A first look at the gambling act review white paper

Lexology

27 April 2023

The UK Government published the long awaited Gambling Act Review White Paper today which contains the most comprehensive plans to reform the gambling sector since the Gambling Act was introduced back in 2005. It is the culmination of the Government’s call for evidence on existing gambling legislation in December 2020 (link), and its official release was stalled four times due to government turmoil, the pandemic and political lobbying.

The White Paper will likely have a sweeping impact across the sector affecting operators and gamblers alike forcing operators to implement considerable changes to their services and operations with aims to ensure the legislation is fit for the digital age and adequately caters for online and other digital forms of gambling.

We will publish further analysis of the White Paper and its potential implications for key players in the sector in due course. In the meantime, please find below our key takeaways from its publication.

Market context

The primary piece of gambling legislation in the UK is the Gambling Act 2005. However the online gambling landscape today is very different to the one which existed almost two decades ago. Put it simply, our regulations haven’t undergone the same transformation which the gambling industry has undergone. Such transformation lies primarily in technological changes (further accelerated by the COVID-19 pandemic) that have driven a channel shift from land-based gambling to online participation and has grown to the point where the total funds staked online minus any winnings or prizes paid out has now exceeded that of land-based gambling. Nowadays, the ease and speed in which consumers can pick up their smartphone and access an online gambling site at any given point in the day is undeniable.

Online gambling products are also increasingly sophisticated, innovative, and visible (e.g. via the use of targeted ads or sports sponsorships) and in turn, potentially increasingly “addictive”. With this White Paper, the Government seeks to strike the right balance in protecting individuals categorised as vulnerable (such as those who are prone to unhealthy gambling behaviour / gambling addiction or who may not be able to afford to gamble) and children from gambling harms whilst retaining consumer freedom and choice and avoiding stifling economic growth and innovation in the sector.

Key Takeaways

The White Paper focuses on 6 key pillars. In each of these, there are a number of different proposed changes by the Government, the majority of which seek to heighten regulation and promote safeguarding and transparency in the online gambling space.

Online protections

Given that the White Paper’s focus was to ensure gambling laws are fit for the digital age, it is therefore unsurprising that the majority of changes relate to increasing online protections which aim to stop players losing massive amounts in a very short space of time, including:

Affordability check thresholds – the Gambling Commission will consult on the introduction of new KYC checks to protect those players most at risk of harm before unaffordable or harmful losses are incurred.

Measures to make online products safer by design, including controls on structural characteristics like (i) speed – such as slowing down online casino games; and (ii) stake limits on online slot machines – the Government will consult in summer 2023 on a stake limit for online slots of between £2 and £15 for all players and a further consultation is also expected on greater protections for 18 to 24 year olds.

Whilst individual operators can take steps to prevent harm on their own platform, those suffering gambling harms usually hold multiple accounts. Where there are serious concerns, operators must work together. Gambling Commission intends to consult on mandating participation in a cross-operator harm prevention system based on data sharing.

As with other sectors, consumers ought to be empowered to make informed decisions and manage spend – improvements in player-centric tools are expected.

Loot boxes in video games – the White Paper reaffirms the Government’s consultation outcome from July 2022 (read here) that “at this time” there is no intention to adjust the legal definitions of gambling to capture loot boxes. As such, there are no expected regulatory changes in respect of loot boxes on the horizon, but the Government does make it clear that it wouldn’t hesitate to consider otherwise if necessary in the future. This is an area that regulators have been scrutinising, and are likely to continue to keep a close eye on, as much of the analysis turns on whether there is a monetary value or active secondary market for the in-game rewards outside the game – for example in respect of a metaverse in-game loot box prize which is underpinned by cryptocurrencies. Online Advertising Programme link here – Online Advertising Programme – GOV.UK (www.gov.uk)

Marketing and advertising

Gambling advertising and marketing has expanded into news channels and grown significantly since the 2005 Act came into force. Tougher restrictions on bonuses and direct marketing are envisaged to address this – for example, looking at how free bets or spins are constructed and targeted to stop them being harmful.
The Online Advertising Programme will also explore other mechanisms to reduce harm from advertising across all sectors.

Gambling Commission’s powers

A new mandatory levy – replacing the current voluntary levy – will be introduced which will need to be paid by gambling operators to the Gambling Commission to ensure that operators help fund treatment services and research, including through the NHS. The Government will consult on how the levy will be constructed, including the rate at which it will be set and the total amount to be raised.
Extra powers for the Gambling Commission to enable it to tackle black market operators through court orders and work with Internet Service Providers (ISPs) to take down and block illegal gambling sites.

Dispute resolution

A new industry ombudsman will be created to deal with disputes and rule on redress where a customer suffers losses due to an operator failing in their player protection duties in order to “redress the power imbalance between punters and operators”.

Safeguarding children and young adults

Specific measures – (i) legislating to raise the age limit to 18 across all online gambling products in line with the National Lottery; (ii) the Gambling Commission will consult on moving from ‘Think 21’ to ‘Think 25’ in their ordinary code for all land-based licence holders; and (iii) the Gambling Commission will consult on lower thresholds for online financial risk checks.

Land based gambling

The Government also want to increase parity between land-based sector and online gambling. As a result, traditional bricks and mortar premises can expect a relaxing of the rules with (i) smaller casinos currently limited to 20 machines able to increase this number to 80; and (ii) high end casinos will be able to offer credit to wealthy overseas visitors in an attempt to attract more “high rollers.”

In putting forward the new measures in relation to gambling, the Government has had to balance the negative effects of gambling, particularly for vulnerable groups against the economic benefits of gambling and concerns around restricting consumer freedom and choice.

Arguably one of the most surprising aspects upon the document’s release is the Government’s backtrack on any kind of significant advertising reform. One of the largest rumours circulating the release of the White Paper was the potential that Premier League clubs may see a ban on gambling companies being shirt sponsors – the aim being to safeguard the high proportion of football audiences which are children and young adults. However, news broke earlier this month that Premier League clubs have instead voluntarily agreed to withdraw gambling sponsorship from the front of their matchday shirts by the end of the 2025-26 season (read the official statement here) and no such related reforms were provided in the paper. This has already received backlash with arguments that the clubs will still be able to continue featuring gambling brands in highly visible areas (such as on the back of shirts and on sleeves). That aside, the Government expects all sports to take a responsible approach to gambling sponsorship and support the sector’s efforts to implement minimum standards for social responsibility through a cross-sport Code of Conduct.

Whilst the White Paper aims to increase existing protections against gambling-related harm in a proportionate and targeted way, it acknowledges the proposals will come with costs to the gambling industry – both in terms of upfront delivery cost but also in reduced revenue compared to current levels, with a larger decrease in online gambling. That said, the Government expects that much of this will be foregone revenue from customers who were being harmed by gambling.

Following its publication, there will now be the opportunity for consultations to take place. For those measures which don’t require consultation Ministers have mostly opted to use secondary legislation to speed up progress through the Commons (as it doesn’t require a vote) with the Government stating it aims to have the majority of legislation in place by summer 2024.

The White Paper shows the direction of travel in terms of how heavily regulated the online gambling scene is likely to become; in the meantime, companies in the gambling space should ensure that all relevant parts of the business understand the new proposals, monitor them closely as well as the draft Bill when it is introduced into Parliament, and have the necessary safeguards in place to protect their users.