Online gambling is a money-driven industry; cash is constantly on the move, and the industry relies on assurances of payouts, fairness and legitimacy. Over the last twenty years, the gap between the online gambling and financial sectors has grown smaller, driven by technological advancement. Simultaneously, as technology and online financial systems have improved, interest in online gambling, which provides more convenience, accessibility and a great variety of games, has also increased. But in which ways do the online gambling and finance industries intersect?
Payment service provision
The first and most obvious area where online gambling intersects with the financial industry is through financial service provision to gambling operators and consumers. The physical gambling industry used to rely on cash, then credit and debit, and by 1997, the first e-wallet was created (three years after the launch of online casinos).
Options like Skrill in the UK and Play+ in the USA are now segmenting the market to specifically target online gamblers, facilitating same-day cashouts at gambling sites, and in the case of Skrill, creating a VIP program and developing a betting section and sports corner (listing “winning tips, advanced matches, team and player stats, interactive live match tracking”).
There may be further intersection if financial services offer credit or loans, although this is a practice the UK has tried to stamp out, with the Gambling Commission’s banning of credit cards in gambling from 2020.
Crypto and blockchain
As the pace of financial services innovation has increased, newer currencies and ways to process transactions have been created. We’re talking about crypto. Despite regulatory hurdles that have made it a majority offshore gambling option, cryptocurrency has created greater convergence between the financial and gambling industries as it spurred a new gaming and gambling sector.
One of the primary pull factors for gamblers using crypto is the lack of centralised regulation and increased privacy over transactions. This has expanded gamblers’ autonomy over finance. However, due to the inert market vulnerability of crypto, many have also cited its use in gambling as irresponsible due to the large potential losses users have incurred. For gamblers who embrace crypto, the greater potential for losses or wins is considered a “true gamble”. This idea of enhanced riskier gambling blends technological advancement in finance and gaming.
While many have pushed for the formal acceptance of crypto in gambling, most jurisdictions have not recognised this new form of finance and investment as currency, preferring to classify it as an asset. The Gambling Commission has considered licensing applications from crypto gambling sites but is yet to approve any due to the lack of source of funds information, which must be provided to prove that a gambling business operates crime-free.
Investment in gambling markets
The casino industry is often considered recession-proof. The global gambling market accrued just shy of $450bn wagers in 2022; it’s expected to reach $750bn by 20230, with a compound annual growth rate of 11.3%. Moreover, 26% of the world’s population are thought to be gamblers. In short, the gambling market is an attractive prospect for investment and hedge funds, especially in emerging markets like the USA.
While the rules for operators in differing gambling jurisdictions make launching an online casino or sportsbook challenging, investing in such a business doesn’t provide the same obstacles, adding to the attraction. Financial markets constantly evolve, and so does the world of online gambling. Many new casino sites are cropping up, providing fresh opportunities for players seeking new games and experiences and many chances for investors to take a stake.
Betting on financial markets
So, investors hedge their bets, adding capital to the gambling market. In turn, gamblers may also bet on financial markets via spread betting. Investing in gambling markets and betting on financial markets blur the boundaries between these two industries.
Regulatory and legal controls
Both finance and gambling are highly regulated markets, especially regarding Anti Money Laundering laws, Source of Funds and Know Your Customer checks. Both industries are subject to varying checks by government bodies and third-party testing to ensure compliance fairness and remain crime-free.
Additionally, the two sectors require licensing and also face similar risks, including operational risk, regulatory compliance, money laundering, liquidity, solvency risk, IT and cyber risks, fraud and reputational risk (in both industries, AI and machine learning have become vital for tackling and monitoring for threats).
However, gambling has increased focus on safety and responsibility, which is not present in the same manner in the financial sector. A persistent issue specific to the gambling industry is problem gambling. Gambling operators are usually legally or duty bound to protect consumers by monitoring, engaging and flagging certain behaviours (like overspending in short periods), offering responsible gambling tools, like budget or time limits and self-exclusion and educating players about responsible gambling.
A responsible approach to financial decision-making and gambling is essential for safety – setting limits, managing risk, careful decision-making, and avoiding impulsive behaviour. While risk management tools exist in the finance sector, they are distinctly different, based on hedging against risk rather than impulse control.
Reliance on tech
There is also a clear intersection in how the two industries use tech. Both gambling platforms and financial investing tools have been shaped and depend on technology, like AI, data analytics, machine learning, and algorithms. Online gambling companies use tech for many areas – gambling platforms, games development, payment solutions, safer gambling tools, monitoring of player behaviour, games testing, and compliance. The finance industry uses it in product development, security and privacy, fraud prevention and analytics, to name but a few areas.
Trading stocks and online gambling are often compared, usually with the conclusion that both are gambling and one and the same, mainly because they involve taking financial risks in the hope of a return. There’s no denying some psychological and behavioural factors are at play that are visible in gambling and financial trading; these include a focus on minimising risks and maximising returns (risk and return) and the propensity to manage risky decision-making.
However, there remain distinct differences, especially in the role of cognitive bias. Research has found that cognitive biases for gamblers lead to a “dysfunctional thinking pattern” where superstitions, the illusion of control (bettors bet high when they throw the dice themselves), and mistaken beliefs about gambling lead to errors in decision-making. The way information is presented can also influence decision-making.
The difference between cognitive bias in gambling and the financial industry is that the financial sector places more weight on analytical decision-making (researching the market, checking stock performance charts and trading patterns).
Stepping away from psychology, further differences exist between finance and gambling. Trading is usually a longer-term activity and typically yields a positive result – it has better long-term odds as stocks generally appreciate over time. While gambling is a shorter activity, with potentially less chance of a positive outcome.
There are many ways in which the gambling and financial industries converge and intersect, but many key differences remain. Intersections exist through payment service provision, reliance on technologies like AI, data analytics, machine learning, and algorithms, which have shaped financial trading tools and gaming platforms, investment in gambling markets, betting on financial markets, regulatory similarities and some affinity in the behavioural approaches to risk and reward.
Despite the apparent similarities, both sectors have different objectives, regulations, rules, time frames and typical investment amounts. Primarily, the finance industry focuses on long-term capital appreciation and management. On the other hand, gambling is a form of entertainment, typically shorter term and with more potential for losses.
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