GAMING: An Introduction to UK-wide

Introduction 

Operating in the gambling industry in the UK remains challenging, with prolonged uncertainty relating to the extent of the impact of gambling legislative and regulatory reforms, and enforcement action continuing unabated. That said, in the past 12 months, there have been some small shoots of hope.

The Gambling Commission (the “Commission”) continues to face criticism, notwithstanding the government’s publication of the much-anticipated “High stakes: gambling reform in the digital age” (the “White Paper”) in April 2023, nearly 30 months after the Gambling Act Review commenced. However, there are increasing signs that the Commission is listening to feedback and seemingly appreciating that increased engagement with industry leads to better regulatory outcomes. Although belated, the formation of an Industry Forum was welcomed in September 2023.

White Paper  

The publication of the White Paper was a key milestone and has brought the beginnings of some certainty and direction about the government’s plans to ensure the Gambling Act 2005 (the “2005 Act”) is “fit for the digital age”, not least on important issues such as affordability (now redefined as “financial risk”), at a time when speculation and uncertainty had been casting a long shadow over the future of the gambling industry. It brings substantial reforms intended “to protect vulnerable users in the smartphone era”, striking a balance between consumer freedoms and protection from harm.

Overall, the White Paper was coherent and balanced. Broadly speaking, every stakeholder could read the White Paper and glean from the many proposals things that were good for them. The government should be commended for its achievement.

The White Paper included approximately 20 significant policy changes, to be made through consultations, primary and secondary legislation and changes to the licence conditions and codes of practice (LCCP). Notably, out of the 16,000 submissions (unpublished) received by the government, only 404 were direct responses, with 14% (57) from industry; 15,000 were research responses commissioned by the government.

Timing  

At the time of writing, several White Paper proposals are already subject to public consultation, either by the Department for Culture, Media and Sport (DCMS) or the Commission, with further consultations expected in late November 2023. The Commission is also consulting on non-White Paper-related changes, including amendments to its regulatory panels process, and extending personal management licence requirements.

The government and the Commission aim to implement most key White Paper measures by Summer 2024. Given the volume of work, this is optimistic, and there is unlikely to be more than a handful of proposed changes implemented by this deadline. Proposals requiring legislation are most at risk, given the forthcoming general election.

Key proposals 

Online protections – players and products  

The Commission is consulting on imposing new obligations on licensees to conduct financial vulnerability checks and financial risk assessments, and on extending existing responsible game design rules for slots to other online casino products.
The government is consulting on population-wide stake limits of between GBP2 and GBP15 per spin for online slots; lower stake limits of GBP2 or GBP4 where the customer is a young adult aged 18–24; and/or wider requirements for operators to consider age as a risk factor.
The Commission will also be consulting on mandating data sharing on high-risk customers, and on improving player-centric tools.

The Commission is proposing that financial vulnerability checks will apply at a moderate net loss threshold of GBP125 in a rolling month or GBP500 in a rolling year. These are intended to be “light touch” and “unintrusive” checks using publicly available data.
The Commission is also proposing that financial risk assessments will apply when net losses (excluding re-staked winnings) exceed GBP1,000 in a rolling 24-hour period or GBP2,000 in a rolling 90 days (both thresholds are halved for young adults aged 18–24), thereby identifying customers at “unusually high loss levels”. There is much debate about whether the Commission’s proposals meet the government’s stated intention that these checks be “frictionless”; the outcome remains to be seen.

Marketing and advertising 

From 1 December 2023, the Industry Code for Socially Responsible Advertising will require that all sponsored or paid-for social media adverts are targeted at consumers aged 25 and over, unless the adverts are precisely targeted at over-18s, and that 20% of digital marketing advertising includes safer gambling messaging.
The Commission is consulting on requiring a higher standard of consent for direct marketing of online gambling. 
It will also consult on new social responsibility requirements regarding incentives, such as free bets and bonuses. Other key developments include the development of a cross-sport code of conduct on gambling advertising, and a voluntary ban on gambling advertising on the front of Premier League shirts, effective after the 2025/2026 season.

The Commission’s powers and resources 

The government will consult on a new statutory levy to fund research, education and treatment of gambling harms.
It is reviewing the Commission’s licence fees to ensure it has the resources to deliver the commitments in the White Paper.
Other proposals subject to future consultation include granting new legislative powers to the Commission to strengthen its enforcement and investigative ability.

Dispute resolution and customer redress 

The government proposes that the industry creates an independent ombudsman, to adjudicate complaints relating to social responsibility or gambling harm. It is (optimistically) expected that the ombudsman will be established within a year.

Children and young adults 

The Commission is consulting on requiring land-based operators to “Think 25” rather than “Think 21”, and on test purchasing by small operators in licence fee categories A and B, to mirror age assurance processes in other land-based venues.
The government proposes to require operators of society lotteries and football pools to prevent under-18s from accessing their products, and to strengthen licensing authorities’ powers in alcohol-licensed premises.

Land-based gambling 

The government is consulting on:

a) permitting casinos established under the Gaming Act 1968 (the “1968 Act”) the same ratio of gaming machines as small casinos established under the 2005 Act if they meet the size and other requirements of a small casino, up to a maximum of 80 machines;
b) increasing the ratio of gaming machines to gaming tables to 5:1 for small 2005 Act and larger 1968 Act casinos, mirroring the ratio already in place for large 2005 Act casinos;
c) permitting sports betting in all casinos;
d) adjusting the 80/20 ratio that governs the balance of Category B and C/D machines in bingo and arcade venues to 50/50 or removing the ratio altogether; and
e) permitting cashless payments on gaming machines.

Customer interaction (CI) 

Following a consultation, the Commission’s updated remote CI guidance comes into effect from 31 October 2023, and purportedly seeks to help operators adhere to CI requirements in the LCCP. The guidance is complex and, despite issues raised in response to the Commission’s consultation on the guidance, its content remains ambiguous.

Ongoing enforcement 

The Commission has continued to exercise its enforcement powers against licensees.

The 2022/2023 financial year saw more than GBP60 million in penalty packages, three suspensions and one revocation. In addition, during the 2022/2023 financial year, the Commission revoked one personal functional licence and issued warnings to three personal management licence holders. This trend has continued in 2023/2024 with, at the time of writing, nearly GBP7.5 million in penalty packages and one suspension.

Anti-money laundering and safer gambling continue to be key areas of focus for enforcement activity.

M&A activity 

A continually evolving gambling industry presents significant opportunities and challenges. M&A is not a new trend, but it has significantly accelerated in the last five to ten years, particularly with the increased cost of compliance and market expansion in the US. Although there has been less activity over the last year, this has largely been attributable to macro-economic considerations.

M&A activity is expected to increase again in the second half of 2024 due to:

a) market expansion in the US;
b) the White Paper, as businesses look to streamline increased costs;
c) the relatively untapped B2B sector; and 
d) market conditions, with pent-up demand as transaction financing costs likely decline as interest rates likely decrease in 2024.

Conclusion 

In conclusion, the White Paper has provided direction, some certainty and a glimpse of what political and regulatory stability might resemble. However, the challenge now is how (and when) the government’s vision is implemented and holding the government and the Commission accountable. The White Paper comes at a time when the government, the Commission and industry have significant other work on their plates. Significant effort is therefore required from all parties to ensure the White Paper’s proposals are implemented in a way that achieves the government’s objectives and commercially protects the British gambling industry. If executed properly, Britain can remain an attractive market for gambling in 2024 and beyond.

Therefore, all those with an interest in the industry are urged to engage positively and constructively with the upcoming consultations, and seek to improve relationships within the gambling ecosystem generally.