Industry reaction as cross-party thinktank proposes radical shake-up of UK gambling market

We are always taught that change can be good because it allows people to grow and experience new environments, often to their benefit. However, change in regulation isn’t always so cut and dry, as new legislation provides many headaches for online gambling operators and their compliance departments.

This industry is one that thrives on steady appreciable changes that walk the tightrope of improving the efficiency of the market, while also ensuring that businesses that populate the market can grow and consumers are protected.

With the latest report into the UK gambling industry, the Social Market Foundation (SMF) has attempted to find a happy medium of market improvement as it seeks to update the 2005 Gambling Act for the digital age.

But how has the industry reacted to this broad and challenging study and its two biggest recommendations, regarding taxation and affordability?

Regulus Partners analyst Dan Waugh

I would characterise this as an interesting contribution to the policy debate on the licensing and regulation of gambling in Great Britain. It is a collection of ideas rather than a fully developed set of proposals. The SMF has shone a light on several areas that seem ripe for reform, such as ending the secretive and opaque nature of Gambling Commission’s enforcement sanctions. Other suggestions are more radical, for example establishing multi-departmental responsibility for governance (not an area where the government has a particularly good track record). Some recommendations require further explanation, such as what happens when the suggested “soft cap” of £100 a month is reached?

Does it trigger an open source check or something more intrusive, such as a demand for private documents? In what other areas should the state be allowed to oversee and dictate consumption (food and drink, luxury goods, automobiles etc)? The report is largely an opinion piece rather than a work grounded in deep analysis of problems that need to be solved. However, it is refreshingly open in this respect, compared with other reports that have claimed empiricism while displaying none. Stakeholders should seek to work with the grain of this study, supporting sensible recommendations and demonstrating a willingness to explore the practicalities and complexities of its more radical elements.

The Betting and Gaming Council

This is a thoughtful study ahead of the government’s Review of the Gambling Act – a review we fully support. We welcome the fact that, in contrast to the siren voices of prohibitionists who claim problem gambling is high and increasing, this report rightly states that there is no evidence of a rise in problem gambling and that levels have been stable around 0.7% for nearly two decades.

Although we do support many of the measures contained in the report, the authors share the BGC’s determination to raise standards and we welcome the important acknowledgement that our members have taken action to drive higher standards, especially during the Covid-19 crisis. We fully endorse the concept of a British gambling kitemark as a sign of operators’ commitment to fairness, quality and integrity and the BGC would welcome the opportunity to lead on the development of this concept.

But it is vital that the government’s Review is evidence-led and avoids the dangers of unintended consequences. Some 30 million people enjoy an occasional bet, whether on lottery, bingo or sports and gaming, and the overwhelming majority of them do so perfectly safely. We already carry out robust and improved affordability checks, and regularly intervene on customers to ensure they gamble within their means. We disagree with the suggestion of an arbitrary and random low cap on spending and can think of no other area of the economy where the government determines how much an individual can spend. We must avoid measures that see safe regulated betting being driven to unregulated, offshore, illegal black-market operators online who don’t have the same checks, interventions and high standards that apply to regulated BGC members.

Measures must be proportionate, evidence-led and fully thought through so as not to jeopardise the 100,000 jobs the industry supports or the over £3bn in tax revenue it generates for the Exchequer.

The Gambling Commission

We are aware of this report and will study its recommendations. We welcome all contributions to the current debate around gambling and are focussed on responding next month to the recent reports from the House of Lords Select Committee and the Public Accounts Committee.

Northridge Law LLP partner Melanie Ellis

The proposal to set an affordability figure beyond which operators must conduct enhanced due dilligence has some appeal, as it would level the playing field for all licensed operators. However, the idea that individuals must prove they can afford to spend money on leisure activities before being permitted to do so by the government is a very concerning intrusion on individual freedoms and privacy. Even if we accept this conceptually, the blanket application of a £100/month figure ignores the large variation in household incomes and the likely negative effect on channelisation of such a low figure. Further, the recommendation needs to be considered in light of the nature of the checks that will be required, which are not discussed in sufficient detail in the report.

The report calls for a new Gambling Ombudsman to be the manager of affordability data, however there is a vast difference between an Ombudsman passing on information from open source checks which estimate affordability for a given individual and individuals being required to submit paperwork to the Ombudsman, such as their wage slips, tax returns or bank statements. If the proposed approach is adopted, it will need to be much more nuanced. It is very surprising that the report does not even consider a risk-based approach to affordability checks, for example with open source checks being used by the Ombudsman to set suitable individual triggers for more intrusive information requests.

While the rationale behind the affordability proposals is consumer protection, in relation to tax reforms it is less clear. The report calls for the establishment by remote operators of a “minimum onshore footprint”, however most of the suggested benefits of this (ability to investigate operational malpractice, apply regulatory standards and apply a statutory responsible gambling levy) are already entirely achievable with operators based in jurisdictions such as Gibraltar or Malta. The reality is that the proposals are not a means to achieve higher standards of consumer protection, but a financial inducement for gambling businesses to employ people in the UK. Operators will simply need to weigh up the costs of meeting the minimum requirement against the tax implications.

Genius Sports betting integrity manager Stephen Emberson (Twitter thread)

A quick (boring for most and potentially not that quick) thread on my thoughts around today’s hot gambling industry topic; the latest report into regulatory change.

Whilst many will be instinctively against a “soft cap” for accounts upon sign up. I’m not. I think there is

— Stephen Emberson (@embe14) August 5, 2020

Keystone Law partner Richard Williams

Some of the SMF’s recommendations will not be particularly welcomed by sectors of the remote gambling industry. However, the report follows a similar flogging from the National Audit Office, Gambling Related Harm All Party Parliamentary Group, House of Lords etc. While the SMF states that it is independent of any political party, given that Dr Noyes was a former advisor to Tom Watson, it appears that political influences have crept in.

The industry will particularly welcome proposals to make sanctions for licence breaches more transparent. I have long argued that the UKGC should issue guidance, such as that published by the Sentencing Council, which is used by courts to fix fines for food safety and health and safety offences. Such guidance sets out financial penalty levels and mitigating and aggravating factors and allows professional advisers to more confidently advise clients about the outcome of a regulatory prosecution. The current system of Gambling Commission penalties is too shrouded in mystery. Transparency would therefore benefit everybody.

Recommendations for stake limits and restrictions on speed of play are not new. Even with industry voluntary proposals, it is likely that mandatory restrictions of this nature will be imposed in future. The introduction of a net deposit limit of £100 per month for each customer will not be welcomed, as many “good” casino customers will be exceeding those limits currently. However, the industry must realise that resisting spending restrictions too loudly will play into the hands of those who accuse it of fleecing the vulnerable.

Seeking to persuade offshore-based operators to come back onshore with tax rebates and incentives is new. Offshore jurisdictions will be concerned about these proposals. However, I can’t see any real prospect that the Exchequer will give tax handouts to gambling operators in the current climate, even if this would bring employment benefits. Proposals to split the Gambling Commission into a separate regulator and an Ombudsman to deal with gambling disputes is not new and I expect that the industry will be fairly receptive to this. However, it could add significantly to costs and the industry knows it will have to pay for most of these proposals.