Will 2021 See a New Gaming Act in the UK?

Posted by Harry Kane on Friday, February 26, 2021

When compared to the previous 12 months, it can be argued that 2020 was a relatively calm year for UK iGaming brands, particularly from the perspective of changing regulatory measures.

However, it may be that 2020 actually represented the calm before the storm, with the following 12 months likely to see a significant shift in the UK’s legislative landscape and the rollout of a brand-new bill to govern online gambling on these shores.

In this post, we’ll briefly appraise the issues with the existing online gambling legislation, while asking what a revised gaming act could include going forward?

A Look Back at the Pitfalls of the Gaming Act 2005

At present, the iGaming market in the UK is governed by the Gambling Act 2005, with this representing one of the key legislative measures introduced by Tony Blair’s New Labour government.

This was also the first significant and comprehensive piece of legislation to regulate gambling since the legalisation of betting shops and off-track wagering back in 1961, having been prompted by the exponential rise of iGaming since the turn of the century.

The purpose of this legislation was clear; as it was intended to regulate all forms of gambling (apart from spread betting) in the UK and create an independent regulator as part of the newly formed Department for Digital, Culture, Media and Sport (DCMS). It was hoped that this type of structure would promote fair, safe and transparent gambling across both on and offline verticals, while making key provisions for best advertising practices and safeguarding vulnerable gamblers.

Under the stewardship of the newly formed regulatory body (the UK Gambling Commission), new and relevant licensing requirements were also drafted for aspiring applicants, with a particular view to enforcing updated anti-money laundering regulations and ensuring compliance across the board.

While the comprehensive nature of the Gaming Act 2005 and its structure may have served the iGaming industry well during its infancy, however, we must remember that it was developed at a time when online gambling remained a relatively small (albeit fast-growing) niche.

In the decade since 2010, however, the iGaming market grew at an astonishing rate, having generated a GGY of £1.9 billion and accounted for a 12% gambling industry share just 10 years ago.

By March 2020, online gambling was generating a cumulative GGY of £5.7 billion in the UK, while it had evolved to claim more than 38% of all industry activity.

Make no mistake; the growth of iGaming in the UK has completely changed the way in which customers access games and sports betting opportunities nationwide, while this trend has been further exacerbated by the fact that more than 50% of gamblers now wager regularly using their smartphone or tablet.

This has created a scenario where the Gaming Act 2005 has become increasingly unfit for purpose, with former Labour Deputy Leader Tom Watson and other senior politicians having previously referred to this bill as “analogue legislation in a digital age”.

It can also be argued that the technology which underpins the iGaming market has outgrown the Gaming Act 2005, particularly in terms of mobile access, virtual payment providers and the growth of low-variance slots. The latter has certainly led to an increase in gambling participation at an entry level, with slots now accounting for well over two-thirds of the total online GGY.

The failures of the existing legislation to successfully govern the fast-growing iGaming market have arguably been borne out by the increase in stringent regulatory measures and financial sanctions imposed by the UKGC.

More specifically, betting companies were compelled to pay a record £19.7 million in UK fines back in 2019, while the regulator has also been required to introduce increasingly draconian measures in the form of tougher ID verification and restrictions in terms of available payment methods.

We’ve also seen the creation of new bodies such as the Betting and Gaming Council, which is an industry group charged with promoting best practice and the core strategic values laid out by the UKGC back in 2018 (such as the adequate safeguarding of vulnerable and underage gamblers in the UK).

Clearly, the exponential rise of online gambling (particularly since 2010) has exposed numerous flaws and pitfalls in the existing legislation, which have in turn led to ramifications for both on and offline gambling verticals.

Remember, the decision to slash the maximum FOBT wagering cap from £100 to just £2 has also decimated offline gambling in the UK and caused high street revenues to decline by as much as 56%, with this move prompted directly by government intervention and concerns about the rising instances of gambling-related harm nationwide.

As these flaws have grown more apparent over time, we’ve seen a sustained and collaborative push to introduce increasingly stringent measures while also simultaneously creating new legislation for the contemporary marketplace.

What Could the New Legislation Include?

We’ll discuss the potential timeframes for the introduction of new legislation and its rollout a little later in the piece, but let’s start by saying that it’s almost inevitable that the Gaming Act of 2005 will soon be reimagined for the digital age.

The most pressing question at present is what the new legislation will most likely include, and to answer this we’ll need to address some of the most recent proposals put forward by the increasingly influential All-Party Parliamentary Group (APPG) for gambling-related harm.

This group includes prominent Parliamentarians such as former Conservative leader Iain Duncan Smith, while it has proposed some radical measures as part of a potential overhaul of the presiding gambling legislation in the UK.

At the most extreme end of this spectrum their sits a proposed £2 betting cap for online slots, in a move that would mirror the aforementioned FOBT cap. At present, most low and mid-variance slots allow players to wager anywhere from £20 to £100 per spin when all paylines are active, while higher variance games allow for bets as high as £500 per spin.

Given the current status quo and the accepted fact that slots account for nearly 70% of the total iGaming GGY in the UK, such a move would have a devastating effect on operator revenues and require brands to completely reinvent their verticals and product ranges.

Ultimately, it’s thought that any new legislation would stop short of imposing such a stringent slots betting cap, with the UKGC likely to recommend a slightly higher limit if one is to be imposed. However, it should be said that the same was said prior to the announcement of the FOBT cap, with the regulator having previously suggested a threshold of £30 before being ignored.

A more likely move could see legislation used to impose a monthly betting limit of £100 on individual players, which would have to be applied and overseen by individual operators in the UK marketplace.

This measure was initially put forward by The Social Market Foundation (SMF), while the APPG for gambling-related harm has been quick to adopt this idea and include it as part of their own formal proposals.

It would equate to a weekly betting cap of approximately £23, which is thought to be less than the average amount currently wagered by most players during this time period. As a result, it would be a manageable and viable measure that wouldn’t impact too adversely on operators, while it also has the potential to prevent players from problem gamblers over time.

Of course, the question that remains is whether the new legislation would make provisions for high value players (HVPs), who generally account for the vast majority of revenues in the iGaming space despite representing a vanishingly small consumer base (we’ll have a little more on this later in the piece)?

The initial answer appears to be yes, with players who want to wager more than £100 each month likely to face more stringent verification measures in terms of their earnings and ability to sustain substantial losses on a frequent basis.

This also ties into the likely laws pertaining to existing VIP schemes, which are currently offered by casinos and sportsbooks as a way of rewarding HVPs. These are sure to face separate and standalone regulatory reforms, particularly with several reports highlighting the dangers posed by such programs.

For example, a 2020 report in The Guardian revealed that at least nine of the UK’s market leading iGaming brands were disproportionately reliant on so-called VIPs, with one anonymous operator taking an estimated 83% of its total deposits from just 2% of its consumers.

Even on a fundamental level, the UK’s estimated total of 47,000 VIP consumers are thought to be 11-times more likely to develop a gambling problem than casual players, so this is clearly an area that would demand urgent attention as part of any reformed gambling legislation.

Fraud and money-laundering is also more prominent amongst HVPs, with various iGaming operators having faced hefty, seven-figure fines from the UKGC having failed to control or regulate the activity of high-rollers and big stakes players in recent times.

With these points in mind, it seems inevitable that VIP schemes and the activity of HVPs will experienced a significant overhaul when the Gaming Act 2005 is revised (or replaced), with players compelled to provide concrete evidence of their earnings in order to establish bespoke limits and ensure that affordability checks are met.

Operators will also need to continually monitor player activity to guarantee compliance and identify problem behaviour at an early stage, while it’s believed that they’ll also have to appoint a senior executive to oversee any VIP schemes that remain in place.

These individuals will also have to obtain and hold a personal management license (PML), while they’ll be directly accountable for the safeguards in place and the achievement of compliance over a sustained period of time.

The latter proposal seems to suggest that any new legislation would stop short of banning VIP schemes completely, although it will certainly alter their nature definitively and make them less accessible to players over time.

Loyalty schemes (which are similar to VIP programs in that they directly reward frequent wagering activity) are also likely to be curbed as part of any new iGaming legislation, although it’s unclear at this stage what changes would be made to the existing initiatives.

The new legislation may also make provisions for more rigid deposit protection measures, which are primarily utilised to safeguard customer funds. Of course, there are deposit protection measures currently in force as part of the Gaming Act 2005, but they don’t presently safeguard funds in the event of an operator going bust.

There are currently three levels of protection included in legislation; namely no protection, medium and high. However, it’s thought that a revised gambling bill will create more stringent safeguards that cover consumer funds in the event of liquidation, while also making provisions for instances where failed operators retain funds in an account that’s separate to the official business.

The Last Word – When Will we See a New Gambling Act?

Some of these proposals (particularly the more modest and considered inclusions) have been under discussion for some time, with a few experts predicting that a new gambling act could be conceived and rolled out in the autumn of 2020.

However, various factors combined to make this objective impossible to achieve, while the failure to resolve some of these issues definitively means that major legislative changes may not be made until the second half of 2021 at the earliest.

In fact, we may not see a formalised legislative proposal until 2022, meaning that the current gambling laws are likely to remain in place in the near-term at least.

However, the finer points of the new legislation will continue to be discussed and debated at length over the course of the coming months, as the future of iGaming laws are shaped and sculpted in order to meet the most pressing challenges posed by online gambling in the UK.

Even once the new legislation has been approved, it will take a specified period of time for the revised laws to be imposed on operators. This was precisely how the Gaming Act of 2005 came to pass, as this body of legislation did not become fully active until 2007.

This is good news for operators in the UK, who are clear in the knowledge that new legislation is incoming and can rest assured that they’ll have plenty of time to review and adapt to any laws that are subsequently imposed.

This is particularly important when you consider that any new legislation will most likely prompt a full licensing review, which will require operators to comply with revised laws before being allowed to trade in the UK.