19 May, 2021

Striking the Legal Balance

Olivia Davies, barrister at Cornerstone Barristers, writes on the ongoing UK Gambling Act Review, assessing the likelihood of changes and the threat of the black market

At the end of 2020 the UK Government began its review of the Gambling Act 2005 – launching a wide-ranging call for evidence, which closed on 31 March 2021. The aim of the review is to ensure an appropriate balance between consumer freedom and prevention of harm. The Government recognises the importance and popularity of gambling as a leisure pursuit, citing a figure of 47% of adults as having participated in at least one form of gambling in the previous four weeks. However, it also recognises the need for gambling laws to protect the vulnerable, estimating that there are currently roughly 300,000 problem gamblers, likely to cause harm to those around them.

The Government plans to assess the submissions it receives from the call for evidence and set out any proposals for legislative reform in a white paper in 2022. One of the matters under review is whether the Gambling Commission currently has sufficient powers to tackle unlicensed operators. The Government has asked for evidence on the current scale of black-market gambling in the UK and the perceived risk of a significant black market emerging.

While no proposals have been made as yet, significant areas of possible new regulation include: as yet unspecified rules to minimise the risk associated with online products; a mandatory levy on the industry to fund projects related to gambling- related harm; and new redress measures for individual customers who have been treated unfairly by operators. The Government Review is happening alongside an ongoing consultation by the Gambling Commission, on new rules requiring operators to do more to identify consumers who may be harmed by gambling. These proposals include operators conducting affordability assessments on consumers.


How likely is it that changes will be made?

A precedent for changes to gambling legislation has already been set in recent years. In 2019 the maximum stake for fixed-odds betting terminals was lowered from £100 ($137) to £2 after a widespread campaign. Two significant changes also came in 2020 when it was made mandatory for online operators to be signed up to GAMSTOP (the national online self-exclusion scheme) and a ban on gambling on credit cards was introduced.

The Secretary of State for Digital has described the Gambling Act as “analogue law in a digital age”. This view can’t be dismissed out of hand given that gross gambling yield generated by remote gambling overtook land-based gambling for the first time in2019. New challenges are also being presented by currently unregulated online operations, such as video game “loot boxes” (by which loot boxes in a game can be bought with real money, the contents of which are unknown at the time of purchase) which may require regulation and do not seem to easily fit within the current regime.

Given this background, change in some form seems likely, with the only question being the precise shape it takes.


What is the risk that changes will lead to more black-market gambling?

According to a poll by the Betting and Gaming Council (BGC), six in 10 people believe unregulated websites will be the main winners if the Government tightens regulation too much. Cash staked with unregulated operators has apparently doubled from £1.4bn to £2.8bn in the last two years.

It is possible that some of the Government’s mooted changes to “minimise risk associated with online products” could make regulated operators unattractive to consumers. A perception among consumers of less freedom and choice on the regulated market could drive them towards black-market operators. For example: if a statutory limit is set for online gambling at a level much lower than customers would prefer, customers fail affordability assessments, or greater safeguards are introduced for “higher risk” products like slots or casino games which reduce consumer enjoyment to too great an extent. This risk means it is important the Government gains a clear understanding of both the scale of the black market and what drives consumers to use it. Only then will it be possible to predict what changes to regulation will cause the black market to flourish. It shouldn’t be forgotten that the Government is consulting not just on the prevalence of black-market operations but also on the Gambling Commission’s ability to tackle them. It may therefore be the case that any possible driving of consumers to black-market operators caused by tighter restrictions could be off-set by more expansive powers and greater funding given to the Commission. However, it is crucial that in seeking to further its harm prevention objective in the regulated industry, the Government does not make products so unattractive to consumers that the desire for greater freedom attracts them to unregulated operators. Only time will tell if the Government manages to strike this balance successfully.