Review of the Gambling Act 2005: Is Regulation the Answer?

Gaming & Betting

20 Jan

Introduction

As with the rest of the digital age, gambling has dramatically evolved over the past 15 years and, in consideration of this, last month the Department for Digital, Culture, Media and Sport launched a review of the Gambling Act 2005.

The Act requires all remote gambling operators to obtain a licence from the Gambling Commission to enable them to transact with British customers and advertise in Britain.

The long-awaited review considers whether the Act is still fit for that purpose and to address the protection of customers in an online setting.

Over recent years, legislation has been enacted to add several additional measures, including the implementation of a maximum stake on Fixed Odds Betting Terminals of £2, a tightening on the rules concerning the age and identity checks operators must do before allowing an individual to gamble online, banning under 25-year-olds from joining VIP gambler schemes and banning the use of credit cards for gambling online. In addition, it is now mandatory for online operators to sign up to GAMSTOP (the national online self-exclusion scheme).

COVID-19 and Gambling

In the UK, nearly half of all adults gamble each month and during the current pandemic these figures have increased.

The Gambling Commission's latest data (from October 2020) shows:

the online market grew, month on month by 29% in gross gambling yield, with a 7% increase in active accounts. The main driver for this was real event betting which saw a 53% growth in gross gambling yield;
in October (in comparison to September) the number of online slot session lasting longer than an hour increased by 12% to 2.2 million (although this rise was at the same rate as the increase in overall session). The average session length remained steady at 21 minutes with around 8% of all sessions lasting more than one hour; and
licensed betting operations experienced month on month growth across some metrics, with increases of 1% in bets/spins placed and 9% in gross gaming yield (to £204m) likely to be referable to the same sporting results.

According to the Gambling Commission, Britain is home to 24 million adult gamblers, of which 10.5 million gamble online. Of these, the Gambling Commission Chief Executive, Neil McArthur, identified 22 per cent of British online gamblers as “problem gamblers”.

In view of the above, are additional restrictions justified and, if so, are additional measures the way to fix the problem?

The Proposed Changes

As part of the Review, the Government is considering the following measures in the following six areas:

Online protections: including greater controls at the product level (such as stake and prize limit), greater controls at the account level (such as deposit limits), universal limits and player specific limits (based on affordability and other considerations), better use of consumer data collected by operators and the risks posed by blockchain and crypto currencies.
Advertising, sponsorship and branding: including the benefits and harms of allowing operators to advertise and promotional offers, the effectiveness of safer gambling messages and the impact of gambling sponsorship arrangements across sports, e-sports and other areas.
The Gambling Commission’s powers and resources: including evidence of a black market for gambling and the ease with which it can be accessed, whether the Gambling Commission’s powers for investigation, enforcement and sanctioning are sufficient, barriers to high quality research and effective systems to recoup regulatory and societal costs of gambling (including the Gambling Commission’s fee system).
Consumer redress: the availability and suitability of redress arrangements for individual customers who feel they have been treated unfairly by gambling operators.
Age limits and verification: including children’s access to certain slot machines, the effectiveness of age controls, the age limit for lotteries and extra protections for those aged 18 to 25.
Land-based gambling: the outcome of changes to the land-based sector introduced in the Gambling Act 2005, particularly for casinos, and whether they are still appropriate in the digital age.

Is Regulation the Answer?

Whilst regulation is necessary to protect the rights and safety of the public, if a market is burdened by overly strict regulations it can have the converse effect by encouraging users to access unregulated markets that have none of the safeguards put in place by the regulated sector.

In 2019, the Betting and Gaming Council published its annual review which detailed the dangers posed by the online black market. Through the studies conducted in carrying out this review, it emerged that British punters had visited unregulated sites 27 million times between 2018 and 2019.

A report prepared by PWC revealed that between 2018 and 2019 an estimated 200,000 punters had used unlicensed gambling operators, wagering £1.4 billion on illicit bets. This represented approximately 2.5% of all online gambling during that period. Further data revealed that almost 10 % of online gambling searches were for disreputable gaming platforms. Among those, the number of underage gamblers is unknown.

Many have concerns that further restrictions could push even more customers into the arms of black-market operators.

Gambling and the Economy

Aside from considerations as to encouraging users away from the black-market, the Government needs to protect the gambling industry, which generates a huge amount of revenue for the economy. The industry directly employs 100,000 people and contributes around £3.2bn in taxes each year. In addition, contributions to good causes made by National Lottery and society lotteries exceeded £2bn last year.

Around 31.3% of adults in Great Britain gamble weekly, totalling more than £135 annual spend per individual, generating a £14.2bn gross gambling yield. 2019 indicated a continuously growing trend towards online gambling with remote gambling accounting for £5.7bn of the gross gambling yield (39.9% of the overall market). Conversely, non-remote betting yielded £2.4bn (a 26.4% decrease from the previous year).

The fear for the economy is that additional regulation may deter businesses from operating in the UK and, instead, establish a business in a less regulated environment.

Any reform which introduces stricter new controls must be carefully balanced as not to drive punters to the dark web, in which there is no protection for at risk individuals and no derived economic benefit. The review will need carefully to balance the consumer freedoms of adults to spend their money as they wish yet protect vulnerable people from being exploited and preserving economic benefits.

We shall publish a further analysis once concrete proposals are available.