For some time now, I have wondered about the true intent behind new initiatives and regulations that the Gambling Commission (“UKGC”) introduces which is, we are told, based on an evidence-led approach.
Well, I am going to make two statements:
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- The UKGC has not considered wagering limits in light of all other regulatory changes especially those focused at reducing gambling related harm; and
- The introduction of wagering limits is being used as another mechanism to reduce the number of operators the UKGC will have to oversee, as it will drive smaller operators out of the market due to increased marketing costs. The net effect will be consumers will have less choice.
I must admit I was wondering when wagering limits would be subject to a consultation. Much like affordability before it, the UKGC have been “encouraging” operators to look at the effects of wagering requirements for some time now.
I advised a gaming client (to remain anonymous) who received a request for information from the UKGC regarding the topic of wagering requirements. Questions were focused on the same themes as the consultation, with the salient concerns being:
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- Offers being designed in a way to encourage excessive gambling behaviour;
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- The significant (x35) wagering requirements may encourage customers to gamble excessively; and
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- The time period of 30 days to complete wagering was also of concern.
The data the client provided with my support showed that:
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- 0.02% of customers had made a complaint about the offer in the 3 years it had been active. 8 customers in total, with all being resolved without further escalation;
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- None of the complaints related to customers having gambled excessively;
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- Enhanced affordability checks, safer gambling tools and customer interactions would help prevent players from suffering harm;
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- Only bonus funds contributed to wagering requirements, and the average and median deposit value of customers opting into the welcome offer was extremely low, and unlikely to cause any harm; and
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- Customers had to actively opt into the offer.
The client never heard back from the UKGC, which is usually a sign that the data presented was valid and proved that there was no factual evidence to back-up the proposed concerns.
But…we are now told there is evidence to support the UKGC’s view that this is an area which requires immediate attention.
The UKGC has often used Compliance Assessments, Enforcement Activity and Customer Complaints amongst its toolset to understand what is going on in the industry they regulate. In recent years, they have added to their evidence base by setting up various expert panels including the Lived Experience Advisory Panel, the Advisory Board for Safer Gambling and the Digital Advisory Panel.
They remind us that they use a “rigorous, consistent and transparent evidence assurance process to collate, interpret and weigh up the overall strength of evidence for a given issue or topic”.[1] (Gambling Commission, 2023)
The advice from the UKGC in the Advice to Government – Review of the Gambling Act 2005, “Qualitative evidence from the Commission’s Lived Experience Advisory Panel, our compliance activity and ADR casework, has raised concerns around promotional offers that are designed in a way that could lead to excessive gambling, such as setting high wagering requirements attached to bonus money.”[2] (Gambling
Commission, 2023)
The starting point from the UKGC is clear, from their research their view is that there is a clear link between high levels of wagering requirements, intensity of gambling and complexity of offers which all lead to increased risks of excessive gambling and thus harm. Their evidence shows there is a problem, and they are going to fix it.
UKGC Evidence – Is it flawed?
Well let’s look at some of the detail of the evidence base that has been provided.
There is a reference made to two academic studies Balem et al. (2021), and Hing et al. (2018) that found that there is a clear link between the use of wagering requirements and increased gambling frequency and intensity.
Looking into the detail, Balem et al. (2021), is a using data from the French market from 2015/2016. The French market does not regulate Online Casino, so this key factor has not been taken into account. This is an important point as the higher wagering seen in the online market tends to be linked to Casino offers and not Sports related offers. Let us not forget, it is wagering requirements which is the key perceived issue here. What is interesting, is that this study does not consider the value of wagering requirements which is the subject of this consultation.
Hing et al. (2018) uses data from the Australian market, which once again does not regulate Online Casino. It focused on direct marketing only for opted-in customers, and the survey for the data set is from 2017. The conclusions of this study focused on frequency of direct marketing messages and the requirement for a rigorous opt-in mechanism. The research does not relate to the size of wagering related to an offer. How relevant is this study as critical evidence for this consultation?
If the UKGC considered the same period in the UK market, which was pre-CMA changes (use of unfair terms and practices, clarity of offers), pre-advertising changes, pre-banning of credit cards, pre-banning of reverse withdrawals, pre-customer interaction guidance, pre-affordability, pre-bonus buys to name just a few key changes, then I am sure the conclusion of the “evidence” would possibly point at an issue. But this is a different era, one where the customer journey is regularly interrupted by interactions and source of wealth or funds requests. There is evidence of customers getting frustrated by the continuous interruptions to their customer journey. A case of the enjoyment of majority being disrupted for the protection of the minority. It is also an era of a better safer gambling educated customer than in 2017, the annual Safer Gambling week is a testament to that.
So, is it really fair to use data of this era and using it an evidence base for informing potential policy decisions that may have such wide-reaching effects on the sustainability of the market?
Are other jurisdictions so relevant?
The UKGC makes references to other jurisdictions in its evidence and in doing so, reveals that it has not considered the concept of unintended consequences.
Let us consider the Sweden example. Famously Sweden regulated in Jan 2019, and introduced a key regulation ensuring that customers were limited to one sign-up offer per licensed operator. This meant that for many operators, where the gaming product they offer rarely differentiates from the next operator, being able to retain customers would prove difficult and be reliant on brand loyalty and product marketing. An Online Casino operator offers the same key gaming content as the next Online Casino operator. Therefore, product marketing is challenging. The effect of this particular regulation (alongside Duty of Care requirements and some Covid related deposit changes), meant that the size of the black market grew, and the regulated market became smaller.
A recent report commissioned by the Branschföreningen för Onlinespel (BOS), in June 2023, suggests the level of channelisation of the Swedish market is around 77%. This means that 23% of the market is currently taken by unlicensed operators. In total there are 100 operators in the market, with a staggering 27 operators having since exited the market.
What has happened in Sweden, will happen and arguably is happening in the UK. The complete ban on wagering requirements will result in smaller operators not being able to offer as many incentives to attract and retain customers as the cost of such incentives will increase. This will ultimately lead to more operators exiting the market – and perhaps that is the intention?
The US as a market has been a race to the bottom with operators prioritising marketing spend to increase market share, over profitability. Only those with the deepest pockets will survive. If you are the UKGC, it is much easier to regulate an industry of 10 operators, that one of over 500. Over the last two years, the number of Online Licensed Operators has decreased 5.4% (up to March 2023), from 591, to 559 but this still represents a 12% increase on when the Point of Consumption regime began back in November 2014.
The UKGC’s provisional position is to follow Denmark as it has a 10x wagering requirement. However, it does not seem to have considered the likeliness of that market demographic and regulatory environment to the market it regulates. For example:
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- How does Denmark’s harm minimisation regulations compare?
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- Does it enforce low affordability limits to protect against financial harm?
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- How do the effective customer interaction requirements compare?
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- What other product differences exist? Stake limits, game design etc.
The UKGC is also interested in hearing the view from operators of the direct costs associated with the implementation of the proposal. Perhaps it should also consider the indirect costs such as reduction in value and type of marketing offers that operators may be able to provide due to increased operating costs and decreasing margins. The UKGC have been clear and transparent in stating that they are keen to understand the impact and proportionality of the approach. Perhaps it should start by reviewing the evidence base and include more quantitative UK market specific data in their analysis. The opportunity of this consultation should not be underestimated, now is the time for all stakeholders to provide the balanced evidence base that will provide for a safer, better market for all involved.
[1] Gambling Commission, 2023. Autumn 2023 Consultation on proposed changes to Licence Conditions and Codes of Practice (LCCP) and Remote Gambling and Software Technical Standards (RTS). p. 93.
[2] Gambling Commission, 2023. Advice to Government – Review of the Gambling Act 2005. p. 166.