On 27 April 2023, the Government finally published its White Paper which is expected to shape the UK gambling industry for the next few decades. We shared our initial thoughts on the Government’s approach on the day of publication and this is the first in a series of articles digging into the proposals in more detail and setting out our thoughts on the likely output of the initiatives which are intended to implement the Government’s stated objectives, the timing of the same and the potential impact on the sector.

The White Paper recognises that the online gambling landscape is very different to the one which existed in 2005. When the Gambling Act 2005 (“2005 Act”) was first published, the Gambling Commission’s (“Commission”) principal area of supervision was over the land-based sector, over half of all web users only had dial-up internet and floppy discs were still in circulation. Indeed, even as recently as 2014 when the point-of-consumption regime was introduced, the Commission only had regulatory oversight over one out of the top 20 British-facing sportsbooks.

As set out by the Government, the purpose of the White Paper is to create a legislative and regulatory framework that is “fit for the digital age”. As noted in our previous article, it is no surprise to us that, as an enabling piece of legislation and despite the early rhetoric to the contrary, the 2005 Act is very unlikely to be overhauled as a result of the White Paper, albeit elements of it may be amended/repealed.

The majority of the anticipated changes will be effected (after rafts of consultations) via secondary legislation or amendments by the Commission to the Licence Conditions and Codes of Practice (“LCCP”). Nevertheless, the advances in technology since 2005 explains why, when dividing the White Paper into six chapters, “Online Protections – players and products” is first up and why measures around financial vulnerability (more on the so called “customer restrictions” and, in particular, how the concept of “affordability” is developing, will be covered in our later articles) and product restrictions are likely to have the greatest impact on both industry stakeholders and consumers.

This article will focus on the key proposals around product restrictions, namely stake limits, responsible game design, player centric tools and prize draws and competitions.

From a product restrictions perspective, the Call for Evidence flagged particular concern with certain online gambling products (such as slots, bingo and casino games) being associated with a higher rate of problem gambling.

Specific response requests included:

• Evidence on the effectiveness of current online protections and whether changes were needed at the product and/or account level to improve player safeguards; and
• Evidence relating to product restrictions, such as stake, speed and prize limits, and evidence as to the effectiveness of protections already in place including player-set spend limits

Inevitable – Death, Taxes and Online Slot Stake Limits

Of the White Paper’s various proposed product restrictions, it was online stake limits that made headline news. The Government has lined up a consultation to take place this summer on maximum stakes for online slot games of between £2 and £15. The Consultation is also set to consider a lower limit for customers aged 18 to 24 of between £2 and £4. Secondary legislation is then expected to be enacted within the first half of 2024.

This was far from a surprising proposal. Given that the review of British gambling laws carried out by the Department for Culture, Media & Sport (“Review”) explicitly highlighted the need to address legislative disparities between online and land-based gambling, stake limits for certain online products felt inevitable given the introduction of the £2 maximum stake for fixed odds betting terminals (“FOBTs”) in 2019.

In response to the Call for Evidence, the Betting and Gaming Council (“BGC”) and leading operators sought to emphasise the view that account level controls are the real fail-safe and sufficient in themselves to restrict issues concerning rapid loss on online products.  Perhaps sensing this was a losing battle, some of the larger operators looked to get ahead of the game. For example, in 2021 Flutter set a £10 per spin limit on online slots in tandem with deposit limits for the under-25s and Entain announced that it was adopting a program of personalised stake and deposit limits.

To tier or not to tier…

Shortly after the White Paper was published (and as if its 256 pages wasn’t enough), the Commission published its modest 166 page “Advice to Government – Review of the Gambling Act 2005” (“Advice”). In its Advice, the Commission provides its support for stake limits for online slots but no other casino games or, indeed bingo, poker or sports betting. Both the Commission and the Government have concluded, based on various data research points[1], that online slots represent a significantly greater risk on a standalone product basis (including the most significant “binge rate”) than any other product. As such, the Government has decided to only impose stake limits on online slots products, recognising that they are “associated with the highest average losses of any online product”, with 1% of active accounts providing over 40% of slots GGY.

The Commission argues that this is only part of a wider package of protections to limit the potential for gambling related harm (including account level controls and safer game design, more on the latter below). At a minimum, the Commission believes that consideration should be given by the Government to “tailoring stake limits to individual risk”. This would potentially include the introduction of tiered limits being applied in certain scenarios (e.g. where a customer is identified at risk of harm or falls within a certain demographic (such as young adults)). Additionally, the Commission suggests that where an initial financial vulnerability assessment or enhanced assessment of financial risk and affordability is completed by a customer, these tier limits might be relaxed or removed, where appropriate.

The Government has, however, turned down the opportunity to pursue the tiered (or so-called “smart”) stake limits on the basis that it would require primary legislation and has stressed the importance of “quick and precautionary action in this area” and is instead proceeding with limits fixed for all customers.

Campaigners are likely to argue this as an opportunity missed, but, in reality, this type of limit would require significant technical development and decision making in relation to the application of movements through tiers which would likely lead to subjective decisions rather than regulatory certainty which many have been calling for (especially given that pinning down how to define “financial vulnerability” is going to take some time yet). Furthermore, it is not hard to imagine the Government’s approach being influenced by that the media frenzy in response to the Commission’s announcements around fines and regulatory settlements pertaining to the failure of certain online operators to configure their systems to quickly react to speed of spend issues.

Race to the bottom?

So what will the limit be? Well, the Government somewhat alarmingly states in the White Paper that £2 might be a sensible starting point – the FOBT debate which resulted in the £2 limit involved a Commission recommendation of a wider range between £2 and £30 (rather than £2 to £15 this time around), so it is easy to take a pessimistic view at first blush.

Certain commentators are suggesting the possibility of higher limits is simply window dressing by the Government but, unusually for lawyers, we think there is cause for some degree of optimism. Firstly, the Government (taking a self-confessed “equitable approach”!) expressly acknowledges the “opportunity for data driven monitoring” online as compared to that which takes place in “anonymous land-based settings”. Furthermore, the number crunching analysts note that the Government calculations on the impact of slots stake limits are seemingly based on a limit of £8.50 which (according to those who consider the calculator mightier than the pen) implies a drop in region of a 4-6% in slots NGR which isn’t as catastrophic as some feared as the Review progressed. Finally, it seems illogical that the Government would point towards a limit of £2-4 for the 18-24 year old cohort if they were really gunning for an end game of £2 across the board.  It feels to us like there remains scope in the forthcoming consultation for the industry to make a real play for an outcome which doesn’t involve a race to the bottom.

Flexibility – too much to ask?

It is also crucial, in our view, that any new law or regulation resulting from the White Paper is properly future-proofed. Any secondary legislation relating to product design must envisage a range of stake limits which could be adjusted not only downwards (if the smorgasbord of protections emanating from the White Paper do not (on an objective basis) achieve the Government’s aim in the medium term) but also upwards: (i) if limits are demonstrated to have been unnecessarily low (albeit one can foresee it being tricky to isolate evidence with such a raft of new measures even before considering the negative media attention an increase would entail); (ii) if slots afficionados have been driven to the black market (Germany anyone?); or (iii) simply to take account of inflationary pressures over time (albeit an area the Government may not want to dwell on leading up to an election).

Consultation – let’s go again…  

The industry has a chance to really digest the Government’s position in the White Paper and respond in detail to the upcoming Government consultation on stake limits, a process which should involve less dice loading than those conducted by the Commission in recent years. Statistics demonstrating that the voluntary limits imposed by some of the leading operators over the last 18 months have had a positive impact wouldn’t go amiss either.

Central to any resistance to the lower end of the range will be a clear explanation (backed up by evidence where available) to show that the cumulative effect of limits, account level restrictions, game design changes and safer gambling processes operate to reduce risk to the consumer to such an extent that the establishment of too low a rate (that is likely to drive traffic to the black-market) would be self-defeating from a consumer protection perspective.

One has to ask whether a ‘one size fits all’ approach to stake limits is the correct way to regulate when account level measures will kick in to prevent excessive speed or volume of spend. On the other hand, regulatory certainty was called for by many and the impact of certain operators not grasping the nettle in terms of using their data analytics and system configurations to prevent or temporarily halt obviously excessive binge activity cannot be ignored. Nevertheless, there is still much to play for.

In January 2020 and following discussions with the Commission around collaborative efforts designed to improve player safety, the BGC formed a working group focussed on responsible online game design. The work of this group ultimately led to the BGC adopting its current Game Design Code of Conduct in September 2020. In July 2020, the Commission, concerned that the Code of Conduct wasn’t going to move the dial sufficiently, initiated a consultation on online slots game design and reverse withdrawals. This resulted in the outright ban of four key features of online slots games: (i) features that speed up play or give the illusion of control over the outcome (such as “turbo modes”) ; (ii) slot spin speeds faster than 2.5 seconds; (iii) auto-play – which can lead to players losing track of their play; and (iv) sounds or imagery which give the illusion of a win when the return is in fact equal to, or below, a stake. Operators were required to implement these new rules by no later than 31 October 2021.

In light of early evidence that the above initiatives have led to a decrease in both session lengths and stakes/losses[1], the Government (having concluded that only online slots merited stake limits) is now seeking to apply similar design controls to other online products in order to “prevent harm at source and reduce the reliance on reactive harm detection systems”. These controls, the government says, will build upon the online slots rules and be set up to apply across varying game types, with bespoke provisions only where necessary (particular concerns having been cited about “fast roulette” with paid spin speeds comparable to slots).

The next step is for the Commission to consider game design rules for online products generally, such as “limits on speed of play to reduce immersiveness and rapid losses and intensifying features such as simultaneous play of multiple games” and the provision of real-time data on session losses, before consulting in the summer of 2023 on specific updates to the remote technical standards.

The devil is going to be in the detail in terms of the impact of these measures. B2B companies with a particular focus on non-slot products will have an important role in terms of advancing arguments as to why their offerings might benefit from bespoke treatment but, having already dealt with equivalent measures for online slots, the industry is unlikely to be able to use the “development nightmare” card such that we anticipate the Commission will be resistant to an extended implementation timetable.

The White Paper notes that while customers have access to responsible gambling tools to help them manage the time and money they spend on gambling, the uptake of these tools is relatively low – for example, Commission data suggests that financial limits are only used by 11% of online gamblers with even lower take up on time outs and reality checks. Whilst evidence suggests such tools can not only empower consumers but make a real different to those who use them, White Paper submissions focussed on the need to improve uptake.

The White Paper effectively concludes it is no longer effective for an operator to simply have these tools on its system; the Commission and the Government believe that use should be more actively encouraged or, in certain circumstances, mandated. The White Paper cites relatively few concrete examples of how this will be achieved but the most significant is the suggestion of making deposit limit settings mandatory for all customers on account creation with the potential for pre-populating the limit with a reasonable default position. Operators are likely to be resistant to an “opt-out” rather than “opt-in” approach in terms of a frictionless customer experience but may be more alarmed by a Commission led consultation later 2023 involving default deposit limits in relation to which the Commission’s much criticised approach to “affordability” may again rear its head.

Whilst not a headline grabber in the same way as stake limits, we believe the output of the consultation on player centric tools could nevertheless be significant. Whilst the availability of information on annual or lifetime losses seems a straightforward and sensible ask, there must be an argument that the need for the opt-out approach to deposit limits referred to above might be better assessed following the introduction of account level initiatives and the product restrictions referred to above. It is fair to say that there is likely to be a lot of interest in the detailed content of the consultation documentation once published.

We have seen a significant uptick in interest in recent years in businesses looking for advice on how they can organise highly profitable online prize draws and competitions in the UK market, often offering valuable prizes, such as luxury houses or cars. With the proliferation of advertising of such offerings (particularly to wide audiences on social media), they have not escaped the attention of the Government and the Commission.

Very often the offerings will not meet the definition of a lottery or otherwise fall outside the scope of regulation under the 2005 Act (perhaps via the use of a free postal entry route or purported elements of skill). If so, they are not currently subject to Commission oversight and are not obliged to follow the rules on identifying and mitigating gambling-related harms which apply to licensed operators (or the same advertising restrictions).

As such, the Commission is unable to set limits on their size, annual proceeds, or prizes. In reality, existing Commission guidance in this area has been overtaken by the advent of these commercially driven online offerings (whose commitment to charitable causes varies significantly) and the Government has reached the conclusion that a re-assessment is required, with a hint at the need to protect the exclusivity enjoyed by the national and charitable lotteries.

With the Government admitting the absence of regulatory supervision leaves it with limited information on the size of the market and the scale of possible gambling regulated harm, it will be interesting to see how any consultation in this area is framed. There is no date set for a consultation, and with other matters that appear to be more pressing, we suspect we may be left waiting a while longer until any further information is provided regarding the precise direction of travel.

The proposed package of product restrictions applying to online products which are likely to emanate from the White Paper are not hugely surprising with many having been foreshadowed in the scope of the Review. Much is going to turn on the output of the raft of forthcoming consultations which will, in effect, put the flesh on the bones.  As such, the long-awaited White Paper is really only the beginning of the end.

If the reduction (albeit modest) in problem gambling rates set out in the very recently published NHS Health Survey’s gambling data (based on surveys in 2021)[1] is anything to go by, there must be scope for the industry to argue that the patchwork of player and product level protections (both in terms of Commission led changes to the LCCP and voluntary initiatives by the industry since 2018) are already showing signs of promise and, if operators and suppliers are able to furnish the Government and the Commission with data to support this, the new measures emanating from the forthcoming consultations are more likely to be proportionate outcomes having regard to the current state of play rather than more historic cases latched onto by the media which paint the industry in a much less favourable light.

Notwithstanding that various stakeholders have cautiously welcomed an objective approach from the Government as part of the White Paper, all eyes will be on whether the consultation documents in this area pass the sniff test in terms of window dressing and whether there is a difference in approach to collaborative engagement with the Government (who will lead on stake limit consultation) and the Commission (who take charge on the rest).

Stake limits will continue to grab the headlines. However, notwithstanding the introduction of voluntary measures around product restrictions, there is scope for changes in the requirements around responsible design and player centric tools to have a not-insubstantial impact both in terms of economic effect and customer experience. Balancing these against consumer protection is going to be difficult to pin down in practice and with so much change in such a short period, assessing the effectiveness of individual measures looks an even tougher ask.

The White Paper can be accessed here and The Commission’s ‘Advice to Government’ can be found here.

References

[1] The White Paper states that, “Over 70% of gaming sessions on a single product type that lasted over 3 hours were on slots, and slots had the highest proportion of players (5.5%) who ever played for long than three hours.. Additionally, the Commission’s research into why consumers gamble found that of the 14% of past month gamblers who reported binge gambling, 24% had done so on online slots — more than any other gambling activity, including online casino games”.

[2] The White Paper states that BGC data following the adoption of the rules showing shows a drop of 20% and 35% respectively in average sums staked and lost per player per day.

[3] https://digital.nhs.uk/data-and-information/publications/statistical/health-survey-for-england/2021-part-2/gambling