Wiggin partner: Examining the UK gambling regulation debate

By Gambling Insider

The Social Market Foundation has published a report that seeks to contribute to the current debate about gambling regulation in Britain. Here, Jason Chess, partner at London-based Wiggin, reviews the approach taken and outlines some of the recommendations made that might do more harm than good. 

The SMF Report follows hard on the heels of the recent House of Lords report on the gambling industry and, like the House of Lords report, approaches the issue with no pretence to objectivity. At the outset, for example, the ‘Acknowledgements’ prominently omit any mention of any input from the gambling industry itself. Following shortly after, the first paragraph of the ‘Introduction’ hits the reader hard with the now-obligatory apocalyptic picture of ‘regulatory failure, public health, addiction, harm, crime’ caused by the ‘normalisation of gambling in sport and the proliferation of gambling…on our high streets and in our homes’.  

To their credit, the authors do mention in passing the latest NHS figure showing that problem gambling is stable at 0.6% but the figure carries no significance for them. They point out that the number of people for whom this statistic represents is larger than what can be cared for. In case a tone-deaf reader might be tempted into thinking that that might be reflection upon the difficulty of obtaining NHS care, the authors quickly deploy public opinion to make clear where the blame should lie. A high percentage of people think that gambling is ‘dangerous for family life’ and only 29% of people ‘think that gambling is conducted fairly and can be trusted’. Moreover, there has been a significant increase in the number of people who think that gambling is associated with crime.  

In objective terms it is of course possible to read these two broad condemnations in a variety of waysWithout in any manner showing complacency towards the genuine tragedies suffered by individuals, one might reasonably take the view that significantly less than one per cent of people encountering material issues (and an apparently downward trend) might be seen as a positive statistic, albeit by no means a laurel wreath to rest uponThat 2016 figure appears to represent a reduction and the key to the debate is of course how best to ensure that the decline continuesIn the second place, it should come as no surprise to anyone that public confidence in gambling is low. That is the inevitable consequence of the message that the present unremitting media crusade hammers home day after day and which has become the dominant public narrative. When only one side of an argument gets to set the public agenda unchallenged, that is what is bound to happen. Whether and to what extent public opinion is correct, justified or has merit is not a question that the report asks itself. So the report’s statistics may mean that we are indeed living in the shadows of the Last Days. They may also mean that considerably fewer than one per cent of people suffer material harm from gambling and that media campaigns influence public opinion.  

Although some of the recommendations of this report make good sense, in many cases they are already work-in-progress in areas identified for improvement. Good work is already being done by the industry around responsible product design (particularly for slot games) and the dialogue with the regulator in this regard has been robust

Just like the House of Lords report, this SMF report is at its core political in the sense that it makes public opinion into the yardstick against which everything – including the success of both regulation and regulator – must be judged. Put colloquially, the success of the Gambling Act 2005 and the Gambling Commission is to be judged against how faithfully they follow the morning’s headlines rather than by evidence. This principle is sometimes stretched to an alarming extent. In Chapter 1, the authors acknowledge (in so many words) that although the failed Gambling Act 2005 actually contains everything that it should and although the apparently toothless regulator actually possesses and exercises all the powers it needs, ‘a review of media stories over the past ten years’ shows that everything is in fact a failureThe reality is quite different. The British regulator has imposed far greater sanctions upon its various British licensees than any other gambling regulator in the world, bar none. The modern customer protection regime also specifically adopts as regulation the Gambling Commission’s historic public statements on its previous enforcement actions.  

As for teeth, a major gambling operator who in 2020 commits a serious breach of customer protection regulation can expect a fine in the region of eight digits and see its senior executives risk the loss of their personal licences and their ability to work in the industry. That prospect is far more real, likely and dangerous under a British licence than under almost any other gambling licence available worldwide. It’s an unchallengeable fact that consumer protection standards are today vastly improved. The fact that so many sanctions have been imposed by the British regulator points to the exact opposite of the laxity and feebleness on the part of the Commission that this report assumes. The flurry of regulatory sanctions instead points to the regulator driving standards upwards from the entry-point of September 2007 when the 2005 Act took effect, a time when the problems of remote gambling were relatively new and unfamiliarThe regulator has raised the bar a long way and very rapidly, and the industry is working hard to follow suit. More must unquestionably be done, but it is not Armageddon. 

 

Fair and balanced 

The authors attach great weight to the poor public perception of the ‘fairness’ of gambling, complete with a graphIt’s worth drilling into the idea that gambling is somehow ‘unfair’ to see what substance lies beneath itIn reality, fairness’ is addressed extensively and rigorously in British regulation on several levels. On the technical level, the manufacture and supply of gambling software used by British players can only be done under a Gambling Commission licence subject to detailed technical and information-provision standards, the so-called ‘RTS’. It is an offence – Section 41 of the 2005 Act – to manufacture or supply software for the British market without this licence. For important matters such as the essential statistical ‘fairness’ of the core ‘random number generator’, the certification of an independent test laboratory is required. Self-certification will not do. Payout ratios must be carefully logged. On a contractual level, all persons who gamble with a British licensee have access to an independent dispute arbitration service entirely paid for by the gambling operator if they are unhappy with their treatment by a gambling operatorOn the regulatory level, every British licence requires that the terms and conditions upon which British licensees offer their product must comply with British consumer laws and regulations. For promotions, incentives and the protection of customers’ rights to cashout their deposits, the Competition and Markets Authority has subjected the industry to a further, special suite of specific consumer-facing undertakings. So what does the ‘unfairness’ consist of, in concrete terms? What in reality do the 71% of people who consider gambling to be ‘unfair’ actually mean by ‘unfairness’?  

More industry input into the SMF Report might have been helpful. The authors show significantly more understanding of how gambling works than the House of Lords report, but some of the ideas might have benefitted from industry inputThe authors want each operator to receive a ‘kite mark’ akin to the ‘red tractor’ symbol used by British farmers. Condition no. 8 of each British licence already requires the licensee to display its British licensed status and number, as well as the Gambling Commission logo, to fulfil exactly that function. If the Commission has good reason to suspect that a licensee cannot comply with the licensing objectives, then the 2005 Act already provides for the licensee and its senior people to be punished, suspended or lose their licence. At the most basic level of law, Section 22 of the Act only permits gambling (subsection b) where it is consistent with the licensing objectives (this bit comes first - in subsection a). A ‘kite mark’ doesn’t appear to add much to this: the idea is already in the legislationA recommended ‘total overhaul of the remote licensing system’ to scrap white label operators also misses the point. There are many white label operators (such as major media brands) that are genuine, bona-fide brand (only) owners who wish to monetarise a valuable brand by subcontracting it to gambling operators. This is because licensed gambling operators are best positioned to comply with gambling regulation and hence protect both consumer and brand, which is a good thing. Robust official guidance already addresses abuse of the system and the regulator has tightened its scrutiny in this area noticeably. In terms of harm, some might see this as a red herring. The introduction of PFLs for remote gambling is also unnecessary as there is already an onerous system of PMLs (the whole of Part 6 of the 2005 Act), which in the case of major operators are invariably held by quite large number of executives. The Commission can and frequently does point to managers within licensed businesses and order them to obtain PMLs if the Commission considers them to have appropriate responsibility 

The authors clearly don’t like low-tax jurisdictions and this appears to be unrelated to gambling. Chapter Four starts off with reference to the Panama Papers and works its way down through a Dantean spiral of ‘high net worth individuals…political leaders…large multinational corporations…the largest and richest US technology companies…Amazon…Google’, all of whom deprive governments of money for public services and the rectification of income inequality. It’s to the credit of the authors that they phrase the solution to all of this evil capitalism in terms of ‘incentives’ but they don’t contemplate the utter impossibility of any high-tax, high-spending, debt-burdened, low-growth EU state ever competing with smaller nations on tax. In any case, the issue for gambling is not British duty, which is relatively competitive as it is. It’s with corporation tax and irrecoverable VAT.  

Trying to establish some kind of objectivity and balance in the current gambling debate is a dangerous thing. Pointing out misconceptions and asking for a truthful and frank exchange of ideas based on facts, like Gradgrind, opens one to the charge of complacency, indifference or callousness to the terrible places in which too many gamblers end up

Although some of the recommendations of this report make good sense, in many cases they are already work-in-progress in areas identified for improvement. Good work is already being done by the industry around responsible product design (particularly for slot games) and the dialogue with the regulator in this regard has been robust. Affordability is a live issue but in the writer’s view, it’actually not a gambling debate at all. It’s a question of the extent to which some people in society (Aldous Huxley’s ‘alphas’) should seek to prevent the rest of us from spending money (either at all, or too much) on a pastime which they find unpalatable. This isn’t a new debatethe preamble to Queen Anne’s Gaming Act of 1710 lamented that ‘the laws now in force for preventing the mischiefs which may happen by gaming have not been found sufficient for that purpose…’  

As at many other junctures of the report, the authors here reveal something of their true colours and take a swipe at ‘libertarians’ and their ‘entirely artificial crusade…against the spectre of a nanny state’. Shortly afterwards and without any discernible irony, they propose a public agency with statutory authority’, which will determine what financial commitments each ‘household must fulfil in order to achieve a socially acceptable standard of living’. Nor is this aimed at avoiding ‘severe hardship’: it also concerns how gambling might affect ‘disposable income in an everyday sense’. One doesn’t need to be too radical a libertarian to find the North Korean flavour of such a state apparatus uncomfortable, particularly as in excess of 95% of people appear to be capable of making these decisions for themselvesThe industry is well aware of the need to develop robust assessments of affordability but it also recognises that affordability for international poker players will need to be measured differently than for an old lady who plays bingo once a week, or the writer who bets once a year on the Cheltenham Festival. The writer’s suspicion is that someone who enjoys following the form within their means on even a modest income doesn’t necessarily need to be ‘determined’ by the state. 

 

Mixed messages

Trying to establish some kind of objectivity and balance in the current gambling debate is a dangerous thingPointing out misconceptions and asking for a truthful and frank exchange of ideas based on facts, like Gradgrind, opens one to the charge of complacency, indifference or callousness to the terrible places in which too many gamblers end up. Reports like this SMF Report, with little balance and page-after-page of ‘powerful’ statements such as ‘our happy, courageous, beautiful children were deliberately addicted to toxic products, deliberately given a life-threatening, life-long illness’ do nothing more than raise the temperature. That is fine if the aim is to generate sufficient public anger and political will to prohibit gambling entirelyBut we now all live in a completely connected world which means that is no longer an option, even if it ever was: Queen Anne’s 1710 legislation itself refers to previous failed laws.  

The only choice is between regulation or abandoning the vulnerable to the black market. If that duality is accepted then reports like this SMF Report become part of the problem because they refuse to take part in an evidentially founded dialogue with real potential to improve regulation. They instead waste time with pantomime caricatures of evil predatory gambling companies stalking innocent child victims. So, regrettably, this report makes very little contribution to what should be a wholly consensual, urgent and dispassionate round-table between an industry, its regulator and a public who all want exactly the same outcome: a safe, fun, entertaining adult product where the colossal possibilities of data and technology are harnessed to create world-leading protection for every single customer. 


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