Fact or fiction: Gambling businesses thrive in a recession

  (photo credit: INGIMAGE)
(photo credit: INGIMAGE)

Many market commentators are suggesting that it's not a question of 'if' there's a global recession but 'when'.

It's a big worry for many people in Israel, America and across the world.

A broad consensus from the heavyweights in the economic sector suggest that it will happen sometime in 2023. Chief economists at the Global Economic Forum, reported in September 2022 that seven out of ten respondents said that a global recession was somewhat likely in 2023.

At the same time, economists at Florida-based global investment research company, The Ned Davies Research Group reported: "The weight of the evidence still suggests that we're in a moderate global slowdown. But we've recently seen more indicators flash negative signals, including our Global Recession Probability Model and leading global indicators. This indicates that the risk of severe global recession is rising for some time in 2023, which would create more downside risk for global equities.

While the more cautious-sounding World Bank cited: "As a result, the global economy is in the midst of one of the most internationally synchronous episodes of monetary and fiscal policy tightening of the past five decades."

Here at JPost we have teamed up with casinos.win to look at how iGaming fairs in recessions.

Rising inflation, tightening of finances and a contraction in global GDP are all red flags. Combine that with the impact of the war in Ukraine and countries sluggishly recovering from the impact of the coronavirus pandemic, and the outlook doesn't look sunny, economically speaking.

If that happens, then it will be the fifth global recession since World War II.

Of course, in any recession, there are winners and losers. But what will happen to the so-called recession-proof businesses like gambling and online casinos.

Gambling is a big deal in Israel, as this publication has previously reported. Playtech's office in the heart of Tel Aviv employs project managers, product managers and account managers, to name a few. Then there are all the support services, software providers, marketeers etc, from a long list of companies supporting the sector, amounting to thousands of jobs.

So, when, or if, the recession does hit, how hard will it hit?

It may not be as bad as you think if you're working in the gambling industry in Tel Aviv!

In 2012 Study in the Journal of Gambling confirmed a link between gambling and economic strength.

To put the report in a nutshell, gambling revenue grows during economic expansion and stagnates during a recession. In other words, there's no growth, but it doesn't lose. Only the Lottery appeared to be so-called recession-proof.

A conclusion that makes complete sense! 

People who gamble may gamble less, some who already gamble less than the average turn to the Lottery, which offers them a low-cost way to try and win a great deal of money.

That summary is also supported by the science journal, Frontiers, whose report also arrived at the conclusion that those affected by a recession tend to buy scratch cards or lotto tickets, whereas those with problematic gambling showed no change in behaviour pre or post-recession. 

The report concluded that: "Overall, the findings of the follow-up study suggest that when people are experiencing financial difficulties during economic recessions, the possibility to improve their financial situation by winning large jackpots with low initial stakes becomes more enticing."

Recessions, by their very nature, create desperate financial times for people. Job losses, loan restrictions, cash flow, and rising prices can all lead to depression and low self-esteem, causing people to turn to gambling, with some people gambling a lot more than they can afford to lose.

That is very unsurprising, given the brain chemistry involved.

When people gamble, the brain releases the pleasure drug dopamine, giving them a feeling of happiness and reward. 

The trouble is that your body learns to tolerate it, meaning players seek out that thrill more and more.

When you're at the bottom of a recession and feeling low, gambling can bring a respite, a short burst of joy but a bucketload of problems if you spend more than you can afford.

There are lots of companies and free advice online, and if you're feeling unhappy or feel like you are developing a problem, don't be afraid to reach out to them.

One of the many challenges facing governments the world over when it comes to online gambling is its global nature.

An online casino may have its HQ in Ireland, a licence from the Caribbean, staff spread across Europe and be accessed from anywhere that has a WiFi connection.

In the UK, casinos are heavily regulated but legal. In some countries like Israel, they are all but illegal save for state-backed lotteries and sports, while in the USA, it's down to individual states to determine their approach.

In the UK's regulated market, the Government has proposed new affordability checks. Similar to those carried out by mortgage lenders, gamblers have to prove they have the funds and income to afford their spending.

The hope is that the checks will prevent problem gambling, but gamblers have accused the changes as overzealous.

It's quite the controversy in the UK gambling community, given the Government hasn't made its mind up yet, but the gambling regulator - The UK Gambling Commission - has already issued guidance to operators to carry out affordability checks and ask for personal details such as bank accounts without having a "legislative mandate" to do so.

The challenge for governments globally is how do you stop people from playing online at casinos in black and unregulated markets, especially during a recession. 

After all, you need only download a VPN and change your location when signing up. 

In times of recession, people may choose to take a risk and sign-up for casinos that are unregulated, unlicensed and unscrupulous.

Punters who join a black market operator - a company offering online casinos to players from countries where gambling is illegal or prohibited - will have nowhere to go for help if they are ripped off.

In this murky world, money laundering goes unchecked; there's no auditing, no transparency, no background checks and no comeback for players.

In unregulated developing markets, players still don't have the level of protection they enjoy in a regulated market. However, where casino operators do business in countries where governments are taking steps towards a regulated market, then players can take some comfort from joining casinos that have a reputable brand, are licenced and have clear and transparent approaches to business.

Whatever you choose to gamble on and with, we always advise that you check out the rules and legal status of gambling in the country you live in before signing up for any online casino and abide by them.

This article was written in cooperation with casinos.win.