Gambling, Uk’s new paradigm
The appointment of Chris Philp as new minister – known for his tough stances towards the gaming sector – worries the UK industry ahead of the Gambling act’s review.
By Michael Haile
Chris Philp has been named as the UK’s Gambling Minister following the recent Cabinet reshuffle led by the United Kingdoms’s (UK) Prime Minister, Boris Johnson. Philp was appointed Parliamentary Under Secretary of State at the Department for Digital, Culture, Media and Sport (DCMS). DCMS confirmed Philp would replace John Whittingdale in overseeing the gambling industry in the UK. DCMS also confirmed that Philip would oversee the completion of the 2005 Gambling Act review. It is expected that Philip will take a tougher stance towards gambling operators compared to his predecessor as he previously campaigned for stricter regulations of fixed-odds betting terminals (FOBTs) even before the £2 stake limit was implemented in 2019, a glaring difference from Whittingdale – who had led a committee that proposed an expansion of the machines prior to his time overseeing gambling.
Philips’ new boss is Nadine Morris, who replaces Oliver Dowden as Secretary of State for DCMS, who was also promoted to the role in the same reshuffle. As the new Secretary of State DCMS, Dorries will have wide range of responsibilities to oversee. Dorries has been a long-time supporter of Boris Johnson, which may go some way to explaining her appointment to senior government roles. Many political commentators have suggested Johnson prizes loyalty above other characteristics.
Her views on gambling are less obvious, but she has been an outspoken supporter of British racing and was previously a member of the All-Party Parliamentary Racing and Bloodstock Industries Group. She has also been seen at top racing events, such as the Royal Ascot and Qipco Champions Day. Nadine Dorries is the 10th culture secretary in as many years. The position of Secretary of State for DCMS seems to go through constant change so there is an inevitable lack of continuity and experience. The gambling industry and the regulator will certainly find the lack of stability disruptive considering the challenging regulatory changes that are on the horizon. DCMS is also managing the Fourth Competition for the National Lottery license, which has been delayed due to the pandemic. The industry has two concerns in this regard- first, that there will be further delays as the new ministers get to speed with the brief; and second, that the change at the top could presage a less benign view of the sector, however the industry can still count on the support from some quarters in Parliament.
When the Labour government liberalised gambling in the UK with the 2005 Gambling Act, it introduced one of the most permissive regulatory frameworks in the world. The idea was that more gambling would deliver economic benefits, and in many ways it did. GGY has nearly doubled, to £10.2bn a year. The industry’s marketing spend has boomed. And HM Revenue and Customs has gained too.
When the 2005 Gambling Act was passed concerns were focused on land based super-casinos. But what happened, instead of the creation of giant hubs, is that gambling, like many other industries, moved online and to smartphones. Furthermore, the UK’s land based gambling sector saw the proliferation of FOBTs, from which gambling companies earned huge amounts: £1.8bn in profits each year until the maximum stake was slashed from £100 to £2 in 2020 following a public outcry.
Oliver Dowden, the former Secretary of State in 2020 said that the 2005 Gambling Act is being reviewed in order to “bring the Gambling Act into the digital age.” The Secretary of State has further described the Gambling Act as “analogue law in a digital age”. His statement rings particularly true as the GGY generated by remote gambling overtook land-based gambling for the first time in2019. The government’s declared aim of the review is to ensure an appropriate balance between consumer freedom and prevention of harm. The Government recognises the importance and popularity of gambling as a leisure pursuit, citing a figure of 47% of adults as having participated in at least one form of gambling in the previous four weeks. However, it also recognises the need for gambling laws to protect the vulnerable, estimating that there are currently roughly 300,000 problem gamblers. A precedent for changes to gambling legislation has already been set in recent years. In 2019 the maximum stake for fixed-odds betting terminals was lowered from £100 to £2 after a widespread campaign, in 2020 it was made mandatory for online operators to be signed up to Gamstop (the national online self-exclusion scheme) and a ban on gambling on credit cards was introduced. The review is happening alongside an ongoing consultation by the Gambling Commission on new rules requiring operators to do more to identify consumers who may be harmed by gambling.
The main focus of the 2005 Gambling Act review are:
player protection, particularly on the online space
advertising, sponsorship and branding
the Gambling Commission’s powers and resources (particularly to see if it has sufficient powers to tackle unlicensed operators)
consumer complaints & redress
land based gambling
age limits & verification
The government has also asked the GC and the gambling industry for evidence on the current scale of black-market gambling in the UK and the perceived risk of a significant black market emerging. Other new challenges are also being looked at, such as such as video game “loot boxes” (by which loot boxes in a game can be bought with real money, the contents of which are unknown at the time of purchase) which may require regulation and do not seem to easily fit within the current regime.
What possible changes can occur?
Some probable changes have come to the fore: the government is looking for a headline-grabbing statement in a ban for gambling firm displays on the fronts of football teams’ shirts. The upcoming ban on front-of-shirt sponsorships for bookmakers will become part of the white paper the government will release this winter. It will affect several clubs from the English Premier League (EPL), as well as clubs from the lower leagues. Currently, nine out of 20 EPL clubs feature a gambling sponsor on their shirt fronts.
The government is also considering other options to impact gambling advertising as part of the ongoing Gambling Act 2005 review, including a ban on betting advertising on pitchside hoardings and TV commercials. However, according to people close to the decision-makers, this type of ban is less likely at this stage due to its massive impact on lower league clubs. The chief executive of the English Football League (EFL), which is sponsored by SkyBet, described the prospect as “concerning”.
The Governments is also considering going beyond shirt sponsorship by taking aim at the controversial “white label” system used by overseas betting companies, chiefly from Asian countries such as China and Thailand, to strike lucrative sponsorship deals. These firms can gain access to English and Scottish football via partnerships with small companies that hold a British gambling licence, a requirement for firms that want to advertise in the UK. The “white label” firms, often based in jurisdictions such as the Isle of Man or Malta, effectively rent their licences to overseas brands, which can then market themselves via shirts and pitchside hoardings to fans in countries where gambling is illegal and cannot be advertised. This type of set up has raised concerns about the lack of transparency over who owns the companies displayed on the shirts of football clubs and how those companies operate. Industry observers note that this is a massive loophole and they would find it surprising the white label system survives.
The EFL insisted that no change should be implemented prior to finding replacement revenue for the sponsorship funds lost, noting that there is no link between bookmaker sponsorship deals and problem gambling. According to the chief executive of EFL, Trevor Birch, a ban on sponsorship and other forms of advertising could have a “substantial impact” on Football League finances.
Following the release of the white paper, there will be a period of three months for consultation before the proposed bill goes to Parliament, which means that any change is unlikely to get implemented before 2023, giving time to leagues and teams to make the required adjustments and find alternative sponsorship deals.
A further probable regulatory change will be a ban on VIP programs. Ministers are determined to deal away with the VIP schemes once and for all by outright banning the tactic deployed by gambling operators to entice players via one-to-one management programs. Government sources have told media outlets that the Government plans to impose a blanket ban on the VIP practice. VIP schemes have been previously considered by the Gambling Commission, raising the requirements for operators prior to make a customer a VIP client, asking them to check since October 2020 whether their clients can afford to gamble the amounts they bet, but concerns about the effectiveness of the approach remained. The Betting and Gaming Council (BGC) said in a statement, “The BGC, working with the Gambling Commission, has already taken tough action on VIP accounts, including the introduction of a strict new code of conduct which has seen the number of players enrolled reduced by 70%”. Nevertheless, it is becoming abundantly clear that the Government is determined to use the review to finish the job started by the GC.
There are risks associated with legislative and regulatory changes. It is possible that some of the Government’s likely changes to “minimise risk associated with online products” could make regulated operators unattractive to consumers. A perception among consumers of less freedom and choice on the regulated market could drive them towards black-market operators. According to a poll by the Betting and Gaming Council (BGC), six in 10 people believe unregulated websites will be the main winners if the Government tightens regulation too much. Cash staked with unregulated operators has apparently doubled from £1.4bn to £2.8bn in the last two years. For example: if a statutory limit is set for online gambling at a level much lower than customers would prefer, customers fail affordability assessments, or greater safeguards are introduced for “higher risk” products like slots or casino games which would reduce consumer enjoyment. This risk means it is important the Government gains a clear understanding of both the scale of the black market and what drives consumers to use it. Only then will it be possible to foresee what changes to regulation could possibly cause the black market to expand. One must keep in mind that the Government is consulting not just on the prevalence of black-market operations but also on the Gambling Commission’s ability to tackle them. It may therefore be the case that any possible driving of consumers to black-market operators caused by tighter restrictions could be off-set by more expansive powers and greater funding given to the Commission. However, it is crucial that in seeking to further its harm prevention objective in the regulated industry, the Government does not make products so unattractive to consumers that the desire for greater freedom attracts them to unregulated operators. The gambling industry is also concerned that the GC is determined to have its say over the issue of affordability despite their wish that it is clear any decision around the issue should be a matter for Parliament and not an unelected regulatory body considering how intrusive is the regulatory tool.
Only time will tell if the Government manages to strike this balance successfully.