
Then another distinction needs to be made between regulated, licensed operators and unregulated markets, where criminal syndicates are operating who are trying to influence the outcome of games by approaching players.
What needs to be done then? Regulated, licensed operators have set up an early warning system to monitor what we can see coming on to our members' websites.
Together with the European Gaming and Betting Association (EGBA) and EU athletes, we've also come up with an educational programme: a code of conduct on sports betting specifically targeted at players so they know what their roles and responsibilities are when it comes to match-fixing, because ultimately the only people who can actually influence the outcome of a game are the players playing in a match, the officials involved in the match or people associated with the club.
Ultimately they are the only people who can actually influence the outcome of the game, so one of the initiatives that we have taken is obviously to try and get across this message that firstly there are people out their watching what you're doing when you're betting online, so don't do anything stupid because it could damage your career.
Second is to let players know that what they are getting involved with is going to be damaging to themselves, their clubs and their sport, so they need to be aware of these risks, avoid being lured by anyone and inform the right people about it. We've put a code of conduct together specifically to try and promote this with the players and get it done.
The European Commission is planning to address the challenges posed by illicit and unlawful online gambling in its upcoming Green Paper on online gambling in the internal market. What issues would you like to see addressed in the consultation? What would you like to see come out of it?
Top of my list is really ensuring a competitive landscape, because this is what will give European bookmakers the edge over their international rivals. It will also help to support Europe in this climate of innovation and competition.
What you find, and this is probably one of the most interesting things about online gambling, is that actually all the big online gambling companies – the licensed regulated operators, many of which are listed on the stock exchanges – are European.
In terms of innovation, most of it is coming from the US, where you've got the likes of Google, etc. If you look at Internet-enabled innovation, a lot of it is coming from the US and some of it from Asia. Where is Europe in this debate?
Actually, if you look at online gambling, we're leading the way. What does this mean? It means we're coming out with new standards and new technologies which are now being replicated in other areas. If you look at all the security measures that are being developed by online operators, if you look at the live streaming that's being developed by online operators, and all the back-end and B-B business that goes with that, which is predominantly European, then there's a whole industry there.
We need to be able to support and protect that, especially if we want this to fit into the EU's objectives for 2020. That's vitally important and it's exactly what the Green Paper should be doing – helping to give our operators a supportive climate.
But they should also harmonise the best parts of sports gambling and make capital from the good work that has already been done.
You talk about the security issues that online gambling firms face. Could you go into these in more detail? Are we talking about data protection issues or making sure that there are no underage people using the websites?
Absolutely, these are some of the things that I mentioned. There have to be a number of measures and procedures in place to deal with underage gambling and money laundering. Just recently, the industry came together with a number of standards which have been approved by CEN (European Committee for Standardisation).
So the private industry is really working hard to put in place standards that benefit consumers as well. This is really the kind of effort and drive that we're trying to make, because we are licensed and regulated in many different member states. I think we're a very creative and innovative industry, but what we need to do is create a landscape in which our companies can flourish. We can really drive the technological aspect of our industry forward too.
We're mainly talking about self-regulation.
With the CEN standards, yes.
Does the fact that the industry is promoting self-regulation mean that it is keen to avoid legislation from Brussels?
No, absolutely not. The reason we've had to do this is that there hasn't been any consistent regulation across Europe. And given that there's none we want to take the responsible route and develop something, which is why the Green Paper is important to us.
Many industries don't want regulation. But the online gambling industry actually does want regulation: it's just it has to be the right type of regulation. It has to look at the best aspects of regulation, not the worst aspects of regulation, and of course it shouldn't be regulation for regulation's sake.
What we really want is an internal market that works. The Internet is borderless, and likewise, we need to have a landscape within Europe where these companies can flourish as well. It's for the benefit of everyone.
Is there a difference between the needs of online betting companies and more traditional offline types of gambling? At present there is a patchwork of different national regulations in this field.
You have to be careful with the word 'offline'. Some of our members are also offline, like Ladbrokes and William Hill, but they're private operators. I think the correct term for what you're talking about is 'state monopolies', just to make things clear.
Yes, in some countries there are state monopolies, and they are probably less keen to have online operators move in, because they fear it might distort the market. Actually it won't, because in any sector where there has previously been a monopoly and then you start to liberalise the market, the incumbent will always be the dominant player. Always. And this is exactly what will happen if there is harmonisation here.
What it means is that you'll have a more competitive landscape. That's particularly important for the consumer, because it means that the incumbent will also have to change, it will have to innovate and it will have to be more creative. That can only be positive.
If the Green Paper does result in any EU-wide regulation, what kind of timetable would you expect for this?
All we know is that the Green Paper will come out in the middle of March. Then there will be a consultation period and it will probably go to the Parliament. I think, if you look from beginning to end, then given the experience of other sectors, it will take a number of years before we get anything there.
There's going to be a lot of debate, a lot of talk, a lot of discussion and a lot of consultation, but it will be a number of years before we get there.
In fact, the most important is not how long it takes, but that we get it right. That's the most important thing.
Smaller players from the sports world, like those representing grassroots sport and smaller sports like table tennis or badminton, for example, are worried that their voice is not being heard in Brussels. They often complain that debate on EU sports policy is overly dominated by large organisations like UEFA or the International Olympic Committee, which can afford a permanent presence in Brussels. Would you agree that this is an issue?
I was at the EU Sports Forum in Budapest last month, and I was there in 2008 as well, and I saw a big difference. Maybe that was the case in 2008. Now, looking at the agenda there, what you saw during the panel debates is that there were indeed a number of stakeholders who were getting their voices heard.
You had the International Canoe Federation speaking on the main panel. You had EU elite athletes speaking on the high-level panel. They were representing professional players' federations. So there is a dialogue there, of course.
But yes, of course there are some dominant players, the IOC, UEFA, FIFA, and they carry a lot of weight. But fortunately one of the positive things about the European Commission, and especially its sports unit, is that they have fostered – or they are trying to foster – a dialogue with all stakeholders.
From a sports betting point of view that's very important, because we want to be considered as a partner as well. Absolutely. We all have a voice, we all have an opinion and we all have something to say – as long as we're all getting the opportunity to say it. That's the most positive thing.
I have to say I was really pleased with the summit that took place in Budapest, because I think it was good in terms of the relationships that were being built and the spirit of cooperation. This has to continue.
Do you see an opportunity to team up with other stakeholders to get your issues across? Is there a need for the sports world to exercise power in numbers more effectively to try and influence the EU institutions, and is there a sense that we're hearing a plethora of smaller, more disparate voices at the moment?
I don't represent sports federations: I come from another perspective, so it's difficult, but let me refer once again back to the EU Sport Forum that took place in Budapest. What this did was really bring all the players together, so that they're all on a level playing field, can all hear one another's voices, and all have accessibility to the people there.
That's the first step forward. There's now a communication on sport, there are a number of initiatives which are there and hopefully these will also drive forward. But we're lucky in that there is transparency and there is a spirit of communication.
But you're right of course. We all have a voice and we should all be heard.
It seems like there will be very little money available for an EU sports policy in the coming years, meaning that the Union is going to have to focus on a few specific issues where it can really bring added value to the table in order to convince governments do maintain funding. The communication proposes EU action in a wide variety of areas, many of which have been hailed by stakeholders, but we're not going to see money for them all. What do you think should be the priority areas for EU sports funding?
It's difficult for me to answer that because I don't represent sports and we have a different perspective. We have a different agenda. This is really something specific for the sports.
From our point of view, this comes back to the Green Paper. If you do have an open market and you do have some sort of harmonisation, then the benefits for sport will be great, because there will be a lot of commercial agreements in place between operators and sports federations. We're already seeing it in those areas which do have open markets, especially with smaller sports: sports such as badminton, handball and volleyball, which may not get coverage or audiences through traditional means like television.
One thing I hadn't realised is that some sports actually have to pay for the right to be broadcast. Not the other way round, not that the broadcaster has to pay for the right to broadcast the sport, but actually that the sport has to pay for the right to be broadcast.
The great thing about the Internet and online gambling is that it has opened up a whole new audience, because you can have live streaming of games. That has been fantastic, and that's where the investment should be coming from: by having a competitive landscape like that.
That is what will help drive some of those things. How that money will be spent by the sports federations is up to them: they will decide what they want to do with it. I think that from our perspective this is the way to go forward.
Regarding the Kolkott ruling in the European Court of Justice regarding TV sports rights: is the potential revolution that it could herald something that online gambling firms might welcome?
The one thing that came from the Advocate-General's ruling is the emphasis on an internal market, and that is important for us. That part is really important, because of course, there is this internal market and it cannot be fragmented. That, for us, is the most important part of the ruling.
Are you pleased with what the European Commission has been doing on sports policy so far? Has the Commission been giving enough attention to the new policy?
I think now with the Lisbon Treaty and Article 165 now in place, sport has come a long way from where it once was, and it is now being recognised as having an important role to play in society. And that's exactly how it should be.
But we're right at the beginning of this process. We're right at the beginning. It was only adopted in 2010, so we're right at the beginning and I'm sure that as we go forward it will increasingly become more and more relevant.
Is there a role for the European Commission, and indeed sports federations themselves, in trying to boost the visibility of EU sports policy? Sometimes it seems like sports is not very high on the agenda of Commissioner Androulla Vassiliou and that the pressure for concrete action will have to come from outside.
I think that with Article 165 this has changed. We're seeing it with the communication that has come out, which provides another framework for moving forward. So there is momentum there, but we're right at the beginning of the process.
Do you have a final message?
ESSA's role is to protect as much as we can from the betting side of things the integrity of sport. For us it's important, as of course we have a symbiotic relationship with sports.
Where it is betting-related and where we can see problems, we will of course inform the sports federations. We've put into place education programmes and we've even consulted with sports federations about what we and they should be doing.
But it's a two-way process and a dialogue that has to work both ways, and differentiations have to be made as well. It's important to realise that there is betting-related match fixing and non-betting related match fixing. There are regulated licensed operators, and then there are the unregulated markets.
We need to be clear about those distinctions. That is fundamentally important, because otherwise the messages can be quite confused and people will start looking in the wrong direction as to where the problems are coming from.
Too many people, especially in the sports world, think that the problems they have with the integrity of sport come from online gambling. Actually, they do not.
The procedures and security measures that are in place mean that it is very difficult for big criminal syndicates to come and defraud operators: because fundamentally it's the operators that lose the money.
Where there are issues of course is when young [professional sports] players go online and want to place bets, people who are 19 and 20, just starting their careers and don't know [the implications of their actions], or people who are not being paid at all or not being paid well, who are being driven into this.
The focus has to be away from the people who are actually trying to help the sports, and instead it should be on the areas that are the symptoms of those problems: governance of sports and how they are structured, what education policies they have in place, what enforcement systems they have, how they are dealing with these issues, what prevention mechanisms do they have, etc.
These are the issues that have to be focused on.
Is there perhaps a communication issue within the online gambling world? Perhaps the companies sometimes feel like they are under assault from all sides.
I don't what to come across as defensive, but the problem – particularly in Europe – is that people are quite moralistic when it comes to gambling. They either detest it, or they don't care about it, or it is part of their culture, like in the UK.
In some places it is like that and we understand that. The message that we're trying to put across is that we're responsible stakeholders. We're licensed, and we're regulated, in those markets where they allow licensing and regulation.
We're trying to do good work via education programmes: the SEN standard is very important there.
These things show what we're maturing as an industry, especially online. Remember that online gambling is only 10 years old at most. It's a young industry, but it's very dynamic, very competitive and very creative.
For me, it's one of the biggest success stories of the Internet for Europe. I hope that other people see that as well. All the leading brands are European. It's the hidden success story of Europe, but people don't always want to see that.