Regulators Must 'Catch Up' To Looming Challenges From AI

March 28, 2023
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An online gambling veteran has warned regulators that they “need to catch up” with rapid developments in artificial intelligence (AI) in the gambling industry beyond those related to problem gambling mitigation.

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An online gambling veteran has warned regulators that they “need to catch up” with rapid developments in artificial intelligence (AI) in the gambling industry beyond those related to problem gambling mitigation.

Frank Schuengel, an Isle of Man-based online gambling licence specialist with the MannBenham law firm, said operator and player use of AI applications will greatly complicate regulatory environments, regardless of their legality.

Schuengel told the ASEAN Gaming Summit in Manila last Tuesday (March 21) that proliferating AI uses will also challenge regulator understanding of “fair” gaming activity.

AI has a lot of “good uses”, Schuengel said, pointing to anticipated advances in operator intervention ahead of potentially harmful customer behaviour.

But the wider shift in global compliance concerns from grey market awareness to the fairness of games themselves will require a sea change in regulatory work, he said.

“We need new frameworks for this,” Schuengel said. “We need new rules. We need new regulations.

“It has to be light-touch, because this is new tech, we don’t want to … strangle it when it’s still growing.

“But it still needs to be strict enough so that regulators and everyone can trust you.”

To provide this strictness, “the regulators need to catch up” and keep up-to-date with AI developments, he said.

Reported discussion of AI by government and industry officials has focused on the regulation-friendly aspects of the technology, such as promotion of responsible gambling and prediction of player aberrance, and their impacts on customer privacy.

But to Schuengel, AI is a tool that will soon allow operators to act strategically with individual customers, such as predicting what a player will bet on.

He said such a tool would allow the operator to adjust odds for the individual player to maximise immediate profit or strengthen customer loyalty, which raises the question for operators: which is fairer?

“How do you regulate that? How do you make sure that when we, as operators, have these tools we use them fairly [and] we don’t do things that we shouldn’t be doing?”

Schuengel hinted that it is only a matter of time before operators in regulated or unregulated spaces develop AI products that challenge the capacity of regulators to impose fairness and accountability.

“Who’s going to build the first full-AI sportsbook?” he asked.

A virtual, customised sportsbook could do away with old paraphernalia and present an individual betting window, such as ChatGPT, for customers to request and even create specific products, he said.

“Who is going to develop the first AI casino? Who is going to bet on the first AI slot machine [that is structured according to demand]? Who’s going to build that first? And how do you regulate for it?”

Schuengel also warned that players will wield AI against operators to maximise returns, and asked how provisions banning AI in website terms of use can be enforced.

“Most of the AI tools that we have out there … many of them are open source, they are open to use, they are affordable to use,” he said.

Player use of these tools to predict betting outcomes would be “for the first time, I would argue, a strategy that might actually work. Because the machine is analysing a machine.”

“2023, I think probably, is the year … when AI breaks out … and that brings a lot of developments, it brings a lot of interest.”

Any attempt by companies to develop predictive technology on the betting behaviour of individual players will be matched by players themselves, he said.

“You can bet your bottom dollar that there are players out there who will already have the tools to combat that.

“Is it cheating if he is simply using AI to better research his selection?”

On the flip side, Schuengel mused on the prospect of facial recognition technology combining with AI databases and other information to allow operators to tailor products for customers on the spot.

The considerable commercial potential resulting from this meshing of technologies also elevates risk on the regulatory spectrum.

Consequently, Schuengel called for the creation of an industry think tank to research and better understand the consequences of AI evolution for the gambling industry.

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