Will online casino be next in line to face a stake limit?

Just when it seemed Brexit and the General Election was completely dominating the UK political agenda, a cross-party group of MPs fired shots across the bows of online gambling operators by calling for a £2 stake limit for online slots. In a 45-page interim report, the Gambling Related Harm All-Party Parliamentary Group (GRH APPG) said there was “no justification” for staking levels above £2 and that this cap would align online slots with limits on fixed-odds betting terminals (FOBTs) in betting shops. The maximum stakes on these machines was slashed from £100 to just £2 from April.

The GRH APPG pulled no punches when labelling gambling addiction as a “public health crisis” and slamming current gambling legislation as “outdated” and “analogue legislation in a digital age”. Other standout proposals included a ban on credit cards (the Gambling Commission is already likely to implement this), improved affordability checks, restriction of VIP accounts and inducements, and a statutory 1% levy to fund harm prevention projects. The result was around £1bn wiped off the value of London-listed gambling companies after the report was made public on 4 November ahead of cross-industry initiative Responsible Gambling Week.

While some of the recommendations were welcomed, there was understandable hostility within the industry to the controversial call for the £2 slots cap. “If we know a player is playing within their means, I don’t see why we should restrict that player to a level that isn’t really relevant for them,” says Ohad Narkis, co-founder of challenger online casino PlayOJO. “It seems to me to be quite an archaic way of working.

“For example, let’s say we have done the affordability checks after a player supplied all the documents. He can afford to play £500 a month and wants to do it in 50 spins, so why should I force him to play it in 250 spins? As long as he can afford to play comfortably at this level, then he should be able to do that. There is no need to introduce things like maximum bets.”
Bark worse than their bite
Despite the stir and potential repercussions caused by the report, Steve Donoughue, a gambling consultant and secretariat of the Parliamentary All-Party Betting & Gaming Group, insists these backbench MPs lack the clout within the corridors of power to turn their recommendations into reality. “This is no different to a bunch of MPs getting together and writing a policy paper that says every house should own an elephant and that elephant should be painted blue,” he says. “You have to think of an all-party group like a debating society – it has absolutely no power. This lot are a bunch of anti-gambling nutters.”

Yet Eilers & Krejcik Gaming’s senior consultant, Alun Bowden, took to Twitter to suggest the report could be the canary in the coal mine for the industry. Indeed, it could very well end up being a harbinger of further regulation because it’s difficult to imagine the UK Gambling Commission (UKGC) sitting back and doing diddly-squat in the wake of this report. In the meantime, the Department for Digital, Culture, Media and Sport (DCMS) is likely to consider the recommendations and then perhaps consult with the UKGC and the Treasury.

How this ultimately plays out will partly rest on who is the new minister overseeing gambling after the General Election on 12 December and, more importantly, which party, or parties, form the next government. However, the Treasury has already lost a chunk of income from machine gaming duty since the FOBT stake cuts. Remote gaming duty (RGD) was hiked from 15% to 21% to help offset this lost tax revenue. So, stake reductions to online slots, and possibly other forms of online casino gaming, could leave a sizeable hole in the Treasury’s finances.
Stakes and ladders
The UK’s regulated online gambling market – the world’s largest – is worth an estimated £5.6bn in GGR (39% of the overall gambling market) annually. Excluding the National Lottery, an estimated nine million people gamble in the UK each year, with over half placing bets and gaming online. Online slots tend to be the biggest revenue driver in operators’ product portfolios, even if evidence suggests most slots gamblers stake less than £2 per play. In fact, a report published by David Forrest and Ian McHale of the University of Liverpool in March 2018 into online casino play among UK gamblers found that 82.8% of spins involved stakes of £1 or less.

What’s more, just 9.9% of players staked between £1 and £2 per spin, while a shade over 7% gambled more than £2. Crucially, almost 93% bet below this arbitrary £2 online slots cap called for by the GRH APPG. While there is no regulatory limit on online slots, unlike land-based casinos where it’s £5 per spin, the £5 threshold was breached online in just 1.7% of spins, according to Forrest and McHale’s study. It seems the GRH APPG are trying to remedy a disparity between online and offline stakes involving betting shop FOBTs when the lion’s share of play on these machines involves roulette, not slots.

Table games like roulette and blackjack are a completely different beast where players tend to stake more than £2 per round, with live casino games typically displaying minimum bets of £5 or £10 per hand and VIP room maximum stakes running into four or five figures. Forrest and McHale’s research showed that a third of online casino plays, excluding slots, involved stakes above £2. This higher staking per round perhaps explains why slots were singled out for the FOBT-style £2 cap rather than the MPs suggesting a £2 blanket cap be applied to all forms of casino games.

Regardless of whether it’s slots or table games, Karolina Pelc, formerly casino director at LeoVegas, opposes any government-enforced limits. She says: “While I’m all in favour of regulation and responsible gaming practices, I don’t think this is the right way forward. A much better example is an annual deposit cap proportionate to the player’s annual income, however it’s a thin line between what is being done to protect the consumers and invading their rights to make their own decisions. I mean, can you imagine a world in which you are being told how many glasses of wine you can have tonight as a means to combat alcohol addiction within society?”
A 360-degree view
When maximum stakes on FOBTs were £100 per spin, gamblers could lose thousands of pounds in cold hard cash pretty much anonymously. Online is a different kettle of fish of course, with operators having a holistic view of a player’s profile, betting and playing patterns because absolutely everything is tracked. Combined with more rigorous KYC and source of wealth checks, as well as algorithms to detect key indicators of problem gambling, and operators should, in theory, be able to intervene when players are showing signs of developing a habit and/or betting beyond their means.

That hasn’t always been the case in the past, though, and the industry has paid the price in the form of multimillion-pound fines meted out by the UKGC, not to mention an avalanche of negative publicity and increased regulatory scrutiny. “It is not hard to identify if a person can afford the stakes they are betting,” says Richard Hogg, a 20-year online gambling veteran and now CCO at BetGames.tv. “You’ve got the player’s address and you can very easily find out the value of their property. You can look on social media to see what they are up to and if they are working. It’s not hard. The problem is no-one has taken the front foot to do this and they have extracted as much as they can from any customer.”

The fear is that if some sort of curbs to online stakes did come into law, it would be counterproductive and would drive some players to offshore black-market operators not licensed by the UKGC. That comes with inherent dangers. “With a black market you get all the issues of problem gambling and money laundering because it isn’t regulated,” says Donoughue. Shortly before the GRH APPG report was released, the threat posed by the black market due to overregulation of the UK online gambling market was laid out in a report produced by PwC and funded by William Hill and GVC Holdings.

Can you imagine a world in which you are being told how many glasses of wine you can have tonight as a means to combat alcohol addiction within society? – Karolina Pelc, formerly casino director at LeoVegas

It suggested the UK’s active online gambling black market is estimated to be worth £1.4bn. This equates to 1.2% of the £111bn in total remote gambling turnover annually. The report also said 47% of the UK gamblers PwC surveyed were aware of at least one unlicensed operator, while 12% of Google search results are for unlicensed operators and that roughly 200,000 (2.2%) of UK gamblers have bet with an unlicensed brand. The channelisation rate for the UK is estimated to stand at around 95%, which is one of the highest in the world. Yet increased friction with upfront age verification and affordability checks could erode this percentage, the report claims.

PlayOJO’s Narkis says: “As long as we can ensure that channelisation is at the maximum, then the vast majority of players are protected because they are playing on regulated sites. It is therefore imperative to maintain the natural fun and excitement of casino play, otherwise players will look for alternatives with unregulated sites.”

Nevertheless, Hogg insists non-UK licensed sites are ready to strike and take advantage of players irked by increased regulation and friction points. “I already hear numerous cases of databases available that black-market operators are targeting. These players are well known within the industry and databases become freely available. Unscrupulous operators will target them.”
A united front
It has to be said the industry hasn’t done itself many favours by seemingly always reacting to crises rather than being on the front foot with responsible gambling. Furthermore, the “sporadic and individual voices”, as Narkis describes them, representing operators rather than a coherent voice has been a hindrance. The Betting and Gaming Council, which supplants the Remote Gambling Association and Association of British Bookmakers, finally launched in November to coincide with some of the UK’s largest operators unveiling a package of safer gambling commitments. And the hope is this new, all-encompassing trade body will better promote and defend the industry’s interests.

Donoughue, though, stresses operators need to do more than rely upon this mouthpiece to fight their corner as every time there is an attack on the reputation of the industry, the more it rachets up the possibility of politically intervention and further regulation. “My fear is that there are too many CEOs sat back thinking, ‘Well I have written a cheque, that’s all I have to worry about’. What I’m worried about is that CEOs aren’t actually focusing on the fact that unless they get this compliance thing sorted out, they and the industry are f***ed. But also, no-one’s doing anything to rebuild the industry’s reputation. We are considered on a kind of ISIS level. We are creatures of hate.”

Drawing parallels with a brutal terror network may seem extreme to say the least, yet the industry’s reputation is probably at the lowest level it has ever been. With certain politicians seemingly on the warpath against online gambling, it was inevitable online casino games would be the next target to stray into their crosshairs once the FOBT issue was put to bed.

Imposing a £2 stake limit on online slots could be described as sledgehammer legislation that will probably drive high-staking players to the black market, but some sort of stake limits is looking more and more a distinct possibility. It appears 2020 is already shaping up to be the UK industry’s most challenging year yet.