Luke Eales: Will there be a radical overhaul in the Government’s approach to gambling?

Luke Eales is Founder & CEO at Seven Star Digital.

With the nation hunkering down for what might be a long-haul lockdown, there’s been increasing alarm over online gambling habits getting out of hand.

And it’s an issue that straddles party lines. Labour MP Carolyn Harris, a vocal advocate of stricter limits on how gambling sites operate, recently wrote in The Guardian that such companies are “using our newfound isolation to their own advantage”, and “where quarantine has meant a downtown for many businesses, gambling companies may see this period as a huge opportunity to increase their profit margins.” 

In early April, a group of MPs across the political spectrum – including Tracey Crouch, the former sports minister, and Tory big beast Iain Duncan Smith – wrote a letter warning that “people are at home and are severely restricted, with access to mini-casinos on their laptops or mobile phones”.

The MPs called for a moratorium on gambling advertising, an enforced end to online casino “VIP” schemes, and introducing a £2 limit on slots game wagers.

Interestingly, just a few months ago the target of official ire was the very organisation tasked with controlling the online casinos and betting sites: the UK’s Gambling Commission.

The regulatory body found itself in the crosshairs of the National Audit Office, with the publication of an NAO report which dropped some damning findings about the extent of the gambling problem in Britain.

The raw statistics were disconcerting (1.8 million people at risk of becoming problem gamblers, tens of thousands of children with gambling habits), while the report pulled no punches when it came to emphasising the shortcomings of the Gambling Commission. 

“The Commission is clear in describing its overall aim to make gambling safer but has not sufficiently clarified how it is pursuing this aim,” the report stated, bemoaning the lack of a “detailed, measurable success criteria against which to judge progress”.

It also highlighted the creaky, inflexible nature of funding for the Commission, which is paid for with gambling license fees that are set through government legislation decided every four years.

“The way that gambling regulation is funded does not allow the Commission to change licence fees,” the report said, “and makes it more difficult to invest in new skills to quickly address changing risks.”

The NAO was particularly scathing about the “specific skills gaps” among members of the Commission, singling out “crypto-currency and addictive technologies”. Translation: the GC simply can’t afford to invest in recruiting the kinds of experts who can understand and assess the finely-tuned data analytics and algorithmic wizardry deployed by the gambling sites.

This is surely the inevitable consequence of a gulf in finances. The Commission’s annual budget of £19 million means it’s ill-equipped to tackle an industry that raked in more than £11 billion last year, and has the deepest possible pockets for advertising.

After the report was released, Harris went on the offensive, calling the Commission “not fit for purpose”, comparing the gambling industry to “the wild west” and even calling for the resignation of the Commission’s chief executive, Neil McArthur.

It should be said, however, that the regulators aren’t as utterly de-fanged as this public finger-pointing might lead casual observers to believe.

The Gambling Commission has slapped hefty fines on some of the biggest names in gambling for various misdemeanours.

This year, for example, online casino Mr Green – owned by William Hill – was made to pay up millions for failing to implement safeguards for customers (in one case failing to intervene when a customer lost more than £50,000).

On top of that, the Commission has enforced a ban on players using credit cards to gamble, in the wake of research revealing that 22 per cent of people who use credit cards to lay bets online are classed as problem gamblers. 

The Commission has also been focusing on the issue of VIP schemes. This has been a hot button issue of late, with an investigation revealing how disproportionately important so-called VIP users – ie, players who habitually bet and lose big amounts – are to the revenue streams of online casinos.

One such operator told the Commission that the paltry two per cent of its customers with VIP status are responsible for 83 per cent of the deposits made on the site. This is why the operators have set up VIP schemes to keep these big spenders sweet with bonuses and rewards, including free flights and football tickets.

Harris was characteristically vehement in her response, saying, “these practices should be banned to protect problem gamblers and stop the transfer of money from vulnerable addicted gamblers directly into the pockets of the online gambling industry.” 

The Gambling Commission hasn’t gone quite that far, but it has now spearheaded a ban on gamblers aged 25 and under being allowed to join VIP schemes.

Even customers who can join the schemes will be required to pass a vetting process relating to their capacity to spend, while rewards will have to be backed up by audit trails laying out the precise decision-making that went into them, guaranteeing accountability.

This agreement has been made thanks to cooperation with gambling industry leaders, but what else is on the horizon?

The Gambling Commission has firmly stated that “while some progress has been made, this work must now go further and faster, in particular around using demographics and behaviours to indicate risk.”

Such talk paves the way for greater restrictions, not just on incentives and advertising, but on game design itself.

The Gambling Commission has already explicitly spoken of tackling game features such as turbo buttons and split screens, which are “associated with potential loss of control”. 

Such measures are sure to be welcomed by the many MPs who signed the letter urging curbs on the industry during the Covid-19 pandemic.

There’s also a sense of anticipation regarding a long-promised review of the Gambling Act 2005 by the Department for Digital, Culture, Media and Sport.

Another, separate review of the same Act is already being undertaken by Parliamentary All Party Betting & Gaming Group, whose members are convening by Zoom (naturally) to discuss how the Gambling Act should be updated to reflect the immense technological advances that have taken place since the mid-Noughties.

When these reviews are concluded and new legislation is put through, there may literally be game-changing consequences for the gambling industry in the UK.

The casino operators themselves have to a large extent been cooperative.

As mentioned above, operators have worked with the Gambling Commission to implement changes to the VIP schemes.

The industry body, the Betting and Gaming Council, also recently published an action plan to protect customers in the social distancing era, pledging that its members will boost safer gambling messages and intervene if customers start spending too much time and money on sites. 

But regulators can also expect some push back.

Last November, Kenny Alexander, the CEO of gambling giant GVC – owner of Ladbrokes and Coral – warned that calls for online stake limits might backfire, saying:

“If they put a £2 limit on online casinos, the day after that, virtually the same amount of people who used to stake more than £2 will go to the black market.”

Warming to his theme, he said: “They’ll play at sites in Costa Rica, they’ll play at sites in Curacao, they’ll play at sites that may not be licensed anywhere. These sites will not be paying taxes… they will have no interest in responsible gaming, no interest in protecting the player.” 

As an example, Sweden’s new legal gambling regime is fairly restrictive compared to the UK; black market share there is far higher than was hoped, with online casino channelisation as low as 72 per cent.

Illicit online gambling is indeed a very real problem, with a report by PwC showing that the unregulated market in the UK was worth a startling £1.4 billion, with almost a quarter of a million gamblers regularly using such sites. 

With the effects of the pandemic exacerbating concerns on both sides of the fence, debates about new regulatory measures are sure to be intense.

The Gambling Commission may want to be seen to be more particularly bullish in the wake of the somewhat chastening NAO report, while the review of the Gambling Act may embolden campaigners and law-makers to take a hard line against the industry.

On the other hand, gambling firms are increasingly waking up to the need to take real initiative, with the recent decision to halt TV and radio ads during lockdown being generally well received by the often-hostile media.

How this all shakes out will have huge reverberations not just on these shores, but globally.

The UK is still the world’s largest regulated gambling market, and the eyes of many international regulators are firmly on us.

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