UK Gambling Commission gets tough on gambling industry

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The UK government’s gambling regulator has stepped up its activities in recent months. In fact, things are looking decidedly hot for online casinos operating in the UK market.

Pressure on the UK Gambling Commission (UKGC) to take firmer action has been growing for a while, with Boris Johnson’s government becoming increasingly hostile to the gambling industry. The mood music has been sounding gloomier for the whole industry for a while, as recent regulatory changes take effect. These include such measures as banning the use of credit cards for making gambling payments and reducing the maximum stake allowed on real world slot and other gaming machines. The government has also tightened up the rules on advertising and the marketing of gambling to consumers.

The supporters of these stronger rules are emboldened by a recent survey on the effect of the Coronavirus restrictions and quarantine ‘lockdown’ on gambling. With people forced to spend more time isolated, at home and online, the pandemic has affected both player spending and behaviour.

The number of active accounts has grown and the total number of bets also rose considerably during 2020. Time spent on gambling online also increased, with the number of continuous online slots sessions lasting longer than an hour growing by more than 10% in just one month, from November to December. December 2020 saw a 30% increase in income for online casinos when compared to December 2019. Revenue from slots alone grew by 13%.

Further restrictions are likely as the government continues to review the regulation of the industry. Among the additional restrictions proposed is a £2 stake limit for online slots which would severely hit operator incomes. Any extra measures will come on top of an already increasingly assertive approach to regulating the industry. The UKGC’s tough new strategy has meant that it has been on the lookout for any breaches of its guidance and other casino misbehavior, even before the Coronavirus crisis.

UKGC enforcement action

The last few months have seen plenty of investigations into rule breaking operators and the result is some painfully out of pocket casino owners as the UKGC imposed some hefty fines. Indeed, 2021 has already seen two different major UK operators taken to task over regulatory misdemeanors.

In Touch Games took the biggest hit. This operator, which runs several online casinos, suffered a whopping £3.4m ($4.7m) fine as a result of its regulatory breaches. The size of the punishment, issued in March, reflected the fact that its offenses were wide ranging. These included failing to fulfil its obligations under the government’s Responsible Gambling scheme, which require casino operators to restrict problem gambling amongst its players. The company also fell foul of the Government’s anti-money laundering (AML) regulations and failing to ensure its published Terms and Conditions were fair.

Meanwhile, a further company, White Hat Gaming, has also had to pay a considerable sum into the UKGC coffers. This ‘white label’ operator is responsible for around thirty different online casinos operating throughout the UK and European markets. It paid £1.3m ($1.8m) although technically, this was not a fine, but a ‘regulatory settlement’. Basically, the company was rewarded for ‘coming clean’ and fully co-operating with the UKGC’s investigations – a bit like a ‘plea bargaining’ process in the US. White Hat Gaming also committed to an ‘ongoing programme of improvements to strengthen its policies and procedures’ as a promise of future good behavior.

Future prospects for UK operators

The tightening of the regulatory climate in the UK is likely to continue. The UKGC has several different initiatives on the go at present – all likely to make things tougher for online casinos operating in the British market.

The regulator has already clamped down on ‘white label’ operators, demanding that they increase their due diligence checks on their prospective casino owner partners. The UKGC complained that “licensees were failing to appropriately mitigate the risks to the licensing objectives”. These included “a failure to properly scrutinise ownership of the white label partners, address money laundering and politically exposed person’s (PEP) risks.” The regulator also disclosed several case studies as a demonstration of the these white label operator deficiencies.

More generally, the UKGC’s National Strategic Assessment into the future of gambling regulation is already under way. The public consultation closed in February, receiving around 13,000 individual responses. This comes alongside the government’s own review of the Gambling Act (2005) which provides the current legal framework covering the industry.

The result of these assessments and reviews will inevitably lead to a further increase in regulations, with proposals likely to be presented before the end of 2021. Indeed, Tim Miller, the UKGC’s Executive Director has already indicated as much. In an official speech given in February, he pointed to the adverse effects of the Coronavirus pandemic on gambling behaviour and spending and promised to “continue to be unrelenting and uncompromising on ensuring compliance with our standards and taking enforcement action where those standards are not met.”

Influence on the US market

Whilst the UKGC’s rulings have no direct influence on the US market, they do offer an increased incentive for casino owners operating in the UK to increase their interests across the pond. With the UK market looking likely to faces the potential of further restrictions and lower profit growth, the US looks like an increasingly lucrative market.

Gambling regulations have been much tougher in the US when compared with the UK and Europe throughout the 21st Century, but on the eastern side of the Atlantic, things seem to be moving the other way. Many states are loosening regulations and gradually liberalising the gambling market.

Indeed, companies like Malta based White Hat Gaming are already making moves in the American market. They already have a major office based in Chicago, Illinois and are looking to expand their interests. This includes an increasingly close partnership with major US operator Penn National Gaming. Other UK and Europe based operators are also on the lookout for opportunities in the burgeoning American market.

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