Updating Gambling Regulation in Great Britain
United Kingdom (May 19, 2023)
Following the manifesto pledges made by each of the mainstream political parties in the run-up to the 2019 general election, the Department of Digital, Culture, Media and Sport (DCMS) announced, in December 2020, a review of British gambling laws (the review) and published a call for evidence to inform the potential changes to the Gambling Act 2005 (the 2005 Act). (1) To use the words of DCMS at the time, it wanted to make the legislative framework “fit for the digital age”.
The call for evidence ran for 16 weeks and closed on 31 March 2021. The industry and its various stakeholders have been waiting patiently (with the word “imminently” used many times in the past few months) for the government to publish a White Paper in effect confirming the results of the review and providing a blueprint for the next version of British gambling regulation.
The White Paper was published on 27 April 2023. This article sets out the highlights emanating from the 268-page publication.
In his report that led to the enactment of the 2005 Act, Sir Alan Budd cited the “central dilemma” of gambling regulation. He pointed to the tension 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”.
While there have been instances where regulation has been left behind by the industry’s innovation, the 2005 Act has been fairly resilient in acting as an enabling framework for regulatory change. However, the well-documented criticisms that the industry has faced over the past few years were always going to result in some form of governmental intervention, which has finally come to fruition.
Notably, the “central dilemma” that Budd cited remains. As part of the call for evidence published in December 2020, the government stated that it wanted:
the sector to have up-to-date legislation and protections, with a strong regulator with the powers and resources needed to oversee a responsible industry that offers customer choice, protects players, provides employment and contributes to the economy.
This, it must be said, is exactly what the Budd report itself recommended more than 20 years ago.
The stated objective of the review was to “ensure that 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”.
Only time will tell whether the results of the review and the consequential changes to the law and associated regulation will achieve that “balance”. It also remains to be seen whether, in doing so, its clear objective of augmenting player protection does not entirely ignore the impact on choice, employment and tax take.
Clearly, there remain diametrically opposed views as to how the gambling industry should be regulated. Some wish to see a balance between consumer choice, consumer freedom and the industry’s success and viability. Others see gambling as a public health emergency that needs to be more heavily regulated or, the view in some quarters, prohibited entirely.
In trying to achieve balance, it is likely that the government will please some of the people some of the time but not all of the people all of the time. Whether the incessant negativity around the industry, as portrayed in the media, will eventually dissipate remains to be seen.
One thing is certain though: some of the proposals, particularly around “affordability” and stake limits, will go a long way to imposing restrictions on the industry. Such restrictions will state, to a material degree, a relatively small but nonetheless influential cohort of politicians, journalists and Twitterati who have routinely been styled by some in the industry as the “anti-gambling lobby”.
It should not be underestimated how welcome some of these initiatives will be for the industry as well as it seeks to move away from a period of media attacks and regulatory uncertainty to one of clarity of regulatory expectation and long-term sustainability.
For lawyers and academics, there will be a particular interest as to how the changes to British gambling regulation will actually be implemented. Much has been made of the purported lack of powers that the Gambling Commission has in regulating the industry. It has now become clear that the 2005 Act does, in fact, bestow upon the Gambling Commission significant powers to effect a regulatory change of its own volition, quite apart from the further, extensive powers delegated to ministers and exercisable by statutory instrument. The changes called for in the White Paper are stated as generally requiring a secondary legislative change or to be brought in via “Commission powers”.
It is hoped that by virtue of DCMS setting out its position the Gambling Commission will cease to feel backed into a corner and proactively reengage on a collaborative basis with those that it regulates on the back of the government mandate. There has already been a recent change in tone from Gambling Commission officials, which should be welcomed.
The following section of this article takes each of the key proposals in turn and provides a high-level summary of the issue as explained in the White Paper.
This has become a notoriously difficult area for the industry to grapple with. This is particularly the case against a backdrop of vagueness and inconsistency from the Gambling Commission, both within its own written guidance and within compliance assessments themselves.
Some in the industry have been demanding more prescriptive rules on when online operators must make what would be considered to be relatively intrusive checks on the financial circumstances of their customers. This is particularly raised in the context of compliance assessments where operators are told that they are not doing enough but not what “enough” would actually be.
The government has mandated a lighter touch than many campaigners were calling for. Some suggested that some form of affordability assessment should be required before any customer is able to lose more than £100 in a month. The White Paper calls for:
- a financial vulnerability check when a player reaches a net loss of £125 within any rolling month or £500 within a rolling year;
- an enhanced spending check when a player loses more than £1,000 in a rolling 24-hour period (intended to provide “much greater insight into a customer’s financial situation” but with the expectation that the majority of such checks “would not interrupt the customer journey unless the check raises concerns”; and
- enhanced spending checks when a player loses more than £2,000 in any rolling 90-day period.
The White Paper also suggests that the enhanced check triggers should be lower for those aged 18 to 24, at proposed thresholds of £500 net loss in 24 hours or £1,000 in 90 days.
A requirement for “affordability checks” begs two questions – when, in the customer journey, do they happen and what do they actually entail?
The industry has already embedded into its processes the enquiry of certain publicly available databases and information to ensure that there are no obvious reasons why a particular customer should be considered as a high risk of financial harm and, as such, restricted or indeed prevented from gambling entirely by the relevant operator. The White Paper appears to endorse that approach, by requiring these “lighter touch” financial vulnerability assessments when a player makes a net loss of more than £125 in a single month. However, it seems that much more intrusive checks on the financial circumstances of the “ordinary punter” (as the Gambling Commission continues to call them) is a step too far for the government.
A particularly noteworthy paragraph in the White Paper says:
In general, this government agrees with the principle that people should be free to spend their money how they see fit, so we propose a targeted system of financial risk checks that is proportionate to the risk of harm occurring. Assessments should start with unintrusive checks at moderate levels of spend (we propose £125 net loss within a month or £500 within a year), and if necessary escalate to checks which are more detailed but still frictionless at higher loss levels where the risks are greater (we propose £1,000 loss within a day or £2,000 within 90 days). We also propose that the triggers for enhanced checks should be lower for those aged 18 to 24.
Operators will be drawn towards the word “frictionless”, which may appear to conflict with the Gambling Commission’s previous indications (heavily repeated in compliance assessments as if it was law) that “evidence” is required once a customer reaches spend linked to national earnings averages. It is noteworthy that the government considers that the enhanced spending check proposed at £2,000 net loss within a rolling 90-day period would also “give an opportunity to fulfil operators’ wider ‘know your customer’ obligations, for instance by considering customers’ source of wealth and whether that presents any additional risks”.
Clearly, as an operator’s relationship with a customer develops, more detailed checks will be required. These will require more in-depth interaction and receipt of information from or about a customer to better understand that the way in which they gamble does not potentially lead to harm as a result of the corresponding financial unsustainability. However, the White Paper gives some clarity of the government’s expectations of the timing and nature of these types of financial risk profiling checks and striking the appropriate balance between consumer freedom and the need to prevent harm to vulnerable people.
These additional changes to customer affordability assessments will be implemented by way of existing regulation, via a Gambling Commission consultation conducted later in 2023. Following this, there will be a further update to the licence conditions and codes of practice (LCCP) to implement the corresponding changes. There remain key outstanding questions that will require greater clarity through the consultation process, including the appropriate action that operators should take when these types of financial vulnerability checks and enhanced spending checks are carried out. For example, the White Paper proposes that operators should consider “applying limits to an account” when “serious concerns” are present, but acknowledges that establishing whether serious concerns are present (and what an appropriate limit might be) is not straightforward.
The well-publicised contrast between the limits that are applied to gaming machines within licensed betting offices and casinos and the unlimited stakes that apply to online slots will, unsurprisingly, now be removed.
Throughout the review process, there had been speculation that online slot games would be limited to a stake limit of between £2 and £15 (depending on the results of a further consultation). A minority of customers would then be able to stake more than that, having passed certain other types of regulatory checks, but with, it is understood, an absolute maximum stake limit.
The White Paper has announced:
a stake limit for online slot games (which evidence suggests is the highest-risk product) bringing them more in line with the land-based sector. Subject to consultation, the limit will be between £2 and £15 per spin, and we will also consult on measures to give greater protections for 18 to 24-year-olds who the evidence suggests may be a particularly vulnerable cohort. This will include options of a £2 limit per stake; a £4 limit per stake; or an approach based on individual risk.
It is understood that the intention is for these changes to be brought about by way of secondary legislative change.
Notably, these provisions apply to slot games only, indicating the success of lobbying efforts to differentiate gambling products in the minds of the legislature.
Given the overlap between a series of measures outlined in the White Paper aimed at consumer protection (including, in particular, affordability), there is a case for limits to be set at the higher end of the range but with the potential to reduce them in future depending on a review of the impact of the various measures.
A significant amount of attention has been paid to the way in which the industry incentivises its customers to gamble. This has been a particular theme throughout the media coverage around the review and certainly for the campaigners that wish to see limits on the way in which the industry goes about its business.
The government has responded to this and announced that there will be a review of how promotions and incentives can be offered in a “socially responsible way”, rather than an outright ban on so-called “free bets”, as called for by some campaigners.
It is understood that this will be brought about by way of Gambling Commission powers (ie, amendments to the LCCP, probably), following a consultation to take place later in 2023.
As with other regulated industries, the introduction of an ombudsman to deal with disputes and rule on redress for customers is welcomed by the industry. Following a spate of litigation where customers have tried and failed to pursue the industry in the courts, the call for evidence identified that there was a gap within the redress framework available to consumers. The Gambling Commission can and has taken robust action against gambling businesses for breach of regulation, but it has no power to direct them to compensate customers. As such, a gap will be filled.
Currently, the leading alternative dispute resolution provider, the Independent Betting Adjudication Service, is confined to determining contractual disputes. It remains to be seen how this develops to encompass wider disputes that may flow from an operator’s wider regulatory failings. It will be key to ensure that the division of responsibilities between the Gambling Commission and the ombudsman is clearly defined and not blurred. Moreover, the industry will want to ensure the established legal principles, laid down by the English courts, are not side-stepped in any ombudsman process.
The industry has avoided the introduction of a statutory duty of care, as can be seen developing in continental Europe.
The introduction of a statutory ombudsman would require primary legislative change. The government has decided to proceed with a non-statutory ombudsman, mandating the industry to work together to establish it, with an explicit threat that it will become a statutory ombudsman if the government is not satisfied with the industry’s solution.
This is a particularly eye-catching element of the review. It seeks, to a degree, to play to the audience by replacing the system of voluntary industry contributions designed to assist in research, education and treatment relating to the negative impact of gambling with a mandatory levy.
There has been and is likely to continue to be a significant amount of media coverage around this, with critics of the industry applauding a policy which, in their words, will see the “polluter paying”.
The excitement around this will no doubt overlook the fact that the largest four operators within the industry are already voluntarily offering to pay over £110 million to address this issue. Nonetheless, the government has felt it necessary to make it mandatory, showing how it considers this a cornerstone of the gambling operators’ responsibilities in the future. The fact the writing has been on the wall may have influenced the Betting and Gaming Council’s recent announcement that it supported such a move.
Interestingly, it is understood that the government originally wished to see the industry make these payments voluntarily (as is currently the case), rather than by way of some sort of imposition. The 2005 Act does in fact allow the secretary of state to introduce such a levy. It is understood that this delegated legislative power will be retained.
Advertising and sponsorship
Much has been made in some quarters of the negative impact of gambling logos being displayed on the front of players’ shirts within the Premier League. Again, potentially seeing the writing on the wall, the Premier League recently announced clubs would remove all gambling logos from the fronts of shirts from the 2025/26 season. However, to the annoyance of some, the ability to advertise around the perimeter and on shirt sleeves remains.
Clearly, this could have had an implication on the white-label model. This allows for large operators based and regulated in other parts of the world to enter into brand licences with a small number of operators who maintain British licences. The purpose of the arrangement is to allow those foreign brands to be promoted within British football without possessing a British gambling licence themselves. Several large operators and opponents of the industry have for once agreed on something and lobbied for this particular model to be eradicated on the basis of the reputational difficulties that some of those overseas operators can cause.
It is notable, however, that there is no mention of white-label advertising at all within the White Paper. As such, the impact upon the ability of such offshore operators to advertise within British football (aside from front-of-shirt Premier League sponsorship), through wider brand partnerships and/or the use of the digital perimeter advertising boards), seems to have escaped the review’s red pen.
There are a number of additional proposals within the White Paper that are worth mentioning.
The industry needs to work hard to introduce a mechanism to share data among itself for “high-risk customers” and this is likely to be made mandatory by way of additional licence conditions being imposed by the Gambling Commission. Clearly, this data can never be used for commercial purposes and the whole initiative is going to be overseen carefully by the Information Commissioner’s Office and the Gambling Commission.
Public health messaging
The Gambling Commission is likely to impose an obligation on the industry to publish stronger public health messaging. A government working group is to commence work on how to present this in the coming months.
The Gambling Commission’s enforcement tools are to be strengthened, particularly with regard to its ability to pursue the operation of the black market. A lot of attention had been paid to the impact of tighter regulation and the potential for more vulnerable customers to circumvent player protection restrictions and simply move their business to the unregulated offshore market. This will be an interesting area to see evolve as the British regulator seeks to prevent the inward supply from offshore.
The industry will need to consider, again, how it can make games even “safer by design”, building on the extensive work already done on responsible game design. (2)
Levelling gaming playing field
While imposing tougher restrictions on remote gambling operators, the government has agreed to relax the existing regulations to allow brick-and-mortar casinos to install a maximum of 80 gaming machines rather than the present 20.
Developing land-based market
The government wishes to explore changes to certain gaming machine restrictions to allow betting facilities to be made available within all casinos and to permit a wider range of games to be played on electronic terminals at casinos. Furthermore, the government proposes to permit casinos to offer credit to non-UK residents, subject to thorough financial risk and anti-money laundering checks.
The review has advocated closing the gaps so that no under-18s can participate in any form of gambling (such as certain gaming machines and lottery products)
The government advocates for an accelerated review of the horseracing betting levy to further boost the income is generates.
The White Paper contains a proposed timetable of the implementation pathway for these announced changes and notes that the government intends the main measures to be in force by Summer 2024. The changes will primarily be implemented by secondary legislation and Gambling Commission powers, with changes to primary legislation limited to matters in the land-based sector, such as machine ratios in casinos, and prevention of gambling in under-18s.
Key next steps include Gambling Commission consultations on affordability checks (due in Summer 2023) and the socially responsible use of free bets and bonuses (due later in 2023). DCMS consultations are planned in Summer 2023 regarding the online slots stake limit and the statutory levy, with a further consultation on Gambling Commission fees expected in 2024. Notably, it is said that the process for appointing the non-statutory ombudsman will commence in Spring/Summer 2023, with the expectation that it will be accepting complaints within a year.
Recent meetings between the industry and senior representatives at the Gambling Commission saw the regulator suggest that the following three years will see upwards of 60 different compliance and regulatory initiatives flow out from Birmingham. It is expected that the industry will be invited to participate in a variety of consultations and that the Gambling Commission will play its part in listening to the responses it gets.
As a new era of regulation is introduced and the White Paper shows how crucial to the success of the review that Gambling Commission-managed consultations will be, it is hoped that the Gambling Commission has learned from the procedural mistakes made during consultation processes in the past. The Gambling Commission must avoid the deserved criticism it received for the botched way it handled last year’s Customer Interaction Guidance consultation. There is too much at stake for the Gambling Commission to ignore the established process.
(1) For further information please see “British Gambling Regulation – All change?“.
(2) For further information please see “Casino game development – safer by design“.United Kingdom, Gambling Commission, gambling