Will Online Casinos Face Maximum Stake Limits?

Posted by Harry Kane on Monday, November 18, 2019

Last year saw fixed-odds betting terminals (FOBTs) subjected to an incredibly stringent betting cap, with the maximum possible stake slashed from £100 to just £2 by the Department for Digital, Culture, Media and Sport.

This was an extremely controversial move, particularly after the UK Gambling Commission (UKGC) had recommended a more reasonable cap of £30. It was also a measure that impacted significantly on brick-and-mortar gambling brands, with market leaders such as William Hill pledging to close more than 700 stores and announcing more conservative financial projections.

With multi-channel brands also coping with the fallout from the Remote Gaming Duty (RGD) hike, the news that online casinos may also be subject to maximum stake limits has come at the worst possible time. But what has been proposed, and how would a betting cap impact on the iGaming space?

An Online Betting Cap as Part of a Wider Industry Overhaul

The controversial FOBT cap was belatedly rolled out in April, whilst it undoubtedly forced operators to adjust their underlying business models and place a far greater focus online.

However, these plans were also scuppered by the introduction of a 6% RGD hike in April, which requires operators to pay a 21% tax on all revenues accrued online.

These measures have been inspired in part by a cross-party group of MPs, who have recently commissioned a number of reports pertaining to gambling-related harm and proposed a “root and branch” overhaul of betting law in the UK.

A recently published report has been amongst the most wide-ranging, with MPs (led by the high-profile Conservative Party member and former leader Iain Duncan Smith), calling for a raft of radical measures aimed at safeguarding potentially vulnerable gamblers.

At the top of this list is a £2 stake limit on virtual slot machines, which is a radical move that would completely undermine the iGaming space in the UK. To put this into context, slot gaming accounts for nearly two-thirds (64.5%) of the online GGY in the UK, with this sum totalling a hefty £5.6 billion in the year ending September 2018.

This is empowered by relatively generous betting limits of both low and high-variance slots, with players able to wager as much as £100 per spin on average. By slashing this to a paltry £2, operators would see their revenues slashed whilst the iGaming market itself would also see its own turnover reduced dramatically (we’ll have a little more on this later).

This measure would also be compounded by other legislative changes.

Once described by Labour Deputy Leader Tom Watson as “analogue legislation in a digital age”, it has been argued that the current law is unfit for purpose having been undermined by the rapid growth of the iGaming market in the UK and the continued focus on innovation.

This overhaul would make it far easier to introduce the aforementioned measures on a national scale, whilst also creating a scenario where all existing license agreements are reviewed and controversial industry practices such as the signing of NDAs (which can prevent customers from reporting operators to the authorities) are eradicated.

In this respect, the notion of an online betting cap is a headline-grabbing legislative measure that would form part of a far larger iGaming overview, and one that would have a truly seismic impact on individual operators and the industry as a whole.

How Would a Betting Cap Impact on Operators and the iGaming Industry?

Interestingly, MPs in the all-party Parliamentary Group (APPG) on gambling-related harm are confident of influencing and changing gambling policy in the UK, regardless of how the General Election scheduled for December 12th ultimately plays out.

The reason for this is simple; as senior representatives of both the Tories and Labour are keen on reimagining iGaming legislation in the UK, despite Boris Johnson’s desire to safeguard the industry and focus on regulating it further through the UKGC. The collaborative nature of the APPG is also important, as this creates a broad spectrum of support that will be hard to undermine.

With this in mind, we should assume that some form of online betting cap will come into force at some point during the next 18 to 24 months, although whether this will match the £2 limit imposed on FOBTs has yet to be seen.

Even a cap set around the £30 threshold would be impactful, with the revenue generated by online slots likely to decline by almost half in this instance.