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As the world of digital entertainment keeps expanding and transforming into innovative services, there are some specific markets that are gaining a great positioning among users and creating space not only in industry leaderships but also in local regulations. In this piece, we will analyse the market of social casinos and their new encounter with online gambling laws.

Firstly, it is important to highlight that social casinos as well as the world of online casinos, is a very lucrative industry. This market, that initially started as a trend, presents potential for remarkable growth in value. Statista estimates that the revenue of the global social casino industry will increase in value from 4.1 billion US dollars on 2016 to 5.1 billion US dollars for 2020. It isn’t every day that we see markets expecting to grow their revenue by 24% in less than 5 years, and that’s why several companies are now investing in these entertainment platforms.

An important growth factor for social casinos is their relationship with mobile usage, according to experts. In 2018, 75% of the revenue of social casinos came from mobile devices. Worldwide, increase of mobile devices and data subscribers is one of the main trends that drives the growth of several digital entertainment industries, especially in emerging markets.

Now days, the focus of social casinos is not only the number of smartphone users in each market. Another statistic ruling market development is the smartphone penetration, as it shows the total potential of each country. Following this, the eyes of the industry are now on India, not only because it is the second country with most number of smartphone users (i.e. 300 million users), only surpassed by China (717 million users), this market also shows a smartphone penetration of 22.4% announcing an extensive development of the market in further years- thus, making it a target for social casinos market.

With several external factors beneficiating the positioning of social casinos, there is one important trend that might hold back this industry development; local regulation. Until now, social casinos weren’t concerned about online gambling regulation as they weren’t considered real money online casinos. In fact, this is one of the reasons why they became so popular, these platforms could cover a large market of casino games fans without intervening in legal aspects of real money gambling platforms.

The controversial regulation of online gambling in the United States will have an impact on the global social casinos market too. At social casinos; users play for winning virtual coins or tokens which can’t be converted in real money, so these platforms can’t be considered online casinos and online gambling regulation shouldn’t apply. However, recently United States presented a new perspective and according to several lawyers the fact that users can transfer virtual coins between them opens up the opportunity for a second market of these tokens where users could buy them from other users for real money. According to them, this factor is enough for converting social casinos in online gambling platforms and forcing them to follow the pertinent regulation. It isn’t clear how this discussion will end and how far it will influence international gambling regulations however big social casino companies have begun to react to this by forbidding the virtual coin transfers between users on their platforms, a measure that might sound simple and easy to execute to avoid legal issues but that also is showing the new pressure that social casinos must face and the changes they have to do globally for regulations and policies established locally.

The global trend towards digital gambling is the creation of new laws and regulations to allow this activity, each day we see more local initiatives for regulating online gambling platforms to allow its growth while protecting users and of course increasing local tax revenue, even in the United States we can see more pressure from different states to accept and regulate different online gambling markets, we can see it clearly with the new debate of online sport betting platforms. The fact that the industry of casinos is moving towards new local regulations implies that online casinos must be in permanent vigilance of new laws all over the world, and now with the discussion of social casinos being a type of online gambling providers will urge them to do the same.

The consequences of local modifications will have an impact in the industry, especially for small social casino companies for whom restricting access to users according to local laws represents a big setback. We also need to consider the possible modifications on the restrictions that social media platforms may have to put in place for social casinos according to local laws. In conclusion, the bright future expected for social casinos, especially in markets with high potential like India, might have a restraint if the pressure of online gambling regulators establishes that these gaming services should comply their laws.

This article was originally published on Qrius(formerly, the Indian Economist).

Opinions expressed in this article are not necessarily representative of those held by Centre for Civil Society.

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The opinions expressed in this essay are those of the authors. They do not purport to reflect the opinions or views of CCS.