Sports Betting Guideline The Security and Risk Management Guideline on Sports Betting for the Lottery Industry worldwide

Transcription

1 WORLD LOTTERY ASSOCIATION GUIDELINES Sports Betting Guideline The Security and Risk Management Guideline on Sports Betting for the Lottery Industry worldwide Issued by the WLA Security and Risk Management Committee March 2008 This guideline is the property of the World Lottery Association WLA World Lottery Association Lange Gasse 20 CH-4002 Basel, Switzerland 1

2 Table of contents FOREWORD INTRODUCTION Purpose Legal Compliance References with Other Documents How to Use This Document SPORTS BETTING Areas covered in this document Reservations SPORTS BETTING GUIDELINES Events Selection and Odds compiling Odds changes and Blocking of Events Monitoring and managing risks Results Live (In-play) Betting Cancellation of bets Payment of winnings and reimbursement of players Transaction Integrity Sports Betting Transactions and Responsible Gaming Hedging Personnel Issues

3 Foreword These guidelines are issued by the World Lottery Association to provide a general background and practical guidance on the subject of offering Sports betting for the lottery community. Bookmaker competition and the desire to channel sports betting games into a regulated environment are resulting in an increased number of lotteries offering sports betting. The nuances of such an offering are not to be taken lightly. The intent of this guidance is to provide lotteries a roadmap to the secure offering of this product. These guidelines should be seen as additions to jurisdictional legal and regulatory requirements and are based on best practices. As with all WLA guidance documents, lotteries are encouraged to perceive this document as a truly living document that will be subject to periodic update as required. Any comments or suggestions regarding this guideline should be directed to the WLA Security & Risk Management Committee. 3

4 0 Introduction 0.1 Purpose This WLA Sports betting document is for guidance only. It does not constitute a Security Control Standard and should not be included within the scope for assessment of controls against the WLA security certification process. 0.2 Legal Compliance Lottery organizations should be aware that jurisdictional laws and regulation exists in most cases and the WLA strongly encourages its member organizations to carefully review and consider these requirements. In cases where contradictions between applicable laws or regulation and the contents of this guideline exist, applicable laws and regulation shall always take precedence. 0.3 References with Other Documents The WLA Sports betting Guideline is based on input from the WLA Security and Risk Management Committee, WLA Members, Associate Members, and the security community as a whole. 0.4 How to Use This Document The WLA Sports Betting Guideline is intended for use primarily by lottery organizations. While it is recognized that a one-size-fits-all approach may not be appropriate for the entire lottery industry due to the diversity of games and sales channels, each jurisdiction should consider the specific nature of its business, organizational structure, type of customers and transactions, etc. when implementing the suggested measures and procedures to ensure that they are effectively applied. The main principle is that a lottery organization should be able to satisfy itself that the measures taken are appropriate, adequate, and follow the requirements of the law and regulation. 4

5 1 Sports betting 1.1 Areas covered in this document This document covers the following areas: Event Selection and Odds Compiling Odds Changes and Blocking of Events Monitoring & Managing Risks Results Live Betting Cancellation of bets Payment of Winnings and Reimbursement of Players Transaction Integrity Betting Transactions and Responsible Gaming Hedging Personnel Issues This Guideline includes suggestions for the security of operations relevant to the limitation of risks in sports betting organizations. Such risks include: Risks related to the financial liability inherent in offering sports betting products Risks related to conformity with regulations that may jeopardize the license to operate and business ethics that may lead to loss of fame Risks related to financial crimes such as money laundering, that could be associated with the game of sports betting and may cause legal or other liability to the organizer, including loss of fame or jeopardy of license to operate Risks related to social responsibility issues that may cause legal or other liability to the organizer, including loss of fame 1.2 Applicability to Mutual and Fixed Odds Sports Betting Games Sports betting games include both mutual (toto) and fixed odds betting. Fixed odds games have significant financial risks related to the outcome of events and players winnings. Mutual games do not present such financial risks. This document relates mostly to fixed odds betting, but several issues relate equally to mutual sport betting games (toto). Therefore, applicability of specific recommendations provided in this document should be interpreted according to the games offered, fixed odds, mutual or both. Fixed odds sports betting include all kinds of sporting events. Non-sporting events such as cultural, political, financial and other events are sometimes offered. The emphasis in 5

6 this document is on sporting events because they account for the overwhelming share of public interest. Applicability to non-sporting events is easily adjusted accordingly. 2 Sports betting guidelines 2.1 Events Selection and Odds compiling The outcome of events is used to determine winners and odds determine winning amounts. In this respect, events and odds are equivalent to a draw and therefore must be fair in the same manner that a draw must be fair. The process of events selection and odds compilation should be properly logged and audited periodically. In consequence, lottery organizations offering sports betting should consider the following measures: Events offered should be selected based on best available judgment that the events are fair Odds offered should reflect best knowledge for the probability of the outcome of each event, adjusted for the organizers profit margin (over-round). Odds should therefore be based on judgment of facts and not be based on opportunity or rumors Consider having different specialists selecting events and compiling odds to ensure events are proper and odds are accurate Network with other lotteries to learn from their experiences Odds compilers should understand the impact of odds values for the lottery versus legal or illegal competition 2.2 Odds changes and Blocking of Events If odds are properly set, then changes should only be necessary to handle exceptions. The process of changing odds should be formal and involve several levels of authority. Logs and other audit trails should exist to prevent, detect and contain misuse of authority. Controls that prevent fraud are preferable to others that merely detect it or are discretionary. 6

7 Below are some valid reasons to change odds: Because of new information related to the event that was not available or known when the odds were set, such as injuries, absent players, weather conditions, etc Because of the need to limit risks based on actual sales and pre-established rules, for example, to balance books and limit liabilities Because of significant market shifts that, if not properly addressed, would lead to increased liability, arbitrage or less competitive offerings To limit financial liability or ensure fairness, organizations may decide to block an event (i.e. stop accepting bets for that event). The process to block an event should be formal and involve several levels of authority. Logs and other audit trails should exist to prevent possible misuse of authority. The same applies in case the same event is un-blocked (re-start to accept bets on the event). In mutual games, events can t be blocked. Therefore, proper selection of events is most important in order to offer the game safely for all. 2.3 Monitoring and managing risks The purpose of monitoring is to limit various risks related to offerings of fixed odds sports betting games. Monitoring is set to: Manage financial risk (liability) Offer a fair game Limit possibilities of player misbehavior Limit possibilities of fiscal fraud Internal or external information about events that may be unfair should be logged and processed in a formal manner to avoid single-person oversight or over-reaction. Logs should be audited periodically and controls in place to ensure their integrity. Events involving any persons (e.g. teams, players, managers, referees, etc) formally charged with illegally setting-up events should not be offered for betting until the accusation is officially cleared. Lotteries should monitor turnover per event to detect unexpected large sums in unlikely positions, as this could indicate an unfair event or other fraud. Lotteries should set clear rules for maximum stakes and winnings and publicize them. 7

8 Registration of players can help control financial risks because it is easier to assign limits per player based on historical data. Financial liability management should include thresholds for stakes, winnings and payouts globally, per sport, league, per event and / or per bet placed. When these limits are exceeded, relevant action should be taken by authorized personnel (traders and risk managers). Decisions on these cases should be logged and audited for possible negligence, misuse of authority or even fraud with internal and / or external collaboration. 2.4 Results Sports Betting results are the equivalent of a draw for number games since they declare winners. Results should be taken only from official sources, such as the league that organizes the event (e.g. FIFA, UEFA, National Leagues, official organizers, etc). Results for nonsporting events (e.g. cultural, political, financial or other) should also be validated from the corresponding official sources. If there are compelling business reasons to use results not provided by an official source (for example, if the source is known to delay announcements significantly), then results should be checked against at least two independent sources before publication and payout. 2.5 Live (In-play) Betting The Lottery should set very clear work responsibilities in order to minimize mistakes, limit liabilities, and increase the amount of separation between related duties. Lotteries should ensure that bets are clearly explained to players and odds are readily available to the public. Bet types offered for Live Betting should be carefully selected to ensure that they are fairly offered. If cancellations are available, bets applied to live betting should have a small delay period prior to becoming effective, possibly ranging from a few seconds to a few minutes depending on the bet type being offered. 8

9 2.6 Cancellation of bets Lotteries should publicize their cancellation policies. Any cancellation process offered should be fair to players but restrictive to limit possibilities for misuse. This is particularly important for anonymous game play. To increase monitoring efficiency and limit possibilities for financial crimes, the period available for cancellation should be kept as short as possible. Cancellation of bets should not be allowed after the start of the first event on the bet, unless live (in-play) bets are accepted. For bets with multiple events (legs) that allow cancellation for events that have not yet started or resulted (depending on whether the game is live), total odds should be readjusted. As it is not practical in retail environments to inform players of odds adjustments, cancellations should be allowed only on the entire bet. 2.7 Payment of winnings and reimbursement of players To decrease the opportunity for fraud, claim periods should be limited to a relatively short time after official results are known (e.g. within two months after registration of results). Since sports betting players generally claim their winnings within hours or a few days, this limited claim period should not have an adverse effect. Lotteries should have a clear policy on unclaimed prizes and their publication. The Lottery should also have a fair and well publicized policy regarding: Open (not yet settled) bets for cancelled events (these are normally reimbursed or credited). Special consideration is due when bets contain multiple events, as exchange tickets may be offered in lieu of crediting the entire transaction. Open bets for events that are postponed, with consideration for offering player reimbursement. Results wrongly reported by the lottery (typically, bets are re-settled in this instance, though prizes already paid are to be honored). Mistakes should be infrequent and unavoidable to avoid severely damaging the credibility of the lottery. 9

10 2.8 Transaction Integrity The lottery should establish the means to verify the integrity of betting transactions and in particular that: Betting transactions cannot be added for an event already in progress unless live betting is offered. Betting transactions registered cannot be modified except to be cancelled as provided for in policy. Cancelled transactions should be clearly identifiable (distinct) from betting transactions. Transactions (bets, cancellations, settlement, payments) in sports betting normally flow in a continuous stream of 24 X 7 X 365. In most betting operations, there is no time when the field book (data files in the case of computerized systems) can be frozen and locked before entering results and declaring winners, as is normally the case with draws for number games. Therefore, transaction integrity should be established by a combination of: Technical means, for on-line and / or off-line transaction processing systems Procedures for human intervention to betting systems such as those that may be conducted by programmers, system administrators and operators Regular auditing by independent auditors 2.9 Sports Betting Transactions and Responsible Gaming Security is relevant to responsible gaming. Laws and regulations may indicate significant penalties for incidents related to breach of terms of license, such as sale to minors. Enforcement of socially responsible rules for sports betting protects the lottery s brand and goodwill. Technical and procedural security should therefore make specific reference to the enforcement of policies related to responsible sports betting and any applicable regulations related to social issues. Such regulations usually include age limits for players and may include limits on stakes and losses per time period. Registration of players is an effective method to control, enforce and defend a lottery s policies for responsible gaming given the history able to be kept for those players. Records kept for players should be handled in accordance with local laws and regulations regarding data privacy. With the possible exception age verification, it is difficult to apply and enforce regulations on anonymous players who simply walk in a shop and place a bet without need to verify their identity. Although social issues are perceived to apply to sporting events, non-sporting events have similar issues. For example, even if it legal, it may not be appropriate to offer betting on certain types of events (e.g. local elections). Guidelines for responsible gaming in sports betting fall outside the scope of this 10

11 document Hedging Hedging may be used to balance financial risk and may be used if laws and regulations allow it. Specifically, regulations regarding payments and financial accounting should be considered. Hedging should be executed by persons specially authorized and fully trusted. If not properly executed, hedging may actually increase financial risk and could be used to commit fraud. A formal process should therefore exist to monitor hedging. A detailed log of actions should be maintained and audited regularly by independent auditors. Audits should consider both practices and financial performance of hedging Personnel Issues Persons involved in event selection should not have a criminal record. It is advisable that such personnel have engagement agreements or contracts with specific limitations given below for sporting events. These should be properly adjusted and extended if non-sporting events are offered. Although the culture of the society should be taken into account, agreements would ideally include provisions to ensure that these personnel are: Not allowed to participate in any capacity, directly or indirectly, in events offered for betting. Direct participation includes players, managers, trainers, and any kind of support roles. Indirect participation includes any direct relationship with leagues, federations or other collective authorities. Not allowed to act as referees or their assistants in events offered for betting Not allowed to bet on events offered for betting by the lottery organization. Exceptions are possible under explicit authorization for purposes related to management of risk, such as hedging Discouraged or not allowed to place bets with other operators Prohibited from engaging in arbitrage, regardless of its legality in the specific jurisdiction. It is recommended that agreements for cooperation include explicit terms referring to the obligations of such personnel to make every effort and all times to actively participate to deter fraudulent activities related to sports betting and sports (as they would for nonsporting events). Personnel should be asked to re-certify their compliance at least annually. 11

12 It is recognized that the above limitations and obligations placed on personnel may at times be difficult to enforce and to detect. However, organizations are encouraged to make their rules of proper conduct clear to their personnel. These measures are designed to limit the possibility of fiscal fraud or even arbitrage. Work agreements or contracts may include specific terms of confidentiality, for example, to prohibit dissemination of information related to imminent changes of odds and of blocking of events. Terms may also be included for the disclosure of wealth and personal records, as permitted by applicable laws, regulations and good business practices. 12