The New iGaming Proposals – An Update

Posted by Harry Kane on Tuesday, April 26, 2022

For a while now, the legislative powers in the UK have been considering the imposition of new and more stringent regulations for online gambling. This is part of a wider review of the iGaming legislation in the UK, as the drive to safeguard vulnerable gamblers continues at pace.

In recent developments, ministers are considering imposing maximum betting stakes of between £2 and £5 at online casinos, alongside a potential ban on free bets and the introduction of stringent affordability checks for new players. We’ll explore these proposals in more detail below, while asking how they’re likely to impact on the industry going forward:

What are the Updated Proposals?

The review of the 17-year-old Gambling Act 2005 has been ongoing for a while now, with this led at a legislative level by the All-Party Parliamentary Group (APPG) for Gambling Harm. Led by influential political figures including former Conservative party leader Iain Duncan-Smith, this group has discussed a wide range of sweeping restrictions that echo the UK Gambling Commission’s desire to safeguard vulnerable (and underage) players more effectively.

This will also theoretically help to reduce gambling addiction rates, with some measures aimed at big-spending VIPs. Currently, approximately 0.5% of the UK’s adult population (246,000 people) are classed as having a gambling addiction, with a further 2.2 million categorised as being “at risk”.

But precisely which measures and being discussed? Well, a sweeping online betting gap of between £2 and £5 is being considered, with this likely to be applied to all verticals including video slots, roulette and virtual blackjack.

This echoes the April 2019 betting cap imposed on offline, fixed-odds betting terminals (FOBTs) and would have the biggest impact on slot gaming, which currently accounts for around 70% of the total online GGY and enables players to wager as much as £500 per spin in some instances.

Similarly, operators and gaming developing may be required to remove certain features from slot games, specifically those that increase risk or potential losses. These include the popular ‘Autoplay’ option (which enables players to automate a predetermined number of free spins) and the ‘Gamble’ feature, which is available on some slots and makes it possible to risk any winnings in an attempt to double them.

Other new measures include increased affordability checks, which will designed to showcase earnings and determine precisely how much players can safely spend (or afford to lose). Such checks may be particularly stringent in the case of higher-rollers or VIPs, who are known to wager huge amounts over the course of each week or month.

According to previous data from The Guardian, VIP schemes drive a significant percentage of betting operator revenues by incentivising individuals to bet huge amounts of money. In fact, one anonymous firm took a staggering 83% of its total deposits from just 2% of customers, while another derived 58% of its revenues from 5% of its gamblers.

Last, but by no means least, cross-party ministers are also considering a complete ban on the provision of free bets as part of sportsbook welcome offers. This is a common structure for online bookmaker welcome bonuses, with free bets up to a predetermined value offered once new customers have credited their account and placed a qualifying wager.

What Will These Proposals Mean for the Marketplace?

The market’s immediate reaction to the proposals (which may or not be rolled out in their entirety), has been largely positive, with investors particularly relieved that the prospective legislation isn’t considerably more onerous and damaging to the fabric of the industry.

In fact, James Wheatcroft (who’s an analysist with financial services brand Jefferies) has described the key legislative points and proposals as being “relatively benign”, while suggesting that they’ll have a relatively limited financial impact on the industry as a whole.

This sentiment was borne out by the market, with share values in the influential 888 Holdings Plc brand rising by 4.9% in London at the end of last week. What’s more, Playtech Plc gained 0.2% in early day trading, while Flutter Entertainment Plc and Entain Plc saw their share price valuations increase by 0.8% and 0.1% respectively. So, although the Betting and Gaming Council and Department for Digital, Culture, Media and Sport (DCMS) in the UK have yet to make a formal comment on the proposals, it’s thought that most operators are relatively happy with the recommendations.

While an online betting cap of between £2 and £5 would have a significant and adverse impact on turnover, for example, the effect on profitability can be mitigated by minimising the respective payouts and jackpot payments. Similarly, slots and similar games can be altered to amend the return-to-player (RTP) rate and potentially create a new frequency of winning spins.

Even the decision to introduce more stringent affordability checks isn’t as harmful as it may sound, especially with the average gambler in the UK wagering just £2.57 per week or £133 annually. This means that most players wager well within their means, with this also borne out by the relatively low prevalence of problem gamblers in the UK.

The numbers also suggest that most VIPs wager within their greater means and would pass stringent affordability checks, meaning that this proposal would help to safeguard at-risk players without adversely impacting on player freedom and the market as a whole.

From a wider industry perspective, the government is also considering plans to relax regulations for brick-and-mortar casino locations. More specifically, operators may soon be able to install up to 80 offline gaming machines (up from 20), while having the option of extending credit to wealthy foreigners in order to create a more level playing field with online platforms.

This is an interesting move, and one that seeks to reduce the growing gap between on and offline gambling platforms and actually incentivise players to wager at a local, physical casino location. Because of this, Rank Group Plc also saw its stock rise by 3.3%, providing an unexpected boost for the offline gambling niche.

Of course, some have suggested that there’s a clear contradiction between incentivising gambling through one channel and penalising it through another, but this is arguably been done to ensure that all risks are measured without comprising the tax haul generated by the Treasury. Regardless, the proposals have been largely welcomed by operators who expected much worse, so all eyes will now be on any formal recommendations that are made.