FOBTs and PASPA: What lies ahead for online gaming?

Spring 2018 feels like a critical moment in the online gaming space, as industry insiders consider two pivotal decisions that will have a global impact in the next year. Firstly, those with UK operations are assessing the outcome of the Triennial Review on FOBTs. Secondly, we are awaiting the US Supreme Court ruling on the Professional and Amateur Sports Protection Act (PASPA) in New Jersey, which could finally legalise sports betting there.

The UK Gambling Commission’s announcement in March – recommending maximum stakes of £2 for slots and £30 for casino-style games on FOBT – is sensible and considered, and I believe its implications for online platforms are as significant as those for high street bookmakers. From a tax perspective, the £2 limit is likely to be approved by Philip Hammond, but with the requirement to regain the lost tax take elsewhere in the sector.

If, as I suspect, FOBT use declines and bookies are forced to close their physical shops, gamblers will be driven online, where there are no trained staff to monitor play. Spend and problem gambling could rise. Therefore, should the new rules on maximum stakes extend online?

My view is that capping is not the right solution, because problem gambling isn’t related to the value of someone’s bet (some gamblers are wealthier than others). Everyone has a right to gamble, but arguably they also have the right to be protected from themselves – and chunky fines issued to big operators who have got this wrong to date are forcing the sector into action.

Operators typically spend a third of their budgets on marketing and know each individual’s online spending pattern. The onus is therefore on operators to use their data to identify problematic patterns, as well as to find commercial opportunities.  Already, we are seeing senior teams discussing how to appropriately share data, which is encouraging, but will need to be more frequent and better defined to drive meaningful change.  By working together now, operators can get ahead of the press and the political agenda so that placing a bet online feels as safe as going to the bookies will now be.

Meanwhile, in the USA, operators are poised for the outcome of the New Jersey vs PASPA case. Repealing PASPA could create opportunities for betting and gaming firms but the size of the prize is unknown – it may not be commercially viable to operate in the new environment, particularly if operators are taxed on stakes.

While 15 states have already announced that they would legalise gambling, it will take the adoption by key locations such as California to make US gaming a significant opportunity. We’re seeing a trend of cooperation between operators from in and outside the US as companies prepare to capitalise on any announcement. This mirrors the need for UK operators to work more closely in the wake of the new FOBT rules. Increased collaboration is a key theme across the sector in 2018.

If PASPA is repealed, the US market could be flooded in 2019. For online gaming, the biggest implication may be the need for a physical presence in order to operate in some states. There is also uncertainty around whether the advertising of gambling will be permitted.

Online gaming really does feel poised for change and there is an opportunity to become industry leaders around the use of marketing data, particularly in the UK.  The gambling sector is already highly regulated here, but operators need to work together in order to influence the press and politicians. I can’t wait to see how the land lies next year.

Grant Humphrey is a director at Ernst & Young and leads their Betting and Gaming practice