What Will a General Election Mean for Online Gambling?

Posted by Harry Kane on Monday, April 22, 2019

The lines between politics and online gambling have been blurred of late, with responsible gaming lobbyists have increased the pressure on government agencies (and regulators) to introduce more safeguards for vulnerable members of society.

As a result of these concerted efforts, we’ve seen a number of stringent regulatory and legislative changes implemented during the last 12 months, while operators are also bracing themselves for a 6% hike in the existing level of remote gaming duty (RGD).

The impact of these changes is sure to take their toll on iGaming brands, while they’re also being played out against the backdrop of Brexit and an increasingly volatile political climate in the UK.

But if Theresa May stands down after the UK’s withdrawal agreement has been finalised and a General Election ensues, what would each potential outcome mean for the online gambling sector?

The Conservatives – The Best Bet for iGaming Brands?

Under the previous stewardship of David Cameron, the Conservative Party made a definitive shift towards the centre of UK politics.

They’ve returned to the right wing of politics under Theresa May’s leadership, however, as the party’s fringe memberships and Eurosceptics have become increasingly influential.

During this transition, the party has also returned to its capitalist routes, which should theoretically be good news for the fast-growing iGaming sector and its market-leading brands.

Since the UK Gambling Commission (UKGC) has made the protection of vulnerable gamblers one of its core strategic authorities through 2021, however, responsible gambling groups have been empowered to seize the moment and lobby the Conservative government with far greater vigour.

This aggressive lobbying certainly influenced the government department for Digital, Culture, Media and Sport (DCMS), which was tasked at the beginning of last year with investigating the phenomenon of fixed-odds betting terminals (FOBTs).

While the department was always likely to cap the maximum betting limit for this offline gambling channel (the UKGC recommended reducing it from £100 to £30), the pressure exerted by lobbyists resulted in the threshold being brought down to a paltry £2.

Not only are these lobbying groups now turning their attention to the iGaming sector, but the government has responded to its own FOBT cap and the subsequent decline in taxable revenue by increasing the RGD by a hefty 6%.

As a result of this, iGaming operators will be required to pay 21% in RGD from October this year, while also coping with the fall-out from Brexit and (in the case of multi-channel brands) adapt their business model to negate the revenue lost through the impending FOBT cap.

Remember, FOBTs account for more than 50% of bookmaker’s profits, while a reduced betting limit is expected to trigger up to 9,000 high street closures over the course of the next two years.

In addition to this and the 6% RGD hike, prominent Conservative party members are also becoming increasingly involved in a number of high profile Parliamentary groups. Former leader Iain Duncan-Smith is heavily involved in the so-called All Party Parliamentary Group for Gambling-related Harm, for example, which is essentially a cross-party entity that examines the social impact of virtual gambling and practical considerations such as advertising, debit card use and age verification.

This group is set to complete a number of detailed and in-depth reviews in the coming months, with various aspects of the iGaming industry likely to be targeted before 2019 is out.

With these points in mind, it would appear as though the Conservative government is likely to clamp down on the industry and create obstacles to the growth of the marketplace in the near-term. However, this party may well represent the best bet for the iGaming brands in the current political and economic climate, not least because of its capitalist values and likely reliance on big business in a post-Brexit world.

The iGaming sector can also draw solace from the government’s initial handling of the FOBT cap, with the implementation of the new legislation has been delayed twice since the decision was announced last May.

More specifically, the Chancellor decided against imposing the legislation in his October 2018 budget, while he also confirmed that the cap would not be rolled out as of his April 2019 speech.

These decisions were made despite pressure from campaigners and MPs, as the Treasury listened to the concerns of Bookmakers and looked to give them ample time to prepare for the new laws. Sceptics will also note that the decision to delay the cap until October of this year will translate into a £900 million windfall for bookies, while also guaranteeing significant tax revenues for the government over a longer period of time.

These manoeuvres highlight the Conservative governments’ true approach to the gambling industry and the popular iGaming niche, as while it will always seek to impose legislatory changes and drive reform, the Treasury will also strive to maintain market growth and the value of tax levies applied to operators every single year.

In this respect, the re-election of a right-leaning Conservative government may represent the best possible option for iGaming brands, particularly as they look to transition to the UK’s post-Brexit standing in the world.

The Labour Party – Promising a Crackdown on iGaming

If a General Election does ensue at the end of this year, there remains a strong chance that the Labour Party could prevail.

This would arguably be less promising for iGaming brands, with Labour having recently outlined a noticeably tough stance on virtual gambling and its impact on society.

Deputy leader Tom Watson has recently become the face of Labour’s call for a more heavily regulated iGaming market, and in many ways, the party has come full circle since Tony Blair’s initial intervention in 2005.

Back then, the New Labour government brought in the Gambling Act, which introduced Britain to one of the most liberal and deregulated gambling markets in the world. This was done after assurances from industry leaders that online gambling was inherently safe, and while safeguards have improved further during the last 13 years, regulators have also faced a litany of technological and behavioural challenges that have impacted on the market.

This is at the heart of Watson’s call for more stringent regulations, as he claims that the existing guidelines are outdated and mostly serve as “analogue legislation that’s not fit for the digital age”.

Citing problem gambling online as a “public health emergency”, Watson has also drawn an unfavourable comparison between offline gambling regulations and those available online.

More specifically, he has spoken about the fact that there are limits now imposed on maximum stakes and prizes in bricks-and-mortar casinos and bookmakers (including the FOBT caps mentioned above), while no such regulatory safeguards are present online.

Labour’s Watson is keen on introducing spending, stake and gameplay restrictions, with the party keen on revising the existing legislation to tackle some of the most prominent issues in the digital age.

So, not would the election of a Labour government see stringent deposit limits imposed on players, but there would also be caps placed on maximum stakes and rewards. The speed of gameplay would also be tackled by Labour, in order to prevent players from placing large wagers on individual bets within an extremely short period of time.

These small but incremental changes would have a significant impact on the iGaming sector, particularly in terms of accessibility, gameplay and the bottom line profitability of operators.

This is not to say that they wouldn’t help to safeguard vulnerable gamblers more effectively than the current legislation, but the question that remains is whether they would undermine the long-term growth of the industry and ultimately lead to a nationalised gambling sector?

These questions can only be answered if a Labour government is elected into power, but there’s no doubt that operators would face a tough transition period with Jeremy Corbyn and Tom Watson at the helm.

The Lib Dems – A Fate Worse Than Labour?

For years, the UK was established as a three-party nation, while the emergence of UKIP arguably created a fourth (if a somewhat controversial option) for the electorate.

Both UKIP and the Lib Dems have faded into insignificance of late, however, with the layer having been on the slide for more than a decade now.

At the heart of this issue is a lack of clearly defined policies, with even the party’s strong support for remaining in the European Union seeming to lack conviction. The Lib Dems have also been a little non-committal on their iGaming stance, meaning that their unlikely election would create huge uncertainty within the industry.

It is known that the Lib Dems are concerned with the estimated number of problem gamblers in the UK, for example, which is thought to be in the region of 430,000. However, the party has so far concentrated on the threat posed by FOBTs, while simultaneously concurring with the Bookmaker Association’s assertion that seeking to ban a single gambling activity simply transfers the problems elsewhere within the industry.

This suggests that while a Lib Dem government would mirror the Conservative party policy by imposing a restricted FOBT betting cap, it would also adopt a rigorous approach to regulating the iGaming sector if it was ever voted into power.

Unlike the Labour, however, the Lib Dems would most likely choose to focus primarily on safeguarding on vulnerable players, rather than introducing more generic regulatory measures that reimagine the 2005 Gaming Act for the digital age.

This is due largely to the immersive nature of the iGaming sector, and the fact that some reports have revealed that almost 35% of online gamblers could be described as being “vulnerable” or “at risk”.

With this in mind, regulating the use of debit cards online would be a key priority for the Lib Dems, while the party would also look to impose more stringent checks in relation to identity, earnings and age.

The Lib Dems, who also have an influence within the aforementioned All Party Parliamentary Group for Gambling-related Harm, would also become heavily involved in tackling underage gambling and preventing youngsters from being targeted through various digital channels.

Beyond this, however, it’s hard to define the Lib Dems detailed outlook on iGaming, and the unlikely election of the party would create a significant period of uncertainty for virtual gambling brands throughout the UK.

The Last Word

Ultimately, it’s highly likely that the next General Election will see the Conservatives re-elected, particularly with Labour in disarray and the Lib Dems existing on the periphery of the political landscape in the UK.

However, much will depend on the Brexit deal secured by the Tories and how they manage the post-Brexit transition, while the identity of the party’s next leader will also be an important consideration.

There’s no doubt that the re-election of the Tories would maintain the status quo for gambling operators, which is important given the volatile nature of the market at present.

There also remains a sense that a Labour government would adopt a particularly hard line on iGaming, creating further volatility and squeezing the profit margins of operators even further.