Could the UKGC be on a Collision Course with Leading Operators?

Posted by Harry Kane on Tuesday, March 17, 2020

Whisper it quietly, but the UK Gambling Commission (UKGC) could be on a collision course with the market leading betting brands at least if the recent findings by the National Audit Office are to be believed.

According to this authority, which monitors the effectiveness of public bodies and organisations, the UKGC is behind the eight-ball in terms of managing industry evolution and technological advancement, while the regulator is also struggling to contain the well-resourced firms within the iGaming market.

But is the Commission really being outgunned, or is it simply making slow progress towards its core strategic objectives through 2021? Let’s take a look:

What Exactly Did the National Audit Office Find?

When the regulator announced its core strategic objectives through 2021, the key standouts were the desire to safeguard vulnerable gamblers and enhance the reputation of the industry and its key stakeholders.

It’s also fair to surmise that the Commission has been robust in enforcing these objectives, having introduced a number of stringent regulatory measures and hit a number of operators with millions of pounds in fines.

With these points in mind, it may seem strange for the National Audit Office to have called out the UKGC as aggressively as it has, but there are arguably a number of arguments to support this position.

At the heart of this is the UKGC’s relative lack of financial resources, with the regulator boasting an annual budget of around £19 million. However, it is being asked to oversee an industry that took £11.3 billion from punters last year, with iGaming accounting for around 37% of this haul.

This marked discrepancy undoubtedly leaves the Commission poorly placed to deal effectively with the key issues in the market, particularly as the sector and the technologies used by operators continue to evolve at such a frenetic pace.

This trend is hardly likely to abate any time soon, while the chasm between the capability of the UKGC and the brands that it hopes to regulate is sure to grow exponentially in the coming years.

The National Audit Office also spoke about the lack of evidence and findings pertaining to gambling-related harm in society, which is also hindering the regulator’s attempts to impose more strategically-minded initiatives.

Without the necessary resources to source and collate this data, there’s certainly a sense that the Commission is operating in the dark when it comes to regulating brands.

These factors definitely provide support for the verdict delivered by the National Audit Office, which was unveiled after the incumbent government pledged to launch a comprehensive review of the 2005 Gambling Act.

Is the National Audit Office Right?

Ultimately, the findings revealed by the National Audit Office are open for debate, not least because the publication fails to account for the changes introduced by the regulator (and the strong financial sanctions imposed on non-compliant brands) since 2018.

However, the theme that underpins the entire report centres on the inarguable gap between operators and the UKGC, while it’s also suggested that the former is simply outgunning the latter.

To exemplify this, the Nation Audit Office spoke openly about the use of so-called ‘VIP schemes’, which are deployed widely by iGaming operators and have been found to increase the risk and instances of problem gambling.

It also cited the blanket television ban agreed by operators in the winter of 2018, which followed an investigation which found that viewers were exposed to nearly 90 minutes of sponsored gambling messages during live, pre-watershed broadcasts at the Russia World Cup.

This raised huge concerns that underage and vulnerable gambler were being targeted by branded and in-play gambling ads, promoting a review by the UKGC and the threat of further action.

To negate this, the market leading betting brands convened and agreed a voluntary blanket television advertising ban, negating the need for further regulation and a comprehensive review.

While this was welcomed at the time and is largely responsible for reducing in-play betting participation in the UK, cynics have also suggested that operators took this stance in order to placate the regulator and discourage them from cracking down on online and social advertising.

After all, the gambling industry saw a 56% hike in its total advertising spend between 2014 and 2017, the vast majority of which was driven by digital marketing.

Conversely, the cumulative television ad spend diminished significantly during this time, creating the distinct impression operators were happy to agree a ban that had minimal impact on their operations and simultaneously enabled them to dupe the regulator into abandoning further action.

This is arguably the very best example of the regulator being outgunned and outmanoeuvred by the leading iGaming brands, which in the eyes of the National Audit Office is hamstringing the Commission and leaving players at the mercy of profit-focused operators.

The Last Word

The point concerning the TV advertising ban is definitely an interesting one, not least because this issue was also raised in one of our previous blog posts immediately after the announcement.

It also speaks to an imbalance of power in the marketplace, where operators hold most of the power, money and influence and the regulator lacks the resources and agility to effectively manage the industry’s key stakeholders.

This is undoubtedly more a result of circumstances rather than the machinations of unscrupulous operators, and it would be wrong to paint the current situation in any other light.

However, it does raise a significant concern for operators, with the perceived absence of a consistent and capable regulatory presence having compelled the government into action and empowered a number of cross-Parliamentary groups to help gauge, analyse and tackle the social impact caused by gambling-related harm in the UK.

This type of legislative intervention has already inspired the £2 FOBT cap, while it has also proposed a blanket betting limit to cover all iGaming verticals including slots, table games and video poker.

Make no mistake; the actions of the government have the potential to impact dramatically on the size and profitability of the iGaming market in the UK, and operators may quickly need to adopt a more proactive approach and collaborate closely with the UKGC if they’re to avoid the worst of this fall-out.