The UK is one of the biggest regulated gambling markets in Europe. And with the reform of the UKGC’s Gambling Act underway, more and more gambling industry news articles are centered around this topic.
David Clifton, a founding director of Clifton Davies Consultancy Limited, Licensing & Gambling Consultants, has shared his professional opinion on the gambling industry in the country and the upcoming reform. The expert has also explained all the difficulties of obtaining a license from the UK Gambling Commission and maintaining compliance with the exciting regulations.
David, what are the main characteristics of the UK gambling market? What are the latest changes that have happened in the industry?
The UK – or, more precisely, Great Britain – has long-established gambling licensing and regulatory regime, independently described recently as providing “robust regulation, moderate operator costs, and taxation” that “represents one of the earliest pieces of online gambling legislation and remains one of the nest examples of regulation globally”. The latest regulatory changes have added even greater robustness, focusing on consumer protection measures such as a total ban on the use of credit cards for gambling, more onerous customer interaction requirements (including customer affordability assessments), more demanding age and identity verification obligations, considerably more burdensome KYC requirements for VIP customers who are offered tailored or personalized incentives linked to high value spend or frequency of play and, with effect from 31 October, implementation of new controls on online slots intended to make gambling safer. Also in October, operator costs will increase when considerably higher license fees become payable to the regulator (the Gambling Commission).
How did the global pandemic affect the industry?
Overall participation in gambling declined over the period of COVID-19 lockdowns in Great Britain. This was largely due to the enforced closure of land-based gambling for most of the time since March 2020. For example, it’s only since the beginning of August this year that English casinos have been permitted to re-open and trade to the same hours as applied prior to the pandemic. Most of the high-end casinos in London still remain closed and are unlikely to re-open until international airline travel returns to some kind of normality. There was a smaller than expected increase in online gambling participation over that same period since March 2020 and, in what is good news for the industry and consumers alike, recent Gambling Commission statistics show that in the year to June 2021, the overall problem gambling rate has remained statistically stable at 0.4% and the moderate risk rate for that same period of time has decreased significantly to 0.7% compared with 1.4% in the year to June 2020.
What is the procedure for obtaining a gambling license in the UK?
In broad terms, anyone wishing to provide land-based or online B2C facilities for gambling (i.e., gaming, betting, or lotteries) to customers in the UK requires an operating license from the Gambling Commission. In addition, a B2B business wishing to supply gambling software to B2C operators licensed by the Commission must also be licensed to do so. Licenses are either “remote” or “non-remote”, dependent on whether the operator intends to provide online and/or land-based gambling facilities. A wholly separate license must be obtained from the relevant local government authority for each individual land-based gambling premises intended to provide casino, bingo, gaming machine, or betting facilities. Personal license requirements also exist for those in senior positions in gambling businesses and those involved in gaming or handling cash at a land-based casino.
What are the main drawbacks of the existing system from a legal standpoint?
All of the above licensing processes are relatively complex and professional assistance will usually be required from specialists such as myself to successfully guide an applicant through the procedures and, if required, represent the applicant at a contested licensing hearing. Considerable forward planning is required and obtaining all required licenses often takes longer than inexperienced applicants expect. The existing system does not constitute the “light-touch” regulation that was promised when the current gambling legislation came into force in 2007 and that is most certainly not going to change within the near future.
How did the recent amendments to the UK Gambling Act affect the market? Will the new tight regulations and increased fees drive the majority of operators off the market?
Experience to date has shown that the more robust the regulatory requirements become for online operators and the more intensive the enforcement action for regulatory breaches by the Gambling Commission becomes, the greater the number of operators who decide to surrender their licenses and leave the UK market. Increased license fees from October this year will do nothing to reverse that trend and nor will the even tighter regulatory controls expected to result from the current UK Government review of the gambling legislation. However, I would not anticipate that this will lead to a “majority” of operators leaving the UK market. It may lead to greater consolidation within the industry and we may well see a greater threat to the public from illegal black market online gambling operators.
How can operators remain compliant with British legislation and sustain a profitable business at the same time? Or is it an impossible task?
It’s clearly not impossible to comply with British legislative and regulatory requirements and, at the same time, sustain a profitable gambling business. However, this is not a market for amateurs or those who think they can take a shortcut to compliance. Those who fail to take their AML, social responsibility, and other compliance responsibilities seriously are likely to suffer the same fate as those who have received very heavy fines (of up to £13million) for regulatory failings or, worse still, had their licenses revoked by the Gambling Commission.
In your opinion, how will the gambling industry of the UK transform in the next 5 years?
The UK gambling industry is likely to transform to a very considerable extent over the next five years, not least because of the review of current gambling legislation, to which I have referred above. A White Paper setting out the UK Government’s proposals for legislative change is expected before the end of this year. Reflecting the very different political climate than that which existed prior to the reforms introduced by the Gambling Act 2005, it seems inevitable that we will see plans to further tighten regulation of the online gambling sector, with a particular focus on public health considerations, compulsory customer affordability checks, stake, prize & speed limits, consumer redress (possibly by way of introduction of a new Gambling Ombudsman), reform of the “white label” system and gambling advertising & sports sponsorship restrictions. The land-based sector may possibly fare better, with the possibility of some casino restrictions being relaxed that would hopefully enable them to better compete on the international stage. Separately, the reform of Northern Ireland’s gambling laws looks set to finally keep pace with the industry and technological changes in recent years. To end on a positive note, the innovative ideas and technological advances that have been a constant feature of the UK gambling market for many years now should ensure that, despite the undoubted challenges it faces, there is good reason for optimism that the British gambling industry will be thriving five years from now.
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