The Social Market Foundation, a think tank, has released a report highlighting the key ways they believe regulation of the betting industry needs to change in order to keep pace with the way it has evolved in the years since the 2005 Gambling Act.
The wide-ranging report includes many suggestions regarding the regulation of the betting industry, stake limits on certain products and – most controversially of all – a cap of £100 per month on net deposits to online betting accounts.
With a government review of the betting industry in the offing, this report could have a serious impact on all punters so it warrants close inspection. Whilst many punters would not be affected by a £100 cap, tens or even hundreds of thousands would. £100 is not a huge sum for many recreational gamblers and such bettors are certainly not high rollers. Moreover, few losing £100 per month would consider themselves problem gamblers so this is a proposal that would be very unpopular with those taking the bets and those placing them.
Who Are the SMF?
There was no coincidence about the timing of the SMF report into the gambling industry. The authors and contributors knew that the UK government was readying itself to start updating gambling laws and regulations. Like many, they felt that the industry had changed so much from 2005 when the last Gambling Act was introduced that this was the time to take stock and make their own recommendations.
The Social Market Foundation (SMF describes itself as “Britain’s leading cross-party think-tank, standing proudly in the centre-ground of politics since 1989”). Their approach is to “develop evidence-based policies that support a fair society and a strong economy” and they consider various elements of British culture, of which gambling is just one.
The SMF is made up of a number of employees and trustees but the two people most closely involved with the gambling review and reform piece were James Noyes and Jake Shepherd. Noyes is particularly interesting given the amount of work he did in and around the betting industry as a political advisor for former deputy leader of the Labour Party, Tom Watson. He has continued to contribute articles for major news outlets relating to the regulation of the gambling industry after the report’s publication.
An Ever Changing Landscape
The gambling industry in the UK was transformed in 2005. It had always been an important part of society as a popular pastime and a considerable factor in the British economy but the relaxation of regulations in the 2005 Gambling Act led to a boom in all things betting and gaming. For good or for bad, there is little doubt that gambling increased in the years that followed.
This was great news for bookies and great news for punters. Less regulation meant more companies entering the market, which in turn meant more choice for the customer. What the authors of the 2005 Gambling Act could not quite have predicted was that the internet would have an even bigger impact on betting and gaming than had already been seen. Nor could they have guessed how widespread mobile betting would become: remember the first iPhone would not be launched until June 2007.
The ability to gamble online and on your phone means you no longer have to head to a betting shop or sports venue to place a bet. Indeed, you don’t even have to be at home to place a wager or play an online game of roulette or blackjack anymore. Thanks to the incredible growth of mobile betting apps and websites, essentially almost all punters have a bet, game of poker, session of bingo or bout of casino fun in their pocket at all times.
The challenge for both betting companies and the regulators has been ensuring that those who participate in online betting are afforded the same sort of protections from harm as punters in a betting shop or visitors to a casino. Clearly, this is much more difficult and other industries have faced similar problems in the brave new world of the Internet.
The Social Market Foundation argues that the radical changes in the way the industry operates with no end in sight to the growth of online and mobile betting means that the way the betting and gaming sector currently operates and is regulated is no longer fit for purpose. Even many of those who are in favour of betting in general find it hard to disagree entirely with that assessment.
The Timing
The Conservative Party manifesto for the 2019 general election included a commitment to reform the 2005 Gambling Act. Due to the general setback of 2020’s events, those reforms were pushed back until the New Year but the SMF knew that they had to get their report into the press and the hands of government officials ahead of time. That is why it was published in August 2020, in the hope that the report would have the maximum impact.
A concern that higher levels of isolation and other potential mental health issues associated with 2020’s government restrictions also played a part in the timing of the report, as it is mentioned multiple times in the report and is clearly a consideration for the authors. With swathes of society unable to enjoy their traditional leisure pursuits, the appeal of online gambling is clear. What’s more, whilst many have been negatively affected financially, others actually have more disposable funds and so have both more time and more money with which to gamble.
The £100 Monthly “Soft Cap”
The SMF report covered all manner of elements of the gambling industry but there is no doubt that the recommendation that had most cut-through was that there should be an introduction of a £100 “soft cap” on net deposits for punters each month. This specific recommendation, which has come in for a lot of criticism, deserves closer scrutiny.
Will It Protect Punters?
In the first few paragraphs of the ‘gambling affordability’ section of the report, the authors make it clear that, “we believe that individuals should be at liberty to gamble as self-determining agents within a free market.” However, very quickly the authors move to recommending a cap of £100 net deposits per week into online gambling accounts across the board so how and why do they get there?
The SMF report explains that it supports the idea of the concept of Minimum Income Standards, which were proposed to ensure that families can enjoy a certain minimum living standard. They suggest that gambling should fall under the part of a budget that covers ‘social and cultural participation’ and that £23 per week, or £100 per month should be an affordable amount which doesn’t put individuals or families into serious financial jeopardy.
The SMF go on to argue that such a cap would not impact the vast majority of gamblers who bet with less than £100 per month. The problem, as they see it, is that it is inevitable that some people will occasionally bet more than they can afford and that a cap would stop the harm that follows in some of these cases.
A Major Breach in Privacy
One of the most striking stats from the SMF report is that 2% of betting companies’ customers provide around 83% of the profits. In the SMF’s estimation, a cap on deposits would have a major impact on these individuals, as well as those for whom gambling can be problematic.
The problem with this assertion is that the SMF’s deposit limits would take the form of a “soft cap” which could be bypassed as and when individual players prove they have the funds to bet beyond £100 per month. Many punters would be outraged at the notion of having to demonstrate they can afford to make bets, especially given credit card gambling has already been outlawed. They would feel it was a major breach of their privacy and it is easy to have sympathy with this point of view.
Setting aside the issues of who and how individuals would be able to prove affordability, high stakes bettors would still be underpinning large amounts of bookmakers’ profits with such a cap. So, if this issue is a major principle underpinning the proposed move, the £100 cap does very little to fix the problem.
Elsewhere in the report, the SMF argue that these high stakes punters need more protection from the loyalty club account managers who do not have their best interests at heart. Personal licenses, the introduction of oversight from the Ministry of Justice and new Gambling Licensing Authority are all suggested as ways to stop the sort of stories that have surfaced in recent years of account managers breaching protocol.
If such new measures were introduced to protect high stakes customers, would that not stop the damage that a “soft cap” is supposed to prevent and be a better way of going about things? It would be made far harder for punters to lose big amounts without imposing extra stress, regulation and red tape on recreational punters who, for example, might want to deposit £110 into their online betting account ahead of a major sporting event like the Cheltenham Festival, the World Cup or Wimbledon.
After all, much as £100 may be a significant sum for those on lower incomes, for many it is an amount that they might spend on a night of drinking. In city centres up and down the country a coffee can be not far short of £3. Should someone have to prove they can afford a flat white each day and the occasional slice of cake too? And, what about all the other leisure pursuits one might choose to spend their money on?
The counter argument is that coffee and cake are not addictive (although some caffeine lovers would probably disagree). Likewise with other ways in which people might spend their money, although of course alcohol would not fall under such an argument. That said, there is no getting away from the fact that the government, or industry regulators, dictating what individuals can and cannot spend their money on is not something many in the UK are comfortable with. You hardly need to be an out and out libertarian to disagree with such a move.
Bookies Must Do All They Can
Bookmakers have many obvious reasons to oppose a cap on deposits. Even if they were to accept the basis of the SMF’s proposals, these are huge companies who would have to volunteer sensitive information about their own finances and the finances of their customers to a supposedly independent body (a new Ombudsman for gambling is suggested in the report).
One of the key arguments that the bookies have is that their own in-house systems are able to detect the behaviour patterns of problem gambling and step in to ensure the safety of their own customers. Above and beyond the commitments to safer gambling, the regulatory codes they adhere to and the money they give to charities, the bookmakers have a vested interest in ensuring that their customers do not develop problems.
However, if betting companies want to resist caps and other such increased regulations, it is clear they have work to do. The SMF highlights the fact that bookmakers argued against the limits on fixed odds betting terminals in shops by suggesting it would shift the problem online where assessing betting behaviour was much more difficult than in betting shops. How can bookies then argue that they have the tools required to protect their customers?
It is clear from the response to the SMF report that few people who work in the betting industry or enjoy betting online would welcome an arbitrary cap on deposits. The bookmakers must, therefore, ensure that they are doing everything possible to protect the few customers who get into trouble and that they convince the government that is the case during the review of gambling legislation.
Much as they argue this is something they already do, there have been far too many newspaper stories about people losing more than they can afford for most people to take such claims seriously. You do not need to look long to find such tales and indeed, just a few days before we wrote this feature The Sun newspaper reported how reality TV’s Betty Moffatt stole £50k from Scarlett to fund her gambling. With such stories, and tragically those of people killing themselves due to being allowed to lose far more than they can afford, all too familiar, it is clear that online betting sites have a lot of work to do.
Other Recommendations from The SMF
The £100 “soft cap” on deposits is the recommendation that made most headlines from the SMF report. It was just one of a number of recommendations though. Here, we have a look at the other key suggestions included in the report.
Further Limits on Slots & Games
As well as suggesting controls on the amount punters can deposit into their accounts, the SMF say that staking limits should be introduced on certain products such as slots and online casinos. The argument goes that the current grading of these products is no longer fit for purpose as access to land-based casinos and slots is considerably more tightly controlled than for their online equivalents. This has only been exacerbated by the rise in mobile betting in recent years.
The report recommends that limits of between £1-£5 per spin should be introduced subject to the speed at which games can be played and how addictive they are found to be. Such limits were introduced in betting shops and they argue that it is time the legislation applied to online slots and games in the same way due to their ease of access. Having a slot that allows spins of £100 or more just a few clicks away is too much of a temptation for some high rollers, or more dangerously, those who are not wealthy whales but may have temporarily come into some money.
The Introduction of a British Gambling Kitemark
The Red Tractor is a common sight for anybody who regularly shops in supermarkets. It has served as an indicator that the product adheres to certain standards of the British food industry throughout the entire food chain. The SMF report proposes that a similar kitemark should be introduced in the betting industry so that bettors can be assured of fair treatment before opening up an account.
In a linked recommendation, the SMF argues that betting companies who hold the correct licenses to operate in the UK should not be able to ‘sublet’ the licenses to other betting companies. Currently, a number of smaller bookmakers operate as white labels, providing their own branding but using the licenses of other companies. Some of these, such as MoPlay, have failed, costing punters dear and the SMF says that stopping this white label scheme would protect users and strengthen the reputation and fairness of the UK betting industry as a whole. While a UK license offers some protection and guarantee of quality, it is far from watertight.
A Minimum ‘Onshore Footprint’
Even the biggest bookies in Britain host much of their operations outside of the country. Malta and the Isle of Man are two particularly popular destinations for betting companies to move their headquarters to, due, largely, to the available tax incentives. The report authors argue that the UK government should reform the Remote Gaming Duty, Betting Duty and other applicable taxation based on how much of a company’s operation and workforce is based in the UK.
This is just one of the recommendations surrounding what the SMF says should be a wholesale review of gambling taxation. These are all based on ensuring that betting companies pay what the authors argue is a fair share of taxation to the Treasury.
The Introduction of a New “Government Gambling Quartet”
The 2005 Gambling Act introduced a tripartite arrangement to regulate gambling. This is made up of the Gambling Commission, Advisory Board for Safer Gambling and GambleAware. The SMF report argues that the incredible change in the betting industry since 2005 means that the current set up is not fit for purpose.
In terms of the government, the betting industry falls exclusively under the purview of the Department of Culture, Media and Sport. This should change, say the SMF. Opening up the industry to the expertise and workforce of multiple government departments would only be a benefit.
The proposed new system would be a quartet of regulating bodies, with a Gambling Licensing Authority introduced under the Ministry of Justice to deal exclusively with handing out licenses and ensuring betting companies live up to the terms of those licences. A Gambling Ombudsman, who would have access to customers’ information, would deal with punters’ complaints and fall under the Department for Business, Energy and Industrial Strategy. That department would also have oversight of advertisin
g, lotteries and “cultural events relating to gambling”. Finally, the Department of Health and Social Care would take control of the spending of money from industry on RET (research, education and treatment).