Industry predictions: UK stake limits look likely and firms will struggle to see returns in US

Warwick Bartlett, chief executive and owner of GBGC

We will turn the corner as a society in 2022

This year and last year were defined by Covid in a number of ways. The problems caused to the land-based industry by lockdowns and social distancing assisted the growth of internet gambling. I have a feeling that we may be seeing the longtail beginning of the end of Covid in 2022; people will feel more confident going out, and using land-based casinos and entertainment. I doubt this will affect internet gambling by much as people have got used to the convenience of it. A lot of new gamblers have opened accounts, so I think they will stay. The two elements will be complementary to each other – omni-channel will take on greater significance because I expect to see some restrictions on advertising in 2022. It will be interesting to see what 888 does with the William Hill betting shops.

US operators will continue to struggle to see returns

The US is a market where no one so far seems to be making any money. As more states regulate, the marketing spend on each new state will increase and I expect to see further losses. The marketing war of attrition is likely to see some fall by the wayside. M&A has been mooted by some but valuations are high and do not reflect just how much money you need to invest in this market to break even. I don’t see anyone making money in New York where tax rates are so high, but I would love to be proved wrong. Regulation on a state-by-state basis is not working out as well as expected for the industry – it leads to higher costs, different rates of tax, and the cost to service a state with a low population. This market would have been so much better with federal regulation – one policy fits all. But we are where we are, not where we would wish to be. I think the remarks made by Matt Maddox from Wynn Resorts sums it up: “Competitors are spending too much to get customers. The economics are just not something that we’re going to participate in in the short term. We’re going to be focused on building a long-term business that’s sustainable, that is not losing lots and lots of money.” I, for one, was pleased that he had said that because now some reality may pave the way for more realistic trading.

The UK market could consolidate further depending on the outcome of the Gambling Act 2005 review

The UK government’s forthcoming white papers on the Gambling Act 2005 and advertising have cast a long shadow over the industry in 2021. The industry, to its credit, has already addressed many of the problems outlined by politicians, and gone further than most expected. I believe the problems have been largely addressed, but does the government need to go further? We have seen the devastation caused by some European countries that seem intent on driving gambling underground. I am hopeful that the UK will not make the same mistake. The problem is that the media and those intent on harming the industry have had so much publicity to their cause that the industry’s voice has been drowned. That being so, the government might need to be seen to do something, and that is a dangerous situation for the industry to be in. The UK is by far the largest internet gambling market in Europe with many international companies having a footprint here. Harsh legislation that limits deposits and stakes could de-stabilise the European market. In that event, we will see a lot less internet gambling companies, so I would expect to see the market consolidate even further.

David Inzani, solicitor at betting and gaming regulatory and legal experts Poppleston Allen

The level of scrutiny applied by the UK Gambling Commission towards new applicants will continue to increase

In 2021, new applications were subject to delays in terms of them passing, but this was just an adaptation to working conditions brought about by the pandemic. Equally, this year we saw that more work was required when it came to getting them over the line. Parties making changes to businesses in 2022, or new entrants entirely should expect the Gambling Commission to take a close look at them, but on a collaborative and collegiate basis. Clearly in 2022 the UK market will become even more challenging again from a regulatory standpoint and barriers to entry will increase, but that’s the sign of a healthy, well-regulated industry that wants to keep customers safe.

More hold-ups due

This isn’t a highly original prediction, but it seems inevitable that the white paper and following implications will be subject to yet more delays. Why? It looks like the review fell down the government’s packed list of priorities during the pandemic and equally, there was a wholesale change in the personnel responsible for decision making at the top of both the Gambling Commission and DCMS. I’m not a bookmaker, but a solicitor so I won’t offer any odds on exactly how long we’ll wait though. The conclusions should still emerge as anticipated with the delay unlikely to have any bearing on the outcome, but that doesn’t stop 2022 becoming a year of prolonged uncertainty for operators. Bear in mind, however, that if this means there’s a delay to the implementation of stake limits, there’s a commercial benefit for operators too.

Once the review is complete, it looks pretty likely that stake limits are implemented

We don’t yet know of any numbers or have any insight into their implementation, as there hasn’t been a huge amount of detail in the review up until now, but that shouldn’t stop operators continuing to get ready for life with stake limits in 2022. Based on the popularity of this measure with some but not all ministers and the safer gambling groups, it would be sensible to work on the basis they’re coming from next year. Regulators and operators should also begin to prepare themselves for an increase in Gambling Commission workload, which will be covered by the increase in annual fees. This means there will be an even greater layer of protection for the most vulnerable next year, but for those seeking to evade limits, the grey markets could be of even greater appeal.