Left reeling: Industry reaction to the UK government imposing online slots stake limits

After more than five years since the Gambling Act 2005 was promised to be dissected, assessed and rebuilt for the digital age in the Conservative’s 2019 manifesto, the UK government has delivered the first official, concrete change in policy. From September, online slots stake limits will be maxed at £5 per spin for those aged 25 and over, while 18-to-24-year-olds will be faced with a £2 cap.

The £5 maximum stake brings online slots in line with gaming machine limits found in land-based casinos, while the £2 cap for under 25s is the same as fixed-odds betting terminals in bookmakers’ shops after the government slashed maximum stakes from £100 to £2 in April 2019. It is a move that has long been expected to come to fruition after the white paper into the Gambling Act 2005 review was published last April, but the reality of a tangible, actionable and required effort from online operators will mark a new age for the UK market and consumers.

The proposals were put forth with the intention of reducing gambling-related harm, especially among young people, who, according to the UK government, have lower risk perception skills due to “ongoing neurological development”. The measures should see customers spend less on slot machines but, with no time limit or spin delay legislation being introduced alongside stake limits, the measures have drawn criticism.

In fact, even reformists who have long pushed for a slots stake limit remain unhappy. Gambling with Lives described the £5 cap as a “missed opportunity to stop harm”, while the Social Market Foundation said limits alone were “not enough”, suggesting people could still gamble more than £100 per minute when the new measures come in.

This is a view shared by partner at Northridge Law, Melanie Ellis, who airs her concerns to EGR. Ellis suggests that the approach to solely restrict stake limits could be a moot effort when compared with the various factors that come into effect when understanding consumer behaviours. She says: “While there is evidence to indicate that rates of problem gambling are higher among those who play online slots compared to other products, I don’t believe there is sufficient evidence that a stake limit will actually serve to protect vulnerable players from harm. 

“The government clearly want to be seen to be taking serious action to tackle gambling harm but appears to be relying on an assumption that stake limits, and these particular limits, will be effective, rather than solid evidence.”

In terms of evidence, the government has pointed to data which shows just 0.6% of all spins are over £5, with around 20% of customers currently choosing to stake £5 at least once a year. Findings were also taken from GambleAware which showed that of those receiving treatment from the National Gambling Treatment Centre in 2022 to 2023, more than a third (37.9%) reported online slots as being one of the “top three gambling activities contributing to their difficulties with gambling”.

For Ellis, aside from the data the government decided to highlight as part of the consultation, there is still a lack of depth to truly comprehend, and therefore implement, policy changes. She adds: “My concern is that in response to the stake limits, customers simply spend more hours playing slots, losing the same amount of money but potentially experiencing greater harm due to the increased session length or frequency. We simply do not have sufficient evidence which demonstrates the impact of the various factors associated with playing slots on customers’ experience of gambling harm.”

Customer care

While Ellis points to a lack of concrete data, Better Change CEO Victoria Reed is damning in her assessment of the measures. She describes the new stake limits as an “own goal” from the government, as well as being “lazy legislation purely to appease political pressure”. Reed says prevention is better than a cure in this instance, and that education for players should be the top priority to better improve gambling-related harm outcomes.

Similarly to Ellis, Reed believes that stake limits alone will do little to support those at risk, citing conversations with those with lived experience as evidence. She says: “Without exception, every person with lived experience I have heard from about this all say they don’t think this is going to reduce harm. For many, it’s not about the amounts they are spending, it’s about winning to be able to play for longer, and these limits will just encourage them to extend their sessions. If they have £50 available to gamble, they’ll play the £50 regardless of whether that takes them five spins or 10.”

Reed insists that measures won’t necessarily be effective when implemented, noting that should new legislation operate in a vacuum, then the desired outcome will not present itself. She points to the lack of comprehensive action, namely the absence of restrictions on speed of play. She continues: “It is not inconceivable with the new limits and speed of play that someone playing at a £2 stake could lose in excess of £2,000 within an hour, which is why I think it’s lazy legislation.

“The effectiveness of stake limits in addressing problem gambling and promoting responsible gambling practices can’t be in silo. They only have a chance of working if they’re used in conjunction with other tactics. As it stands, all the limits are doing is masking the symptoms of problem gambling, thus making it harder to spot those who genuinely need support.”

The consultation into slots stake limits received contributions from operators, universities, gambling charities and local governments as various organisations gave their insight into the eventual outcome. And while there have been some less-than-positive reactions, the Betting and Gaming Council (BGC) has applauded the measure.

A spokesperson for the trade body tells EGR: “We welcome the government’s decision on new stake limits for online slots games, which provide enhanced protections for young people. The BGC supported the government’s intention to reform stake limits and we fully engaged in the consultation process and the discussions with ministers that led to these proposals.”

However, the spokesperson emphasises, in the same vein as Better Change’s CEO, the need to view these changes through a holistic lens. With slots stake limits the first actionable and imminent official change from the white paper, while affordability checks having unofficially been rumbling on and a pilot scheme due to launch, the focus will inevitably be on the first known unknown. One such fear, as regularly cited from the BGC in the face of regulatory change, is black-market leakage.

The spokesperson continues: “It is important to recognise that measures like this come with a cost to our members and impact their customers. Nothing in the white paper should be viewed in isolation but instead seen as a total package. We must avoid customers drifting to the unsafe, unregulated black market online if we don’t tread carefully and get the balance of regulation right.”

Black-market leakage concerns have been prominent since the release of the white paper, with anecdotal evidence suggesting some measures, particularly affordability checks, are driving customers into the hands of unregulated operators. Stake limits, in theory, could well end up with a similar result. However, it is difficult to truly assess the size of the black market, with Gambling Commission deputy CEO Sarah Gardner recently telling a panel in Sweden that while the scale “may be overblown” and the regulator is committed to tackling the problem, there remain legitimate worries.

Gardner added: “We do not accept that the presence of illegal gambling means we should accept lower standards in the regulated market in a race to the bottom which ultimately could be dangerous for consumers.”

For Ellis, the introduction of stake limits means it is “inevitable” that some customers and spend will be lost to the black market. A combination of an end to VIP schemes in the UK, coupled with loss limits and stake caps, is a potent cocktail. Although it must be noted that there are no such stake restrictions planned for live and RNG casino products, including blackjack and roulette.

“The question is how much?” Ellis muses. “The higher-staking customers will fall into three broad categories: those who accept adjusting their stakes and continue to play regulated slots, those who transfer their higher-stakes gambling to other products, and those who transfer their business to black-market operators. In my view, we don’t have sufficient evidence to accurately predict how many will fall into each category.”

Revenue ruined?

While there are concerns around the effectiveness of the limits to protect consumers, there is also the obvious knock to operators’ top and bottom lines. Being successful in the UK is difficult; a suite of entrenched top-tier firms, now coupled with regulatory headwinds, will make it tougher. But the leading operators are also warning of an impact.

Entain confirmed a combined £40m hit in the UK and the Netherlands this year in the FTSE 100 firm’s full-year 2023 report. While the group did not break down that figure into its subsequent parts, slots stake limits will play a significant role. However, speaking to EGR, deputy CEO and CFO Rob Wood describes the cap as a “positive regulatory development”.

He notes: “We think this will be good for us. Fundamentally, we’ve already lost customers who play over the new cap level. So, it’s an opportunity for us to win them back. The industry is working together on a uniform approach, which would solve the complexity as every operator does it a bit differently.”

Wood expects the UK, which suffered a 6% dip in 2023 revenue when baking in regulatory challenges, to return to growth in 2025.

And while Rank Group CEO John O’Reilly previously told EGR that the new limits could amount to a £4m EBIT hit for the Maidenhead-based operator, Bally’s CEO Robeson Reeves told analysts following the publication of the group’s Q4 results that the change was a good thing for the company. Reeves said: “I feel good about [limits]. All that it ends up resulting in is much more sustainable play, which means there’s greater longevity for this business.”

Despite the positive spin from Reeves and Wood, the government has anticipated the cap could result in a loss of £166m from industry gross gambling yield, even though only 0.6% of all spins involve stakes above £5. There will also be extra costs for operators to implement the measures as part of a 12-week transitionary period. The government has promised to deliver a final stage impact assessment of the changes.

Ellis claims that while the 0.6% appears small in isolation, when extrapolating that percentage, the scale of the cap crystallises. She says: “We can safely assume that 0.6% of spins represents many millions of gambling transactions that will be affected. It is also worth noting that 20% of slots customers translates to at least 300,000 people who will need to adjust their gambling behaviour to some extent, based on newly released survey data from the Gambling Commission which found that around 3% of the adult population played online slots in the past four weeks.”

With operators having reported downturns in FY 2023 UK revenue, and with a long tail of regulatory headwinds alongside affordability checks and now slots stake limits, it may well be a case of grinning and bearing it. The shift to a more recreational customer base has been championed on analyst calls, reflecting a more sustainable player base. But ultimately, revenue and earnings will dip. Flutter could be seen as an exception, with UK and Ireland revenue up 14% for 2023 and online gaming alone increasing 18% on a constant currency basis. For others, including Entain, 888 and tier-two operators, 2025 could be the year to look at the UK as the new normal.

Ultimately, the measures have been put in place for customer protection. But the reality of protection is muddied. Black-market concerns exist and the lack of a cohesive approach with other restrictions could see caps considered a façade, or a sticking plaster to cover something more serious. Reed argues blanket approaches do little to support the individual and, while figures and data can indicate change, the material reality is multi-faceted and yet unknown.

Reed concludes: “I’m not in favour of restrictive measures such as the introduction of mandatory deposit limits or session limits which would need to be implemented alongside the stake limits in order for them to have any effect, but would much rather see operators continuing to understand their customers on an individual level.”

Prevention is better than the cure in theory, but the exercise being suggested may well still end up being a difficult pill to swallow. Costs to both business and individuals could yet soar despite the efforts of government. And, of course, with more white paper measures to be introduced, the same critiques and conversations will rumble on.

EGR reached out to the DCMS in response to the comments made in this article about “lazy legislation”.

DCMS referred us to a statement made by the Gambling Minister Stuart Andrew: “Although millions of people gamble safely every single day, the evidence shows that there is a significantly higher problem gambling rate for online slot games. We also know that young adults can be more vulnerable when it comes to gambling-related harms, which is why we committed to addressing both of these issues in our white paper.”