What Would a Slot Stake Limit Mean for iGaming in the UK?

Posted by Harry Kane on Tuesday, December 17, 2019

In case you’ve spent the last few weeks under a rock, you’ll know that the UK is currently gearing up for a General Election (we know, that’s the last thing we need, right?). It’s certainly unlikely to represent good news for iGaming operators, with all major parties promising to clamp down on the practice of online gambling to one degree or another.

As if this wasn’t enough, a cross-party, Gambling-Related harm All-Party Parliamentary Group has also made a series of regulatory recommendations of late, including the notion that the £2 betting cap recently imposed on FOBTs is replicated in the lucrative world of online slots.

This would have a dramatic impact on iGaming in the UK, and arguably prove more impactful than the betting restrictions placed on FOBTs nationwide. But would such a cap decimate the sector, or could it provide an opportunity for innovation and the development of new gaming verticals?

What Do Slots Contribute to the iGaming Market?

There’s no doubt that iGaming has continued along an upward curve for a while now, although some of the recent regulatory and legislative changes have slowed the rate of growth in the marketplace.

To this end, the total GGY for the iGaming sector peaked at £5.6 billion in the year ending September 2018, with the market having grown by a steady 2.9% during the previous six months.

Whilst this may seem slight when compared with the double-digit growth recorded during the previous year, iGaming continues to increase its share of the overall gambling sector and now accounts for more than 39% of the industry as a whole.

If we drill down further into these statistics, two clear trends emerge. Firstly, casino products and verticals dominate the online gambling niche, accounting for more than 56% of the virtual GGY (remote sports betting claims the second biggest market share with 37.1%).

Interestingly, the casino market itself also boasts a dominant player in the unsurprising form of online slots. By the end of 2017, slots have evolved to account for nearly two-thirds (or 64.5%) of the online casino GGY, with no other gaming vertical coming remotely close to this total.

In fact, table games were the next biggest contributor with a paltry 15.8%, whilst video poker declined to account for just 5.9% of the virtual casino GGY.

This highlights just how important slot gaming is to the iGaming industry and its market leaders, with this genre having become increasingly popular thanks to the rise of mobile gameplay and the sheer diversity of titles now available to players.

To put this into some form of context, the money generated by FOBTs accounted for an estimated 56% of all bookmaker revenues, whilst the subsequent betting cap causing declining profits, thousands of store closure and considerable job losses nationwide.

With this in mind, it’s likely that introducing a similar restriction on virtual slots will have an even greater impact, changing the nature of the existing iGaming sector beyond all recognition.

Could Such a Cap Create Opportunity for Operators Could Such a Cap Create Opportunity for Operators?

If such a cap was imposed on virtual slot gaming, another concern would be where operators would turn to recoup their losses.

For example, the FOBT cap has encouraged many brands to increase their online presence and target burgeoning international markets such as the U.S., but decimating the value of slot gaming would arguably leave the notion of relocating abroad as the only viable option for operators.

According to online gaming consultant Alex Czajkowski, however, the situation may not be as bleak (or as clear-cut) as it initially seems.

Whilst Czajkowski concedes that a £2 betting limit on slots would all but kill the iGaming industry as we know it, he also sees this as an opportunity for innovators that the leading brands will grasp with both hands.

In fact, he suggests that instead of promoting the high-stakes slot games that we currently know and love, operators would create a new vertical which focus on low-stakes slots that offer interactive gameplay and potentially huge rewards.

These slots would almost universally be high-variance too, meaning that they would feature lower return-to-player (RTP) rates and require individuals to wager for extended periods of time on average before cashing in.

In many ways, this type of hypothetical game would merely continue the evolution that we’ve seen in the slot gaming niche over the course of the last decade or so, during which time this market has grown by over 300% in the UK alone.

However, it would also open up the slot gaming market to a wider range of casual players, including those who participate in the lottery but have so far refused to engage with online casino gaming.

This is why there would be a focus on creating low-stakes slots that are incredibly colourful and immersive, in order to persuade players to wager more across a wider range of games.

Interestingly, Czajkowski believes that this type of game will also have merit outside the UK, particularly in burgeoning and typically low-stakes marketplaces such as Brazil, Indonesia and Africa.

“They are all interesting emerging markets but notorious for lower-staking players,” said Czajkowski in the upcoming February 2020 edition of the Gambling Insider magazine. “This is not surprising given their economies and income distribution, and possibly prime for a hybrid lottery or casino game.”

This is certainly a fascinating and informed insight, and one that could provide a viable growth plan for operators should online slot gaming be hit with a seismic betting cap.

The Last Word

Ultimately, we can all agree on the notion that placing a £2 betting cap on virtual slots would decimate the iGaming industry as we know it.

Out of disaster comes opportunity, however, and there’s no doubt that the market leaders in the online gambling space would have the chance and the resources to create new casino verticals that introduce a more accessible form of wagering.

Innovation is certainly one of the key driving forces behind the iGaming market, whilst the leading operators have already showcased their ability to adapt to sudden and unexpected legislative shifts.

So, whilst capping their most lucrative online gambling channel would undoubtedly hit gambling brands hard, we’d back them to overcome this regulatory hurdle and identify new revenue streams going forward.