The Gambling Review White Paper – the Devil Will be in the Consultations

United Kingdom (May 12, 2023) —  On 27 April 2023, approaching 2½ years following the Government’s launch of its review of the Gambling Act 2005, the Government has published its White Paper outlining its proposed reforms. The delay in publication may, in part, be explained by the 16,000 submissions to its Call for Evidence but certainly also due to there having been three Secretaries of State and six gambling ministers during that period (as well as two changes of Prime Minister and three of Chancellor).

This is the first in a series of articles in which the CMS team will assess the implications of the White Paper for the gambling industry. We will also report on the progress of its implementation into law and regulation via our Gambling Law Reform Tracker here.

When the Government launched its review in December 2020, its stated objectives were to:

“ (1) Examine whether changes are needed to the system of gambling regulation in Great Britain to reflect changes to the gambling landscape since 2005, particularly due to technological advances (2) Ensure there is an appropriate balance between consumer freedoms and choice on the one hand, and prevention of harm to vulnerable groups and wider communities on the other (3) Make sure customers are suitably protected whenever and wherever they are gambling, and that there is an equitable approach to the regulation of the online and the land based industries.”

The Secretary of State, Lucy Frazer, in her foreword to the White Paper says that “At the heart of our review is making sure that we have the balance right between consumer freedoms and choice on the one hand and protection from harm on the other.” This ostensibly echoes what Sir Alan Budd, (the architect of the 2001 report which led to the 2005 Act), called ‘the Central Dilemma’. As Sir Alan put it: “The most difficult general issue that we have had to solve concerns the familiar dilemma between the desire to permit free choice and the fear that such choice may lead to harm either to the individual or to society more widely.” And he went on to say “our proposals generally move in the direction of allowing greater freedom for the individual to gamble in ways, at times and in places than is permitted under current legislation. This move to greater freedom is balanced by rather tighter controls on the freedom of young people to gamble and by some tighter controls over those who provide gambling services.” and “Finally we recognise that our proposals are unlikely to be acceptable unless they broadly match public views about what is appropriate for our society. We have made our best efforts to achieve this but recognise that the final say must rest with Parliament.” But the concern for the industry will be that, although the Secretary of State and Sir Alan characterise the Central Dilemma in similar terms, they approach it from rather different directions.

Parliament endorsed and implemented the overwhelming majority of Sir Alan’s proposals in the Gambling Act 2005 and, whilst Sir Alan characterised it as a move towards “deregulation”, it should be remembered that prior to the 2005 Act, the only real regulation was by the Gaming Board of land-based casinos. Online gambling, then in its infancy, was not permitted at all and betting and bookmakers were subject only to licensing by magistrates’ courts with no ongoing regulation. So rather than deregulating, Sir Alan actually replaced a largely prohibitive legislative regime with a great deal of new regulation.

However, it is probably one of Sir Alan’s genuine deregulatory proposals in the removal of most of the restrictions on gambling advertising (particularly when combined with the now ease of gambling via smartphones and some egregious breaches of the Gambling Commission’s rules by several operators) which has led to a change in the public’s view of gambling.

The slogan which became current prior to the last General Election was that the 2005 Act was “analogue legislation not fit for a digital age”. And it was that slogan that exemplified the supposed rationale (such as it was) for a review of the legislation. However, although now largely moot, it is arguable whether the Government really needed to conduct such a wide-ranging review given that the 2005 Act was deliberately technology-neutral and gives both the Gambling Commission and the Secretary of State power to adapt the regulatory regime to respond to changes in gambling technology or to address particular harms. When one looks at how few of the key proposals in the White Paper require primary legislation to implement one might conclude that the Gambling Act was, and remains, fit for the digital age, after all.

Whilst the Government has taken nearly 2½ years to produce the White Paper (which is over 250 pages and 92,000 words and accompanied by the Gambling Commission’s advice to the Government of similar length) the White Paper is just another staging post along the journey to a new regulatory regime. The arrival of the White Paper is rather only the beginning of the end of the uncertainty the industry has lived with over the past 2 years.

The words “consult” or “consultation” appear 150 times in the White Paper, and the Gambling Commission has been tasked with 60 projects connected with the implementation of the proposed reforms. In his recent blog post, Tim Miller, Executive Director for research and policy at the Gambling Commission, said the implementation of the White Paper is likely to take “a number of years to fully complete”, and one can’t help but think he sounded a little overwhelmed at the work ahead when he said: “[t]he scale of work outlined in the White Paper is significant… The scale of change, even with increased resources in future, means there will be very little space for the Commission to consider other policy developments not included in the white paper”.

Nevertheless, the Government has stated that its intention is for the “main measures” to be in place by summer 2024, which itself raises concerns that some of the consultations may be insufficiently thorough and accordingly may in turn (at least in respect of measures not incorporated in primary legislation) be subject to legal challenge.

First impressions

As noted above, we will consider the proposals set out in the White Paper in more detail in a series of articles over the coming weeks. In this article, we set out below a high-level summary of the key proposals and the proposed route and timetable for implementation.

Our initial impressions are that the White Paper seems more balanced and proportionate than many in the gambling industry had feared, and there are no apparent nasty surprises. However, what the industry might be rightly nervous of is the number of proposals that are to be fleshed out as part of a Gambling Commission consultation. Over the years, the industry has become accustomed to Gambling Commission consultations often being a fait accompli, based on limited or questionable evidence, opaque decision-making and with very little genuine consultation with the industry. As advisors we have seen some promise of a shift in the approach and attitude of the Commission in recent times and we hope this continues and is seen throughout all levels of the Commission over these coming months and years as important and formative policy decisions are implemented.

Arguably two of the biggest headlines – affordability and online stake limits – have so far unfolded largely as predicted.

Affordability and financial risk checks

With affordability checks (renamed by the White Paper as “financial risk checks”), the Government is proposing “unintrusive” and “frictionless” financial vulnerability checks when a player reaches a net loss of £125 within a month or £500 within a year. These checks will escalate to “more detailed but still frictionless” checks at higher loss levels (£1,000 within a day or £2,000 within 90 days is the Government’s proposal). These levels would be halved for those aged 18 to 24.

In the absence of such prescriptive requirements, in the past three years, operators have been directed to a paragraph in the Gambling Commission’s Enforcement Report 2019 – 2020, published in November 2020 which states: “Customers wishing to spend more than the national average should be asked to provide information to support a higher affordability trigger such as three months’ payslips, P60s, tax returns or bank statements which will both inform the affordability level the customer may believe appropriate with objective evidence whilst enabling the licensee to have better insight into the source of those funds and whether they are legitimate or not”. Alongside the Enforcement Report, the Commission opened its Remote customer interaction – Consultation and Call for Evidence. That consultation resulted in mixed reaction given the Commission’s proposal to impose requirements to conduct affordability assessments at specific financial thresholds, with the lowest threshold at £100 loss in a month and the highest at £2,000 loss in a month.

Many operators will have endured compliance assessments and interrogation by the Commission as to how this standard and expectation has been met and, in many cases, received criticism for not doing enough soon enough, whilst on the other hand managing complaints or radio silence from customers appalled at being asked for such private information in order to participate in a leisure activity. For most operators, a prescriptive approach to affordability and clear direction from Government as to their expectations for the thresholds at which these checks should be carried out, is likely to be welcome news.

The repeated use of the word “frictionless” in the context of affordability checks in the White Paper will be noted by many, although in the context of the more detailed checks at higher levels of spend, the White Paper also states such an enhanced spending check should provide “much greater insight into a customer’s financial situation”. This does leave one wondering how such detailed, yet frictionless, checks would work in practice. It is understood that the Commission is currently working with the financial services sector to explore this, for example through credit reference agencies and open banking, and the White Paper goes on to say that “the provision of documents by the customer will be only a last resort for the highest spending minority”. The expected operator response to such findings will also be explored through the Commission’s forthcoming consultation this summer.

The notion that customers should be required to provide sensitive financial information in order to spend their own money on a leisure activity has unsurprisingly been the cause of much controversy and concern as being both an unreasonable invasion of privacy and an unjustified restriction on individual choice and was no doubt raised in many of the 16,000 submissions. However, that argument seems to have been lost with the debate now merely being at what level the checks should be set and how to minimise their intrusiveness.

Online slot stake limits

The comparison between the stake limits on physical gaming machines and the lack of any such limits on online slots has long been made and, in one of the most predictable outcomes, the Government are proposing stake limits for online slots of between £2 and £15 a stake, with lower limits for 18-24-year-olds. At one stage, a tiered or “smart” limit on stakes was anticipated but the White Paper has confirmed that in view of the Government’s desire for quick action in this area and therefore to avoid the need for primary legislation, a stake limit for online slot games will be fixed for all customers.

This change will be implemented by way of secondary legislation following a DCMS consultation this summer. The White Paper acknowledges that whilst applying the stake limits which apply to gaming machines in the land-based sector would be an obvious starting place, the wider systems of protections in place for online means that higher limits may be justified. The additional online protections that are expected to be introduced via the White Paper proposals such as affordability checks may also then further warrant limits at the higher end of that spectrum, but this very much remains to be seen. Some have also called on the Government to consider whether it is right that these limits be fixed or whether there should be some recognition to increase them over time to take into account inflation (not least because this year’s £2 is quite different to £2 when that limit was set for gaming machines).

Other proposals

A summary of the main proposals is set out in the section below but here we summarise some of the other noteworthy conclusions in the White Paper.

• Bonuses: Free bets and bonuses have received a lot of attention and criticism. The Gambling Commission will consult on a range of measures such as maximum caps on wagering requirements and minimum time limits before offers expire. In addition, they will look at the potential impacts of targeting groups or individuals with bonuses based on factors like high levels of spend.
• Direct marketing and cross-selling: The Gambling Commission will consult on the introduction of additional requirements for obtaining consent for directing marketing both as part of customer acquisition activity and for existing and new customers, particularly with a view to reduce the perceived risk of cross-selling between products. This could include specific and separate opt-ins to marketing generally, as well as for bonuses and cross-selling.
• Affiliates: The Government has not been persuaded by arguments for affiliates to be licensed.
• Broadcast advertising: The White Paper confirmed that DCMS does not consider that any further tightening of broadcast advertising is necessary at this time.

• Safer game design: Building on the Remote Technical Standards requirements around online slot design, the Commission will consult on updates to expand similar principles to other products.
• Safer gambling tools and information: The Commission will consult on the introduction of mandatory deposit limits for all customers on account creation and pre-populating the limit with a default amount. Measures requiring more prominent provision of information such as lifetime/annual losses will also be considered. In addition, safety messaging such as the “Take Time to Think” campaign is proposed to be led by statutory bodies using public health expertise rather than the industry. The IGRG Code will be updated to extend the BGC’s existing commitment of at least 20% of TV and radio ads space being safer gambling focused to all advertising space across online and broadcast media.
• Ombudsman: The Government plans to work with industry to create an ombudsman that will adjudicate complaints relating to social responsibility and gambling harm. The data from the ombudsman will be used by the Gambling Commission to inform its enforcement work. The establishment and operation of the Ombudsman will be on a voluntary basis initially, but with a thinly veiled attempt that the Government will legislate if the industry-led efforts are not deemed satisfactory.
• Land-based allowances: The Government plans to align the gaming machine allowances for casinos operating under a Gaming Act 1961 licence with those operating under a 2005 Act licence. Casinos of all sizes will be permitted to offer sports betting. High end casinos will be permitted to offer credit to international visitors who have been subject to stringent checks. A consultation will also be undertaken on cashless payments for gaming machines.
• Restrictions on winning accounts: The Government has rejected calls to prevent operators limiting the accounts of successful gamblers. The expectation that operators are fair and transparent with customers in giving information about when and why an account is restricted was restated and the Commission will monitor compliance in this area.
• White labels: The existing requirements which apply to white label arrangements are considered to be adequate. The Gambling Commission will consolidate existing information and good practice on white labels and contracting with third parties.
• Crypto-assets: No changes to the existing controls are proposed. The Commission’s rigorous stance on these technologies to date was noted.
• Prize draws: DCMS will consult on the potential for regulating large scale prize draws (i.e. those where the prizes are luxury homes or a car), which are not currently regulated under the Gambling Act.
• Loot boxes: The White Paper restates that there is no plan at the current time to adjust the legal definitions of gambling in order to capture loot boxes.

Key white paper proposals and next steps

The following is a summary of the government’s main proposals and implementation timetable:

Article By: David Zeffman, Anna Soilleux-Mills, Dan Tench, Tamsin Blow, Alasdair Lamb and Emily Sheard

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SOURCES: CMS Cameron McKenna Nabarro Olswang LLP – Lexology.