Time to Act: The potential impact of a UK Gambling Act review

Shortly after the Conservatives swept to power in December, the newly formed government pledged to conduct a full-scale review of the Gambling Act, following through on a manifesto promise. Down on page 20 of the 60-page document, the Tories had described Britain’s Gambling Act as “increasingly becoming an analogue law in a digital age”, a somewhat dubious claim that’s been repeated ad nauseum since the general election, yet one that makes for a memorable soundbite. The only modicum of detail provided as to the scope of the review was that it will focus on tackling issues around loot boxes and credit cards (already banned by the UK Gambling Commission from 14 April 2020). And that was all.

It is now more than 12 years since the 2005 Act came into force on 1 September 2007. However, critics argue Britain’s gambling laws haven’t kept pace with innovation and that an unrestrained industry flourished under light-touch regulation while, until recently, paying lip service to problem gambling. With politicians, the media and public turning on the sector, the opprobrium has been deafening. Besieged on most sides, a review was almost inevitable. “Good legislation should always be reviewed,” stresses Steve Donoughue, a gambling consultant and a special advisor to a government inquiry into gambling and the Act in 2012. “We’re now 13 years in and, quite frankly, a lot has changed due to technology evolving. There is a lot of stuff they didn’t foresee.”

For one, the Act came in just months after the late Steve Jobs unveiled Apple’s first iteration of the iPhone, which was a catalyst for a radical shift in consumer behaviour and partly ignited the boom in mobile betting and gaming. Gambling on handheld devices helped turn the UK into the world’s largest regulated remote market which achieved £5.3bn in GGY for the year ending March 2019, although this was down 0.6% on the previous year. Combine this with the explosive growth of in-play mobile betting, the spread of social media marketing (Twitter was in its infancy in 2007), the in-your-face nature of gambling advertising, and some say the law needs updating.

The industry’s most outspoken opponents, meanwhile, would prefer to see the whole Act ripped up and replaced. James Noyes, an ex-advisor to vocal gambling industry critic and former Labour Party deputy leader Tom Watson, wouldn’t go that far, but he does urge a root-and-branch review. “The extent of industry exploitation we have seen over recent years, coupled with the lack of understanding on the part of operators in response to the excesses and exploitations of the industry, have led us to an untenable situation.”

Noyes also insists to EGR Intel that “tinkering around the edges”, as he puts it, isn’t going to answer the “big question of gambling reform”. He adds: “We have heard that the 2005 Act is analogue legislation not fit for the digital age, which is why we need to have a wholesale review of that Act to make sure that in the next 10 years we don’t see a repeat of the sort of excess, illiteracy and harm of the past decade, and we can finally build a UK gambling industry fit for the future.”

Stake and chips

While the manifesto referenced credit cards and loot boxes, there is a feeling nothing will be off the table, so to speak, with the review. In fact, even possible limits on online stakes could be explored if calls for caps grow louder. Last November, cross-party MPs from the Gambling Related Harm All-Party Parliamentary Group (APPG) suggested a £2 stake limit be imposed on online slots to bring them into line with the £2 cap on fixed-odds betting terminals (B2 machines).

Then, this February, the APPG suggested UK Gambling Commission (UKGC) CEO Neil McArthur told the group behind closed doors a decision on online slot stake changes would be made in six months. The revelation sparked a sharp sell-off of UK-listed gambling firms, resulting in around £500m being wiped off their combined value. For Richard Flint, ex-CEO of Sky Betting & Gaming (SBG), such a curb to slots stakes would be “a really bad move” and is an “analogue solution for a digital issue” as operators hold a holistic view of their players.

“You can see how much they are spending, what their affordability is, and have an interaction with them,” he says. “The people who want to spend above that level will shift their spending to different products like table games. If table games are restricted, they will switch to sports betting, virtual greyhounds or whatever it might be. If they are a gambler having real issues they will just go and spend that money offshore. That’s not an effective way to control the behaviour of disordered gamblers.”

The only publicly available investigation into online slots play in the UK was published by David Forrest and Ian McHale of the University of Liverpool in March 2018. Based on data from around a dozen operators gathered in January 2017, the duo found that 82.8% of online spins were at stakes of £1 or less. Just roughly 7% of spins involved bets of £2 and above, while stakes of £10 or more accounted for 0.6% of spins. Although this evidence would seem to suggest a £2 maximum bet would only impact a small portion of slots players, Regulus Partners anticipates such a cap would reduce the online industry by around £480m in revenue terms.

“Yes, it would only affect a small number of people, but it is still unclear whether the £2 limit would just apply to slots,” Flint opines. Indeed, the APPG wants to see parity with FOBTs, yet the play on these machines in betting shops is dominated by roulette. An identical £2 limit on online table games stakes would devastate the sector. “If you are going to make it equivalent to retail, you have to apply it to roulette,” he continues. “Then you would have a lot more of the play that would be above £2 a time. If it was just slots, it would be a minority of people who would be affected but, still, why force those people to offshore sites?”

Extra privileges

Many of the high-staking online slots players are likely associated with another aspect of the industry that has come under intense scrutiny and will form part of the review: VIP schemes. Magnified by horror stories in the media of VIPs being encouraged to gamble far beyond their means – in some cases with what turned out to be stolen funds – following perfunctory efforts to conduct source-of-wealth and AML checks, these ‘clubs’ are firmly in politicians’ crosshairs. Indeed, the days of rolling out the red carpet and showering high-spending customers with free bets and bonuses – as well as complementary tickets to sporting events and other perks – to keep them loyal and gambling large sums they can’t afford seem numbered.

The industry’s reliance upon VIPs was laid bare in a recent article published in The Guardian. Through a freedom of information request, the newspaper obtained data collected on nine operators by the UKGC which showed that at one firm, while 2% of customers were VIPs, they accounted for a startling 83% of deposits. Amid mounting criticism of the practice, the trade body representing 90% of the industry, the Betting & Gaming Council (BGC), has made the issue of how firms reward and conduct affordability checks on high-staking players a priority since its formation last year.

In fact, the inner workings of VIP schemes were recently probed when the chiefs from five leading UK firms (GVC, William Hill, bet365, Sky Betting & Gaming, and Flutter’s Paddy Power Betfair) and the BGC appeared in front of the House of Lords select committee. During their two-hour grilling, which took place as ICE kicked off a few miles east at ExCeL London, a few bosses spoke of how VIP staff were no longer incentivised depending on player spend and were instead now required to prioritise responsible gambling (RG) and player protections, as well as conduct far more thorough source-of-wealth checks.

Status symbols

For a recreational-centric operator like SBG where the average bet on sports and gaming is £9 and £20 respectively, together with the fact 62% of customers have deposited less than £240 in the past 12 months, just 100 of its three million customers are classed as VIPs. These account for 1% of the Yorkshire-based firm’s annual revenue. Over at GVC, VIPs represent 1.6% of its Ladbrokes Coral customer database and 38% of total deposits, CEO Kenny Alexander informed the committee, while acknowledging VIP schemes were “too aggressive”.

Meanwhile, William Hill CEO Ulrik Bengtsson revealed that 0.6% of his customers have been afforded this status, with their activity accounting for around 20% of the FTSE 250 operator’s revenue. To qualify for VIP status, these customers have to be over 25, not set deposit limits, time-outs or self-excluded, or had RG interventions. Ralph Topping, chairman of CEE-focused bookmaker Superbet, was CEO of William Hill from 2008 to 2014. He insists that any operator still incentivising VIP personnel based on player spend “are stupid and should stop it”, yet he doesn’t support an outright ban on VIP schemes. “We all don’t earn the same salaries and VIPs are not your fiver-a-bet customers,” the Scot asserts.

“If you go to buy a Lamborghini, you get a different kind of service. And if you are someone who has high net worth, you get a different kind of service. Why shouldn’t the betting industry offer a differentiated service to high-net-worth individuals? Why should we have objections against these individuals or multi-millionaires spending discretionary money and being looked after by betting companies? I don’t see why that’s wrong. It’s hypocritical.”

As Topping alludes to, a tailored level of service involving personal account managers for wealthy customers is part and parcel of many industries. The issue for the gambling industry is that, according to UKGC research, some 8% of Britain’s 47,000 VIPs are thought to be problem gamblers. This equates to 11 times the problem gambling rate among the wider population. So, something has gone awry with VIP programmes. “If it’s a real VIP who is a very rich person that can afford what they are doing and you want to take them to the races or the football, I don’t think that in itself is the problem,” says Flint. “The problem is when you have people who clearly can’t afford their gambling and are out of control and being led along and exploited by certain companies in the industry.”

Flint is of the opinion that robust, upfront affordability checks are a much-needed remedy. “If you did the affordability checks and deposit limits before people spend, then the issues associated with VIP schemes would go away. I think that is where the focus should be.”

Richard Flint

GVC, which employs 120 people in its RG department, was asked by the UKGC to conduct a review into VIP programmes, prompting Conservative MP Sir Ian Duncan Smith, who sits on the aforementioned APPG, to compare it to putting the mafia in charge of looking into organised crime. Either way, Alexander insisted to the select committee that if standard, industry-wide affordability checks that can’t be abused by switching play to another operator were able to be introduced, the number of problem gamblers – approximately 400,000 (0.8% of the UK population) – would “come down significantly”.

Your ad doesn’t go here

One unintended and unforeseen consequence of the Gambling Act legislation, which permitted gambling advertising, including it being beamed into people’s living rooms, was that it would open the floodgates on marketing to the point where sport and gambling brands are now inextricably linked. Today, for instance, 10 of the Premier League’s 20 clubs have gambling brands emblazoned on their shirts, most of which are Asian-facing operators. In the tier below, the Championship, 17 of the 24 sides have shirt deals with gambling companies. Therefore, 60% of the kit sponsorships in the top two divisions are gambling-related.

On top of this, there are the numerous ‘official betting partner’ deals struck with clubs, gambling logos flashing up on LED boards wrapped around pitches, not to mention the ubiquitous TV ads accompanying live sport. The BGC insists the self-imposed whistle-to-whistle ban around televised Premier League matches has reduced under-18s’ exposure to gambling by 90%, yet critics don’t feel this is enough. They accuse operators of bombarding football fans with betting ads and live odds to the point where it normalises gambling in the eyes of minors. The industry, though, would argue it has a perfectly legal right to advertise and strike commercial deals in a saturated UK market.

To borrow a phrase from the competitive equine world, gambling advertising is a racing certainty to be included in the government’s review, as well as sport’s relationship with the activity. Indeed, the new sports minister, Nigel Huddleston, is poised to play a leading role in the review and has spoken in parliament of his concerns around problem gambling. Shane Stafford, a non-executive director of YGAM who has held senior marketing roles at Paddy Power, BetVictor and Matchbook, believes time is up for shirt deals specifically. “Industry sponsorship always happens in waves much like the rise and fall of electronic and alcohol companies’ shirt sponsorship. Gambling has had its time.”

While a blanket gambling ad ban similar to Italy seems an unlikely outcome, the review is sure to also investigate the pervasiveness of marketing these days. There is also the possibility the rise of digital and social media marketing – the latter of which the Gambling Act couldn’t have predicted – will be scrutinised. Furthermore, the role of affiliates and the way they operate, particularly tipster accounts on platforms like Twitter, could fall under the scope of any advertising aspect of the review. “Affiliates seem to be a nice and easy scapegoat to whip,” bemoans Tom Galanis, director of TAG Media.

Some argue the way things are going, gambling is the new tobacco insofar as the tobacco industry disappeared from sport sponsorships and was prohibited from advertising in the UK. “The comparison to the tobacco industry is interesting and we should be paying attention to it,” Stafford warns. Meanwhile, Donoughue says: “If the British public think that gambling is the new tobacco, we just have to accept it.” And the comparisons between gambling and tobacco don’t end with advertising. Indeed, it has been mooted that gambling-related harm should be treated as a public health issue, and gambling should migrate from the Department for Digital, Culture, Media and Sport (DCMS) to the Department of Health and Social Care.

“If it goes to health, we might as well pack up our bags and go home,” Donoughue remarks. Topping also vehemently opposes such a switch. “Health is definitely not a place where it should sit – that’s an insult to the industry,” he blasts. “If anything, it should not sit with DCMS because they are only interested in the arts and it was a strange place for the industry to end up. It should certainly be some department of industry, but it shouldn’t sit with health at all. It would be absolutely crazy to put it there.”

Rate and review

In a recent blog post inspired by the spectre of stake cuts to online slots, Donoughue went as far as to describe the current climate as death by a thousand cuts and that the industry will be “practically dead in 10 years”. This might be a tad melodramatic, or hyperbole for effect, but the way the embattled industry is under fire at the moment has the pessimists wondering whether it is facing an existential threat. One danger, in theory, of changes to the Act resulting in unnecessary over-regulation is increased leakage to the black market. That would be a blow considering the Act did a very good job at channelling players to UK-licensed sites, resulting in a channelisation rate of around 95%.

Steve Donoughue

However, a William Hill- and GVC-backed PwC study suggests the active online black market is worth £1.4bn, or 1.2% of turnover, annually. The BGC has claimed an estimated 200,000 people in the UK have used illegal sites in the past year and that there were 27 million visits from UK IP addresses to unlicensed operators. The BGC also claims four in 10 searches on key gambling terms spit out black market sites, yet those calling wholesale changes question whether the industry is exaggerating the threat posed. Channelling would probably dip, especially if slots limits are applied, but to what extent is far from definitive.

Much rests on the scope of the review, how it’s conducted and its recommendations, obviously. Who leads the review will be key, too. “They have got to be very careful who they pick [to chair it] because if they pick any of the anti-gambling extremists, then they will get it wrong. Whoever you get won’t be perfect,” Topping warns. The likelihood of the UK ending up with a whole new Gambling Act seems remote, though, particularly when this one came into force seven years after economist Sir Alan Budd began his review into the gambling laws, culminating in the report that was the blueprint for today’s Gambling Act. A similar timeline and you’d be looking at the tail end of the 2020s for implementation of any new law.

“Things like affordability, stake limits and restricting advertising can all be done without a new Gambling Act,” Flint argues. Donoughue concurs: “It [the review] will be similar to a select committee inquiry which will make some recommendations. I don’t think it will be a new Gambling Act.” So, what about this well-worn soundbite of an analogue law in a digital age? “My view is this argument that it’s an analogue law is just not true,” Donoughue responds. “It was built to replace an analogue law. I think it [the analogue claim] is very much an argument by those who want to ‘tobacco-ise’ gambling by arguing for a whole new gambling law.” Ultimately though, Topping, who spent 44 years at William Hill, doesn’t have much faith in the government where gambling is concerned. “We have analogue politicians in a digital age,” he concludes.