Do Politicians Legislate the iGaming Market Too Much?

Posted by Harry Kane on Tuesday, January 9, 2024

If we chart the growth of iGaming in the UK, it can be traced back to 2005 when the Gaming Act was passed under Tony Blair’s New Labour government. This was when the online gambling boom began in earnest on these shores, with iGaming now worth an impressive £5.4 billion in the UK.

While that particular government regime may have been responsible for ushering in the golden age of digital gambling in the UK, the current legislative body is taking steps to increases safeguards and actively reduce revenues. But is politics too influential in iGaming as a whole?

How has the Government Previously Sought to Legislate Gambling

The 2005 Gaming Act made a provision for the so-called “UK Gambling Commission” (UKGC), which would regulate the newly formed industry and oversee the issuing (and management) of licenses. This was initially responsible for safeguarding players and holding operators to account, but the landscape has shifted considerably of late.

In 2018, the UKGC announced several core strategic objectives, one of which was the safeguarding of both vulnerable and underage bettors. More specifically, the regulator rolled out more stringent age verification rules and processes, while punishing failures to protect players and prevent money laundering with huge financial sanctions.

Despite such measures, however, the Conservative government of the time sought to legislate, targeting the fixed-odds betting terminals (FOBTs) at land-based bookmakers. These enabled users to wager up to £100 per spin and £300 per minute, while they apparently accounted for approximately 56% of bookie revenues in the UK.

After a period of consultation, the government moved to impose a £2 betting cap, which subsequently slashed company revenues and forced multiple bookmaker closers nationwide. Due to the loss of revenue for the UK Treasury, the Tories also increased the Remote Gaming Duty (RGD) paid by online brands from 15% to 21%. This ensured a negative impact across both online and offline verticals.

The Latest iGaming Reform Proposals – What are the Next Legislative Changes?

In the spring of 2023, the All-Party Parliamentary Group (APPG) for Gambling-Related Harm (which includes cross-party politicians such as MP Carolyn Harris and former Tory leader Iain Duncan-Smith), made a number of proposals as part of a broad gambling reform package. At the heart of this was a comprehensive review of both the 2005 Gaming Act and the licensing demands placed on operators.

The subsequent white paper also proposed a betting cap on slot gaming and similar online verticals, primarily for players aged 25 and under. After further consultation, it has been confirmed that the maximum bet limit for younger punters will be capped at £2, while players aged over 25 won’t be able to stake more than £5 per spin.

These changes will be rolled out in September, while it’s hard to escape the similarity between the slots betting cap and the limit previously imposed on FOBT betting. Clearly, the government sees online slots as posing a similarly considerable risk to players, while it’s striking that this vertical is also the dominant driver of GGY in the online marketplace.

This is a landmark moment for the industry, while operators will have to contend with both a significant loss of revenue and the additional costs incurred by setting two separate limits. Certainly, betting brands will have to invest more in stringent age verification and potential affordability checks, while they’ll have little time to prepare for the changes.

Of course, there are questions over the efficacy of such measures, especially as they don’t prevent players from wagering large amounts of money over extended gaming session. The betting cap could also drive younger players towards the burgeoning black market, which imposes no such restrictions and won’t ask for significant swathes of personal data.

Is Politics too Influential in the UK’s iGaming Space?

While these recommendations are the result of a cross-party parliamentary collaboration, there’s no doubt that the Conservative party have already created more stringent iGaming legislation during its current term in office than any other party in living memory. This is an interesting observation, as the Tory party is historically renowned for empowering the private sector and adopting a Laissez-faire approach to regulating high-growth marketplaces.

Of course, they’ve had to react to significant lobbying and the efforts of the APPG for Gambling-Related Harm, while it’s fair to say that the 2005 Gaming Act was becoming increasingly unfit for purpose in the digital age. Still, the extent of their legislation will be surprising to some, especially as they could have imposed a higher online slots cap for players of all ages.

Ultimately, the question that arises here is whether it’s right for the political establishment to have such an influence in the iGaming market, especially a Conservative leadership renowned for supporting freedom of choice and free market economics. Certainly, their approach seems to differ from one industry to another, while handicapping growth in this way may seem disproportionate given the prevalence of problem gambling in the UK.

While a 2020 YouGov prevalence study found that as many of 1.4 million adults (or 2.7% of the adult population) may be categorised as problem gamblers, more comprehensive research by the UKGC has found that just 0.2% of the population fit this description. Sure, others may be at risk of developing compulsive behaviours, but these are very different things and don’t warrant the same response at all.

Remember, the 2005 Gaming Act also established the UK Gambling Commission (UKGC) to regulate the market fairly and avoid the need to legislate, with this type of approach pivotal in an open and capitalist-driven economy. This is no longer the case in the iGaming vertical, and the main concern here is that sustained political involvement creates an uncertain and constantly shifting legislative space which undermines growth and drives cycles of boom and bust.