Episode Transcript
[00:00:00] Speaker A: A lot of content and, you know, interviews with you and I read a lot about you and, you know, like, I think that, you know, we all have, like, skeletons in our. In our closet, right? So, like, I've brought kind of my, My. My skeleton. And I, like, you know, put it. But that. That part of the story, you know, when. When you said. I heard it a few times, the Coca-Cola of gaming.
[00:00:22] Speaker A: Of igaming. There's so, so much pride there. And this is something that I think, like, often we miss in igaming. Like people always. Some have almost like an underline of a bit of shame changed.
[00:00:36] Speaker B: I'm sorry, that was my phone alarm to wake me up for this call.
[00:00:40] Speaker A: For this call.
[00:00:41] Speaker B: I'll go back. Not everybody categorizes gaming, gambling as entertainment. Some people see it as a sin.
Now, I believe that everybody's entitled to their own opinion, but they're not entitled to tell me what I should do or what I should not do within the parameters of reasonable legislation. The other thing I think is that I have said before, and I still feel the same, and no disrespect to the authority or the group of industry people you were talking about.
The industry is naive and lazy, and the real leaders of this industry do not talk. Enough.
[00:01:18] Speaker A: Welcome to IGB podcast iGaming Checkup with Dr. Eyal. Brought to you by IGB in partnership with RubyPlay.
I'm Dr. Eyal. I've been passionate about games and the people that makes them for many years. Humans have been playing games of chance even before we could write. So what is going on here?
Why gambling games are so central to our experience as a species? And why something as simple as a slot machine is also the hardest game to make.
Sure, there are plenty of igaming podcasts out there covering industry trends and headlines, but this isn't just more of the same. We are here to challenge assumptions, invite sideways thinkers and industry outsiders, and explore the complexity of an ever evolving, fascinating and innovative space. If you are ready to think differently about iGaming, you are in the right place. Let's go.
[00:02:13] Speaker B: Foreign.
[00:02:17] Speaker A: I'm joined by David Carruthers from David Carruthers consultancy.
This episode is.
We call it White is the New Black. We're going to be talking about regulation in iGaming and the personal impact of regulation in the iGaming. And David, I've watched a lot of content and, you know, interviews with you and I read a lot about you and, you know, like, I think that, you know, we all have, like, Skeletons in our, in our closet. Right. So like I've brought kind of my skeleton and I like, you know, put it. But what I found about you and your story, which is, it's an amazing story, is that you, you know, you would have done nothing different.
You very proud of the experience and what it taught you.
So I thought maybe we can just start by maybe you can tell us a little bit about, you know, about, about the history of, you know, bets on sports and your experience back in the, in the. About 20 odd years ago.
[00:03:24] Speaker B: Okay.
First of all, thank you for inviting me to talk and thank you very much for depicting me as someone as handsome as that young man you just showed on the screen a moment ago.
Looks very familiar.
You're right.
It's coming up 26 years when disaster struck. But prior to disaster, there was an amazing amount of joy, learning, happiness, exposure, excitement, adrenaline.
I went to Costa Rica in 2000 and I started BetonSports with the founder.
And together with a lot of hard work, we transformed that from a family business that was just a bookie into a global player, into what we were envisioning to be the Coca-Cola of online gambling.
[00:04:21] Speaker A: I love that part of the story. When you said, I heard it a few times. The Coca-Cola of gaming, of iGaming.
There's so much pride there. And this is something that I think often we miss in igaming people always, some have almost like an underlying of a bit of shame and working in iGaming and then Coca-Cola of iGaming. It's such a powerful statement to say about the company, about a project that you're leading. So I really love that statement.
[00:04:49] Speaker B: Well, number one, it was true.
Number two, it was based on my experience to date at that point.
I echo your frustration with the industry not having quite the echelon of reputation that it deserves.
I joined the industry in 1976. April 6, 1976. And I worked for a brand that is now minimized. It's called Ladbrokes.
But back in the day when I was with Ladbrokes, we were the Coca-Cola of online gambling, but only in the United Kingdom. And I started in Ladbrokes in 1976. April 6, 1976. I had gone through the trauma of working for a bookmaker.
No one else had a university degree. Nobody was thought of as a businessman. You were a bookie. And the Internet gave us all an opportunity to transform the industry and make the industry global. My experiences in Costa Rica showed me the capacity and the opportunity to do that. And as part of the vision and idea for listing the company in London, which we did in 2004, was to globalize the enterprise. And that was my vision. And I actually did it before 2006.
I was the first white person to buy Asian facing businesses from Asian people.
That is monumental.
Not many people know that.
So I was before my time. I was before my time for regulation.
I was before my time for vision. I wasn't before my time for aviator, but I wish I had been.
[00:06:34] Speaker A: You know, if we had the time machine. The thing is, you had a really good, I watched a really good interview you had with Pierre Lint and you talk about that, that experience in 2006 and you know, the arrest and then the five years. I think it's five, five and a half years or deal that followed.
What struck me there in context of regulation and I would really like for you to say a few words about maybe that experience, but that everything was after the effect. So we have a successful public company that is doing that is very honest about its operations. It's a public company, you have to report things, you have to go to licensing.
It's not in a vacuum, right? And then legislation change and then we go back in time and all of a sudden what we've done backwards becomes a challenge. So that to me was very scary. It's a very, very, very scary concept of that ability of time travel in a way where regulator can do it, but not, you know.
So what's your perspective on that and on that experience?
[00:07:50] Speaker B: Well, first of all, we did everything we needed to do to comply, to list the company.
You know, the microscope that goes across everything is phenomenal. And we had legal opinions.
We had legal opinion that was published. It's in the prospectus.
It says this activity in the United States may be illegal.
So it was something we were cognizant of.
But we had a defense.
We've never tested that defense because to test that defense, the risks to the individual are phenomenal.
The defense in a short story is, but in 1989, the US government signed a GATT agreement, a general Trade Agreement.
That General Trade Agreement was signed with Antigua. It was categorized as leisure services under the World Trade Organization. Leisure services include gambling, bet on sports, had a gaming license in Antigua. Therefore it had the right to, to penetrate and do business in the United States. That's what we did.
That was in the public domain.
But I knew and was aware that if we had what happened in 2018 had happened in 25, my share price would have doubled.
I actively engaged with decision makers, influencers politicians, the public in the United States from 2004 up to 2006, effectively, that did not make me a hero. It made me a target for people who objected to the industry.
And I was then used as an example not to follow.
Now, what is frustrating today about all of that is one, they didn't introduce legislation eventually.
Two, they only introduced state legislation.
Three, they're still chasing the black market.
And the black market still represents 40, 50, maybe 60% of the market.
And there are still arguments about what's a sports bet, what's a contract, what's a casino, et cetera, et cetera.
[00:10:20] Speaker A: I think, yeah, like, it seems that a lot of the, you know, a lot of the debates in politics exists in that, in that gray area of, of the definitions. Right. So it's not that straightforward. That's, that's kind of like where a lot of business opportunity exists as well.
But I think, you know, like, for me at RubyPlay, we're in the process of opening in the US in the different states. And I know at the personal level, the amount of due diligence is happening. Like, I had to, I had to tell agencies in the U.S. essentially everything that I've done from the age of 18, everything where I lived, where I worked, what I studied, all everything, my bank accounts, everything.
That level of due diligence blew my mind really. And the thing is, you know what? I think that many people, people outside of the industry, when have, like, they have an opinion about igaming, they miss is that level of due diligence that's happening.
And it's happening, you know, like with.
In a way that for players in the iGaming, you know, business, we welcome that, we welcome that level of regulation. So I think there's a few elements to look at is, first of all, what do you think drives the point of view of regulators in that respect? In a way, almost like trying to push against igaming rather than work with it or work with it and what kind of attitude you can expect from different regulators personally.
[00:12:06] Speaker B: And it's the obvious thing, but that due diligence is an effective barrier to entry.
So therefore, it is something that a nationalistic regulator can use to enhance opportunity inside his own jurisdiction or her own jurisdiction.
Secondly, it's not uncommon nowadays for other things and everything, financial transactions and all the rest of it. So I don't see the inspection as a problem. I see the inspection as a necessity. But what I see as the problem is the naivety, the ignorance, the confusion, the political motivation from some Regulators.
[00:13:01] Speaker A: So, you know, like I look at the. To connect that there's just, I think maybe a couple of weeks ago, the betting and gaming console presented to in the uk, I think it was Granny Host, I hope I'm not butchering her name. That actually presented to the Treasury Select Committee and she talks about taxing the UK and the idea of increasing tax and she's saying, look, ey presented reports about this. If we, if we're going to increase tax, it's going to have a negative impact on everything. It's going to have negative impact on 40,000 jobs that might get lost, it's going to increase black market wagering. But I think she said something like eight and a half billion pounds.
Billion pounds.
So to connect to what you're saying, it's.
I found it sometimes strange, almost like, don't regulators see this point? And one of your interviews Back in 2004, you were talking about Al Capone and the prohibition, and I love that example. So when you actually have this kind of, you know, like restrictive regulators, don't they see the point?
[00:14:20] Speaker B: No, they don't, because, look, I won't single anyone out and accuse them of something without giving them an opportunity to defend themselves. But how many have heard of Charles Laifer? How many of them understand the basics, the math in our industry?
How many of them are there because they love the industry and want the industry to be sustainable and safe?
Most of them are there because it's a career move. Most of them are there because a political ally wants them to be there.
Not everybody categorizes gaming, gambling as entertainment. Some people see it as a sin.
Now, I believe that everybody's entitled to their own opinion, but they're not entitled to tell me what I should do or what I should not do within the parameters of reasonable legislation.
The task here is education, education, education.
And it involves the stakeholders in the industry, the B2B operators, the B2C operators. It involves politics.
And most of all, it needs to involve the customer.
The customer needs to understand why he has to tell you his name, his date of birth and his passport number or his tax id.
The customer has to feel that this is entertainment and understand the overall reasonable level of time. He's not going to win, but he's going to enjoy himself or herself.
The operator has to listen to the customer.
The operator has to educate the regulator.
We all vote for politicians, so that's a longer game, but I'm a bit more suspect about the opportunity there. The other thing I think is that I have said before and I still feel the same. And no disrespect to the authority or the group of industry people you were talking about.
The industry is naive and lazy and the real leaders of this industry do not talk enough behind closed doors and an open plenary about this. They do. They hide from it. They try and minimize it, they try and ignore it.
[00:16:44] Speaker A: But again, you said yourself when you're there back 2006, you get arrested and all the things that happened there, you're facing a potential 80 years in prison of which you end up serving almost two in practice.
This is scary shit, man.
This is scary scary.
[00:17:10] Speaker B: That's political. That's the USA at that time. That's what the politicians wanted to do at that time. They wanted to scare everybody because they did not want to legalize online gambling.
Now and as I've said before about the Al Capone and the prohibition of alcohol, it's a historic bump in the road in the United States. From my historic observation at high level, it's typical. If you look at Germany, it's different.
Germany have a regulatory framework. Taxation is very high.
Their motivation to do that is different.
[00:17:50] Speaker A: But okay, so if you look at Germany, what's happening there is that now with the high taxation and there's, by the way, it's not just taxation. There are other limits on, you know, like the, the, the kind of promotions you're allowed to, to have, the kind of, the kind of bets you're allowed to run. Like that is very restrictive on the players themselves as well. And there's a lot of onus on the operators that comply with all the, the, the laws to actually make sure the players actually are acting within the framework or else they can take huge financial and even personal risks on themselves.
But then all that ends up happening in, in a country like Germany is that then you have a flourishing black market that's starting to, to grow because even for the player, they understand that they play a game at 88% RTP because the house needs to actually protect itself and cover its costs with all of those additional Costas is created from that regulatory ecosystem.
Or they can just play at 86% RTP. And the difference is not, it's not measured from the bottom, you know, from, from zero to the 88, it's measured from the top. And 86 is a 4% for every dollar that you, you wager you, you're paying 4 cents on average for that entertainment. And 88, you're paying three times as much. It's 300% more expensive to play in a regular regulatory setting.
So the player themselves have a very, very easy choice to make here.
Do I want to pay three times as much for the same experience?
[00:19:46] Speaker B: Well, then you just go back to the same thing. What did I say? I said education, education, education.
The German regulator needs to be educated. Who should be educating the German regulator? But big player in Germany is called Tipico. It's now acquired by Allwyn this week.
But, you know, that's who should be talking to the German regulator.
[00:20:10] Speaker A: And do you think that, you know, if you look at, if you look at that role, that we expect the large players within the market, do you think that this is something that.
Are you aware of any that are actually willing to.
To take this kind of conversation?
[00:20:29] Speaker B: Well, I think if you're asking me, the players that are maybe not covered by the regulation, that are in the market, nobody is willing to talk.
I'm the example of what happens when you talk. If you're participating in that direction, it's not feasible.
Everybody has to act responsibly.
I look at this and I look at this from a strategic perspective, and you can already feel the change.
It's almost like climate change. I think eventually everywhere that's willing to allow gambling or entertainment, digital entertainment will regulate.
Eventually. Regulation will harmonize because market competitiveness will drive that harmonization.
It can only happen with dialogue and education.
It will take 20 years. It's not going to take five minutes. But if you go back 10 years from where you are today, you wouldn't imagine the momentum for regulation that seems to be in the wind in the last 12 months.
It is definitely blowing in that direction. Well, you mentioned igaming next, igaming next put out a podcast or a statement about their view of the future.
And it's. Black markets are gone.
Gray markets are going.
Regulation is the way forward, and it is the way forward now. That will not eradicate black markets. It will not eradicate even gray markets, but instead of them being the majority, it will minimize them and it will take time. That will take five years itself.
You look at the Chinese market.
The Chinese market was humongous.
The Chinese market is still sizable, but it's not 20% what it was five years ago.
Because they take measures to stop it.
They take a different view from regulation. Unless you're in Macau.
[00:22:40] Speaker A: Yeah, but that, again, that creates.
We get the Al Capone phenomenon all over again, right? It creates huge incentives for, for operators to. Or for say of. Of some operators to. To act in, you know, to act in unlawfully.
[00:23:00] Speaker B: But that's because some economies have different priorities and different contextual things to deal with.
If you're President Xi, gambling is not your number one priority.
You're still elevating poor people to substance. You're still creating huge infrastructure. You're dealing with geopolitical dynamics that could be World War 3.
Gambling's not high on its priority list.
The reason that gambling gets squeezed in China is because of the outflow of cash, not because it's gambling.
If it was gambling, there would be no Macau. But there is Macau.
[00:23:39] Speaker A: But you know, I think that if you look at Chinese culture in general, like gambling, even playing mahjong, you know, play, they have like these little, even government run kiosks where you can play things that kind of look a little bit like a slot machine. I think.
[00:23:58] Speaker B: We could even do China.
[00:24:00] Speaker A: Yeah, it's a big part of the culture. Chinese love to take a punt. They love it. You know, we can even see in Australia, we have many, many Australians of, of, of Chinese descent and they love, you know, they love taking a punt. You know, not just, not just in, in, in the clubs and the pubs, but you know, like if, in a tub on the, on the horse races on the dog races on. So, and it's like, it's a big part of the culture. And I think that kind of connect to what you said earlier. It's if you view it as sin, right, like gambling is bad and we need to eliminate this.
It's actually ignoring a big part of human nature that we like. That dance with chance, that dance with randomness.
It's deeply rooted in all living creatures, even with pigeons, even with rats.
They love randomness too. So expecting the human species to ignore something that is so deeply rooted in our psyche is a problem, you know, so, and, and I think that, that, that becomes like, yeah, like you said, it's, it becomes more of, of a, almost at a religious level. It's a war on sin.
Rather than, rather than trying to think, okay, this is just entertainment and how do we, how do we actually, how do you actually manage it like any other form of entertainment?
[00:25:38] Speaker B: Well, I, I, I repeat myself again. Education, education, education.
It's the only way you can challenge someone that has an opinion that is the opposite of you. Now, some of you will win, some of you will lose, some you will move a little bit, some of you will make even more determined to beat you. But it's life. That is life.
We just have to accept that we run businesses, businesses make money. But they do much more than make money.
They create creativity.
They create employment. Employment creates more people. More people creates more opportunity.
Somebody whose father worked in a betting shop might go to university and invent the cure for xyz. You never know.
That's the reality here.
[00:26:32] Speaker A: I completely agree. But the, the creativity, I think that the creative output of igaming in all areas, down from the art of games, it's beautiful, beautiful things that are made to engaging with players, creating entertainment around this.
And once I watched, I watched at the end playing a Nintendo game. At the end of the Nintendo. When I finished the game, there was these credits running and it said, as everyone who were involved down to, you know, software engineer this. And. And I was thinking, I've never seen that in one of the slot machines I've made. Something runs at the, at the. At the end or even at the helper was saying, you know, like this.
[00:27:21] Speaker B: No time, no time for that. No time for that. Let me share something with you I think you'll find amusing. Okay. That creativity thing that is driven by customer demand, customer behavior, customer desires. Go back, go way back. Before the Internet, even before television and betting shops. In betting shops in the United Kingdom, we used to have a broadcast system. It was called Exchange Telegraph.
Exchange Telegraph used to broadcast the commentary on the horse race or the dog race from Walthamstow or from Epsom or wherever it was from.
It was regionalized.
So it would come from the race course and someone would listen and then regurgitate and the person covering Scotland would interpret the base commentary in a different way to the person in Norwich.
I've heard both.
One, there's an accent difference, two, there's a pace of talk difference.
And three, there's probably 50 meters difference in terms of where the horses are from beginning to end. And in the Scottish version, it was always tremendously exciting.
You were standing in the betting shop, listening, looking at the whiteboard, and you still thought your horse had a chance of winning with 10 seconds to go. The reality was the winner was probably already decided.
If you actually saw the race on television and the customers loved it. The customers were cheering and laughing and screaming and yelling and they loved.
[00:29:04] Speaker A: Reminds me of the world's, you know, the World Cup. Watching the World cup and then watching the Brazilian broadcast, talking about the game, and it sounds like the most exciting thing. And then you watch like maybe the one from the UK and you think that they're having tea.
[00:29:19] Speaker B: Exactly. But our industry have emulated that in different products and different things that, you know, the live show games, the drop ball, the color bowl with the girls and gentlemen talking and laughing and singing and everything.
It's the same thing. It's what customers want. They want to be entertained, but they want to have some kind of cliff where they win a fortune or they have to try again.
It's not new. It's not new.
It's the same thing. Just regurgitated with new technology, fresh ideas, evolution. And it will continue to do that.
[00:30:01] Speaker A: And at scale, I'd say the scale is.
[00:30:03] Speaker B: Yes, yes. Well, that allows you to be very creative with prize giving, very creative with profit distribution, et cetera.
[00:30:14] Speaker A: So I want to talk a little bit about the incentives. Like you said, that you think that eventually the industry from the regulatory perspective start harmonizing.
I think that something that is often missed is that from our point of view as from Ruby player, as a B2B content supplier for B2C companies for sportsbooks and casinos, is that in many ways being white is actually a lot better than not like, because if you want to like the. The dream of many companies was to become listed companies is to become publicly traded is to bring investor money in. This is why you can see huge financial gains for companies like this. And then, you know, the multipliers on your profits on money made in, in, in. In. In wide markets is much more significant.
The risk associated with this kind of revenue is much lower than gray or black markets, which often get discounted completely from your books when you go to some kind of a IPO proceeding.
[00:31:26] Speaker B: Evaluation model. Yes, that's normal.
[00:31:28] Speaker A: Yes.
[00:31:30] Speaker B: And also try because if you go back to 2006, only one service provider got into trouble regarding Beno Sports. Only one.
None other platform provider. None other games providers.
Only Neteller. No, I'm sorry, yeah, Neteller. I thought I'd said Netflix. Sorry. Neteller only Neteller only. Neteller got into trouble.
Neteller paid 119 million. No longer any trouble.
B2B businesses need to be regulated. B2B businesses need to meet the standards. B2B businesses need to be transparent and.
[00:32:13] Speaker A: They want to be. They want to.
[00:32:15] Speaker B: Good, good.
[00:32:16] Speaker A: I think because this is how you end up creating a lot of.
[00:32:23] Speaker B: It's part of the player protection insurance.
Integrity is everything.
And that goes across all businesses. Doesn't matter which industry you're in. Integrity is everything.
This is one reason that I speak like this on events like this.
I tell the truth, even if the truth is ugly and it's okay to disagree with me. I'm happy to chat to you. I'm happier to Listen to you because every time I listen to a counter argument, I learn something.
[00:32:57] Speaker A: But you see, I think also the incentives from the industry to players, right? Like the idea or the villainizing of the industry saying, okay, we just want to grab players money as quickly as we can or deplete their wallet.
It actually doesn't make sense if you think about this.
What we want is a long term relationship, a trusting relationship with the player. I would much rather you spend a few dollars with me a day over a lifetime than just spend a thousand bucks in a single week. Realize that this is something you cannot afford and then I lose you.
The cost of bringing a single player is so phenomenal. Like it can be hundreds of sustainability.
[00:33:42] Speaker B: The word is sustainability.
The black market is not sustainable because one, it's against the law, two, it takes advantage of customers, three, there's no incentive to evolve and give something different creative, blah, blah, blah, because you're already making money. It's really easy.
I used to joke, I used to joke and I used to say to people, you could have taken your grandmother with me to Costa Rica, given her a server and she'd be a millionaire.
And in 2000 that was true because all you had to do is plug it in and switch it on and you would get money.
Nowadays it's not true, it's very different. You have to be proper, business orientated, technically savvy, commercially smart, politically astute, et cetera, et cetera.
[00:34:34] Speaker A: Yeah, it's a tough business.
[00:34:40] Speaker B: The biggest challenge will be in the next five years in this industry will be jurisdictions like where you reside at the moment, where there is a regulatory environment that internationalizes opportunity, that rather conflicts with independent regulation by country and their sustainability as hubs might come into question for a regulatory issue rather than a logistical issue.
You know, I have lived in Malta. I know how busy it is, I know how bad the traffic is. But I also know how, you know, how the history of the country is amazing. You know, for example, it's a nice place, but it's challenging for some.
[00:35:29] Speaker A: So David, I think we do both agree that the right direction is white. You know, like saying white is a new black. Really? We all want that. We all want the industry to regulate, we all want the, the, the industry to educate.
[00:35:47] Speaker B: Can I make a suggestion?
And it's not trying to make a joke or continue something I said. I said it about a year ago, but like, I think the new bite is purple.
Okay? It's not because it's no longer white, but it's because it includes everybody.
It includes the service providers, not just the games developers, it includes the payments providers, it includes the marketing, it includes the affiliates, it includes the technology developers, the banking service, everything.
Because unless you comply, unless you meet the standard, you are not sustainable.
[00:36:28] Speaker A: I completely agree. I completely agree with the statement. I like that the new white is purple.
Okay, David, thanks a lot for joining me today for this really cool conversation. I really enjoyed it and yeah, I hope that we'll see more honest conversations around this with regulators and.
Yeah. And a driving, yeah. Thriving ecosystem working with regulators rather than against them wherever they're open to it.
[00:37:02] Speaker B: Yeah. Well, thank you for the invitation and I wish you and RubyPlay all the very best.
[00:37:09] Speaker A: Thank you. Thank you.
[00:37:10] Speaker B: You're welcome.
[00:37:12] Speaker A: Thanks for tuning in to this episode of IGB podcast iGaming Checkup with Dr. Eyal. There's plenty more to come so stay with us for more eye opening, thought provoking and stigma challenging conversations that dig deeper into the world of igaming.
