What to Expect from the Gambling Review in 2023

Posted by Harry Kane on Tuesday, February 8, 2022

While the last seven years have seen almost uninterrupted growth in the UK’s iGaming and remote betting markets, this trend has showed signs of reversing as the sector has continued to mature over time.

This has brought increased demand while drawing awareness to the financial and societal challenges posed by problem gambling, with some 430,000 Brits now thought to wager compulsively on a regular basis.

It’s this that has inspired the recent gambling review, which drew from market insight and a cross-party committee (the All-Party Parliamentary Group for Gambling Related Harm) and has raised a number of proposals to reform the sector going forward.

We’ll explore this in more detail below, while asking what UK operators should prepare for as new Prime Minister Rishi Sunak continues to back stringent reforms to “fix the catastrophe of online gambling”.

The Gambling Review – What You Need to Know

As we’ve already touched on, the growth of the UK’s iGaming market has drawn significant attention to the issue of problem gambling, with the presence of 430,000 supposedly ‘at-risk’ customers a headline grabbing figure that has risen exponentially of late.

However, there’s little evidence to suggest that this increase in the number of problem gamblers is disproportionate to the rising number of players across the board. More specifically, problem gambling has increased in line with growing demand and new player accounts online, so it isn’t necessary indicative of a rampant societal problem that needs to be addressed through drastic reforms.

Despite this, it has helped to drive the clamour for online gambling reforms, especially within the legislature and among members of the APPG for Gambling Related Harm. Similarly, a Guardian report from 2020 highlighted the iGaming industry’s reliance on big spends and potential problem gamblers, with this arguably one of the main triggers for the gambling review in the UK and subsequent reform proposals.

These findings were uncovered following analysis of several different operators in the UK, with one such betting form allegedly taking 83% of its total deposits from just 2% of its customer base. Of course, this issue has been addressed in part, with the UK Gambling Commission (UKGC) having intervened and implemented a number of measures to help protect players and uphold the tenants of responsible gambling.

A key pillar of this is the requirement of operators to undertake comprehensive customer assessments before offering any high value customers (HVC) incentives or rewards, such as those typically made available through lucrative VIP schemes. These are underpinned by regular checks on the sustainability of a high value customer’s spend and an industry standard ‘Know Your Customer Check’.

Licensees must also maintain full audit trails relating to their HVC reward and VIP programmes, while identifying a senior executive (or board member) who will assume responsibility for how such schemes are operated. Because of this intervention, the gambling reviews’ proposals for changes to VIP packages and free bet offers were ultimately dropped, with the mandatory safeguards now in place considered to be adequate for the protection of players and the industry’s reputation as a whole.

Beyond this, recent gambling addiction clinic figures disclosed to The Times have revealed that some 599 patients have been referred to the service during the course of the previous six months, with this representing a 42% increase on the same period last year.

Some reports have also referenced a noticeable hike in gambling-related suicides, which are currently recorded at more than 400 each year in England alone. In fact, clinics have reported that one-in-three of referred patients had committed suicide, suggesting that the extent of problem gamblers debts’ may be worsening in the digital age.

With all of these facts in mind, both the APPG for Gambling Related Harm and new PM Rishi Sunak are keen to push ahead with publishing the gambling review and its proposals, with the latter seemingly particularly keen on tackling the societal and socioeconomic harms caused as a result of compulsive online gambling.

In this respect, he will be adhering to a key Conservative manifesto pledge from 2019, while finally publishing the report and its formal outcomes after a series of legislative delays and in the wake of Boris Johnson’s resignation.

What Should Operators Expect When the Report is Published?

Despite the removal of a select few proposals following intervention from the UKGC, the gambling review is expect to impose the toughest control measures on online operators since the market was fully regulated and opened up way back in 2005.

But what are these measures likely to include? Well, the primary headline measure will see betting stake limits imposed at government level, with proposals ranging between £2 and £5 and likely to be leveraged against online slots (which currently account for 70% of the iGaming market’s total GGY in the UK).

This is akin to the controversial FOBT cap introduced in April 2019, which slashed the maximum stake on fixed-odds betting terminals from £100 to just £2, slashing offline bookmaker revenues by more than half in the process.

In the case of online slots, some provision could be made for high rollers to wager more on selected slot games, but only if the player in question was able to prove the sustainability of their spend and demonstrate that they can realistically afford to place larger bets.

This brings us onto the second headline proposal, which will see broader customer affordability checks rolled out across the board, outside of VIP players and high rollers. This measure is widely opposed by industry leaders, who claim that this measure is simply unnecessary given the average spend of UK gamblers and the frequency with which they wager.

For example, reports have shown that the average UK gambler spends just £2.57 per week, with this equating to a total spend of £133 per annum. This means that the overwhelming majority don’t need to be subjected to affordability checks, which could subsequently appear as being intrusive and simply unnecessary.

Of course, the principle of customer affordability laid out in the reforms suggests that operators will be required to carry out “non-intrusive” checks on their customers’ finances, with a view to ensuring they’re safeguarded against the risk of unsustainable losses.

However, there’s yet to be any formal confirmation of what form these affordability checks will take, with some citations suggesting that the government “will consult on the precise mechanism” at a later date. The real concern here is that players won’t want to undergo official credit checks that could impact on their individual credit rating, potentially forcing them to turn away from the market and seek out entertainment elsewhere.

Secondary measures could see the government impose a more robust and transparent age verification process, in order to help protect underage gamblers from being able to access online gambling content.

In 2021, it was revealed that 14% of 11-16-year-olds had spent their own cash on gambling and wagering during the previous week, up from 12% in 2017. So, although this is lower than the rates seen prior to 2017, it has fallen slightly as the UKGC has improved the age verification process at sites and continued to implement vulnerable player safeguards.

Finally, the government will also set up an omnipotent ‘Gambling Ombudsman’ to deal with consumer rights and disputes. This will operate separately to the UK Gambling Commission, and provide an independent channel through which players can raise concerns and have their conflicts settled in a fair and transparent manner.

Ultimately, the review is considered to be incredibly stringent, but there are some components that will disappoint anti-gambling lobbyists. For example, the government is expected to permit Premier League football clubs to adopt a voluntary approach to gambling and betting brand sponsorships, a stance that has been actively criticised by Parliamentary members and the Gambling Related Harm APPG.

What Will This Mean for Operators, the Market and the Government

If we consider the wide range of likely proposals in play here, the recent gambling review will have a significant impact on the industry and individual operators.

In a previous assessment of the affordability checks and stake limits and their potential impact on the iGaming industry in the UK, the government suggested that such measures could see online gambling revenues and the market’s total GGY decline by as much as £700 million.

This number could scale further depending on the extent of the betting caps imposed on virtual slots, particularly if the government opts to cap the maximum betting stake at just £2. The impact of affordability checks will be a little more subtle, of course, but much will depend on the way in which sustainability checks are carried out and how they effect players (and the subsequent demand for iGaming verticals).

It should therefore come as no surprise that there’s some opposition to these measures within the industry, although it should be said that both operators and the UKGC have already moved to improve procedures and safeguard potentially vulnerable players more effectively.

It can also be argued that widespread and universal affordability checks are largely unnecessary, particularly with the vast majority of UK gamblers only betting a little over £2 per week across iGaming and sports betting verticals.

From a government’s perspective, this will be seen as a quick and decisive win, particularly as industry reforms of this nature will be adopted using so-called “secondary legislation”, which requires absolutely no votes in Parliament to verify. This means that the proposals can be implemented quickly, swiftly delivering on a key Tory manifesto pledge in the process.

This will be particularly good news for new PM Rishi Sunak, who was previously impartial on industry reforms and refrained from commenting on iGaming unless he was raising concerns about the funding of grassroots UK racing initiatives in the UK. However, he’s now alleged to have changed his approach, probably in a bid to project strength to his core voter base and after listening to the recurring warnings of senior NHS clinicians and rising suicides relating to iGaming.

As for the timing, The Times has suggested that some government members are pushing for the review to be published before Christmas and the proposals to be implemented as quickly as possible. However, this is thought to be unlikely, even accounting for the concerns about gambling related harm and the increased prevalence of suicide among punters.

Certainly, NHS doctors have called for the government to place suicide prevention at the heart of the reform’s agenda, in response to the exponential rise in demand for the services being offered by addiction clinics nationwide. Of course, some will argue that despite the importance of this issue, it’s still a relatively rare occurrence among UK gamblers, so it could be argued that a more balanced and rational perspective should underpin any legislative reform.

Regardless, 2023 is likely to be a seismic year for iGaming in the UK, with operator revenues expected to take a significant hit and demand for certain verticals and VIP schemes set to fall as affordability checks begin to take hold.

This may even see payouts and jackpot prizes dwindle in line with reduced stake limits and thresholds, as operators look to ensure that any loss of revenue doesn’t also translate into diminished profitability and margins.

Like the offline gambling industry in the wake of the 2019 FOBT cap, the UK’s iGaming vertical will have to brace itself for a subsequent period of transition, and this may not be one that all operators (especially less established entities) will be able to survive.