In a world where smartphones, self-driving cars and the Internet are at the frontier of technological innovation, Silicon Valley has achieved a level of cultural prestige and influence that society hardly could have predicted. Much of the power of these tech giants stems from their large-scale data collection operations, giving companies the likes of Facebook, Google, and Amazon an unprecedented overview over our everyday activities.
Data collection at such unprecedented scales can be crucially important for making calculated, strategic decisions that anticipate the movements of markets, optimize supply chains, and predict shifts in the political climate. Outside of Silicon Valley, traditional companies now use this wealth of information to predict labor needs and plan shipping routes. Retailers use it to target advertising and forecast sales. Some companies even employ statistics derived from data mining in personality tests to make hiring decisions. In many ways, decision-making has become increasingly dependent on large, quantifiable data inputs.
This data has been increasingly important for the development of recent advances in Artificial Intelligence (AI), with data-wielding tech giants racing to acquire AI startups. Google alone has acquired 12 AI-related start-ups since 2012, but if the acquisitions of Alphabet, its parent company, are taken into account, the number rises to 20 – the largest number among the tech giants. In order to gain an advantage in an ever more fiercely competitive field, IBM recently partnered up with MIT to develop a $240 million AI research lab.
With such dynamism in the industry, AI development can be expected to progress quickly. In fact, AI has already improved to the point that it outsmarts the human brain. When in May this year, Google’s AlphaGo defeated a human champion of the notoriously complex game of Go, a threshold in AI advancement was breached. Although the artificial brain beat its human opponent only by a narrow margin, the fact that it was programmed to ensure victory and succeeded may signal the beginning of a new era.
However, AI is no longer limited to playing Go, with unforeseen consequences to boot. In the search for new sources of revenue, Google and Facebook have now turned their eyes onto the flourishing online gaming market. The market is estimated to reach a value of $66.59 billion by 2020, as a growing number of countries, with the US being a newcomer, adopt new regulations. By leveraging their data mining operations and AI advances, these companies are now able to create AI capable of enhancing the fairness and competitiveness of games.
Fundamental to virtual gambling is the Random Number Generator (RNG), which guarantees that games of chance are played fairly. Most current online casinos face audits to ensure customers enjoy fair play – but as a recent investigation revealed, a group of Russians was able to rig the RNG system and obtain unfair winnings – as much as $21,000 per person for two days of playing casino slots. Another gang in Asia used a fiber optic camera and a computer program to record the riffle of a deck of cards and predict how they will be dealt.
For an industry that has enjoyed newfound success from the past decades of technological advances, particularly from the rising capabilities of mobile devices, big data and advanced AI are needed more than ever to ensure that trust is not broken between players and game providers. Consumer protection is now at the top of the list for most online gambling companies, especially in trying to identify and isolate gamblers with unhealthy gaming habits.
While Silicon Valley companies have come under increased scrutiny over their unprecedented influence and power over data, and Europe is enacting new regulations concerning the way firms store and utilize the information they collect, the gambling sector remains largely unaddressed by regulators. But Malta, where online gambling makes up 12 percent of GDP, could offer a lesson for other regulatory bodies that debate how best to reconcile the industry’s growing revenues with consumer protection.
Malta’s gaming authority (MGA) has proposed a regulatory overhaul that would increase the scope of their oversight and enforcement abilities, streamline licensing and taxation, and crucially, enhance consumer protection standards. According to the MGA’s Executive Chairman, Joseph Cuschieri, the legislation will be introduced in the fourth quarter of this year, with a focus on improving protections for consumers, but also to encourage innovation. Perhaps as a nod to the source of the challenges to come, Cuschieri, and Emmanuel Mallia, Malta’s Minister for Competitiveness and the Digital Economy, call this the “Silicon Valley” concept.
Malta’s efforts of balancing the need for robust consumer protection with a good climate for development, offer a model to address the new threats to the industry from tech giants. Developing data collection and predictive AI software are the most efficient way to identify at-risk behaviors. However, for that to happen, adequate and forward-thinking regulation is necessary – and so far, regulators seem more interested in twiddling their fingers than taking action.