Politics

Licensing Expert – Assessing a month of mounting challenges for the betting industry.


August 2017 was not a kind month for the online gambling sector. David Clifton breaks down three standout events that have placed social responsibility practices at the forefront of industry debate and concerns….

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There are three standout stories in the betting licensing and regulatory sphere from the last month. There is a common social responsibility thread running through all three.

The first is publication of research findings into gambling behaviour in Great Britain commissioned by the Gambling Commission. Those findings are based on health surveys conducted in 2015, very shortly after all online gambling targeting British customers came within the scope of regulation by the Commission. The findings are therefore a bit historic but they have nevertheless created headline news in the national media.

As usual, the Daily Mail was leading the charge, its headline shouting More than two million people could turn into gambling addicts: Regulator warns huge expansion in online betting has left 4% of the population at risk”.

To put the figures into proper perspective, the research found that 1.4% of gamblers (representing 0.8% of the UK population) could be classed as problem gamblers – a proportion that has remained statistically stable during the past five years – with 6.4% of gamblers (3.9% of the population) falling into the ‘at-risk’ category. Of those classified as ‘at-risk’, nearly three-quarters were classified as ‘low’ (as opposed to ‘moderate’) risk gamblers.

Of course, it must not be forgotten that these figures do not reflect the fact that many more (in terms of friends, families and communities) are impacted by the wider consequences of gambling-related harm, something that the Commission has certainly recognised, expressing the view that “the pace of change to date simply hasn’t been fast enough – more needs to be done to address problem gambling.”

However, it is also worth bearing in mind that the newspaper headlines did not focus on the particular types of gambling activity that have resulted in the highest rates of problem gambling. In this respect, the research found that the highest rates were among those who had participated in spread betting, an activity regulated by the Financial Conduct Authority rather than the Gambling Commission (at 20.1%, a proportion that will have distorted the overall figures insofar as regulated ‘gambling’ is concerned). After this came betting via a betting exchange (16.2%) and playing poker in pubs or clubs (15.9%), both activities often regarded as the preserve of professional rather than recreational gamblers. They were then followed by betting offline on non-sporting events (15.5%) and playing machines in bookmakers (11.5%). Despite the Daily Mail’s headline, participation in online betting with a bookmaker ranked much lower in the list at 5.4%.

We know from the Annual Assurance Statement experience for larger gambling operators that the Gambling Commission now expects such operators to assess (and explain how they identify) the current prevalence of at-risk and problem gambling within their customer base, the impacts of their actions to address these issues and to provide an estimate of the proportion of revenue derived from ‘at-risk’ and problem gamblers. It surely can’t be long until this becomes a compulsory requirement for smaller operators too. The recently published research findings provide a good base from which operators might start to identify those of their customers who may be most at risk.

Secondly, adding fuel to the media fire has been the announcement that, following the discovery of significant flaws in its social responsibility processes, 888 UK Limited has agreed to pay a record penalty package of over £7.8million, of which £3.5million is to be repaid to self-excluded customers who were nevertheless able to deposit sums amounting to this figure over a period of 13 months and £4.25million is to be paid to a socially responsible cause to invest in measures to tackle gambling-related harm. In addition, for “future assurance” purposes, the Commission has ordered an independent audit of 888’s processes relating to customer protection.

In terms of timing, this case could not have provided the Gambling Commission with a more perfect opportunity to flex its muscles against a major very well-regarded operator to ensure that the rest of the industry sits up and takes notice of the repercussions of its new more robust enforcement policy. Sarah Harrison, chief executive at the Gambling Commission did not mince her words, saying: “Safeguarding consumers is not optional. This penalty package of just under £8million reflects the seriousness of 888’s failings to protect vulnerable customers”. All gambling operators can expect more of the same at November’s second Gambling Commission “Raising Standards” conference, this time to be entitled “Leading from the front: raising standards for consumers”. 

Of course the politicians are not slow to take note of the shifting sands of perceived public opinion. It is rumoured that the Chancellor of the Exchequer is not, as previously imagined, “blocking” a review of FOBTs for economic reasons, the Guardian quoting a letter from Philip Hammond to the Bishop of St Albans, saying: “Recent media reports on the status of the review of gaming machines and social responsibility measures are entirely without foundation. Both I and my department fully support DCMS’s work to ensure the UK’s gambling regime continues to balance the needs of vulnerable people, consumers who gamble responsibly, and those who work in this sector.” Not to be outdone, deputy Labour Party leader Tom Watson has announced his party’s policy that, if elected to government, it will ensure that football clubs are banned from entering into shirt sponsorship deals with betting operators. More on this no doubt at the forthcoming Betting on Sports 2017 conference, but these developments represent a worrying sign that the political tide may have turned against the betting industry.

Thirdly, the ever-increasing social responsibility burden on operators has been behind the very recent decision by Sky Betting & Gaming to terminate its affiliate marketing programme. It made this clear in its closure notice to affiliates, saying: “…… the regulatory landscape in which the industry operates is developing and maturing and operators are experiencing increased obligations regarding their regulatory responsibilities and level of compliance. In order to continue to operate in a compliant manner, we feel that operating the Programme is no longer viable and that managing the output of affiliates presents a significant risk to our business from a regulatory perspective. It is for this reason that we have chosen to terminate the Programme.”

The obligation on operators to take responsibility for the misdemeanours of their affiliates was (not entirely coincidentally) the central theme of my Licensing Expert article for SBC last month. That obligation includes ensuring compliance by their affiliates with the regulatory requirements of data protection legislation, advertising rules and Gambling Commission LCCP demands, the last of which was brought home by BGO Entertainment being hit earlier this year with the first ever formal warning of its type from the Gambling Commission and a £300,000 penalty, following an operating licence review for breaches by them and by their affiliates of LCCP Social Responsibility code provisions.

Some commentators have suggested that all of this may lead to a need for affiliates to become licensed. Personally, I don’t see that happening. The Gambling Commission already has power to impose the requirement to obtain a betting intermediary licence if an affiliate “crosses the line” into facilitating the making or accepting of bets between others. The Commission has never supported an initiative for licensing affiliates and, putting it bluntly, why should it if the operator can be held liable for its affiliates’ actions or inactions? What I do see happening, particularly with the General Data Protection Regulation coming into force next May, is a greater number of operators following Sky Betting & Gaming’s lead unless they are able to more effectively control management of their affiliates’ marketing activities than I suspect may well have been the case to date with some.

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David Clifton – Director – Clifton Davies Consultancy Limited

dc@cliftondavies.com



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