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04Jul

White Paper Series: The Gambling Commission’s powers – more to come?

4th July 2023 David Whyte Harris Hagan, White Paper 264

As all stakeholders seek to get to grips with the White Paper and their focus is drawn to its high-profile proposals such as financial risk checks and stake limits, they might be forgiven for overlooking the potential aftereffects apparent from some of the more inconspicuous proposals, particularly when those proposals are considered in the context of the Gambling Commission’s Advice to Government – Review of the Gambling Act 2005 (the “Advice to Government”).

When referring to the Gambling Commission’s powers and resources in the White Paper, the Government states in its summary (our emphasis added):

“The Commission has a broad range of powers that enable it to regulate the industry effectively but there are some small changes that could be made around its ability to investigate operators, including improving the Commission’s responsiveness to changes of corporate control.”

There is limited information contained in the White Paper about what those “small changes” might be. Points of note are:

  1. “The government and the Commission are clear that an enhanced approach to compliance enforcement is required to effectively monitor the industry and ensure that operators are abiding by the rules.”
  2. The Gambling Commission has advised that “some of its powers concerning investigations could be enhanced to better protect consumers and hold operators to account”. In particular, “it is concerned that licence holders are able to take action that can hinder or frustrate an investigation, including surrendering their licence during the course of the investigation.”

The Government concludes:

“When Parliamentary time allows, we will legislate to give the Commission additional powers to assess and regulate new business owners, reflecting the increased complexity of the entities that it regulates. We will also look at the case for providing further powers to ensure that licensees are not able to interfere with the Commission’s ability to conclude its investigations or move their finances to reduce the size of their fine.”

To understand fully the extent of the “small changes” or “further powers” that the Government may decide are appropriate, it is necessary to consider the Advice to Government, within which the Gambling Commission proposes amendments to the Gambling Act 2005 (the “2005 Act”) “to allow for streamlined regulatory action in a number of areas”. This article focusses on three of those areas: (a) the process for change of corporate control (“CoCC”) applications; (b) options for investigations and licence surrender; and (c) flexibility for penalties that can be imposed on licensees.

Change of corporate control

Under section 102 of the 2005 Act, a change of corporate control (“CoCC”) takes place when a new person or other legal entity becomes a new “controller” of a licensee (more information on a CoCC can be found in our previous blog). When a CoCC occurs, licensees must notify the Gambling Commission, via eServices by means of a key event, as soon as reasonably practicable and in any event within five working days of them becoming aware. Licensees must then submit a CoCC application within five weeks of the event occurring or the Gambling Commission is obliged to revoke the licence, although it may, at its discretion, extend the five-week period. Presently, in determining a CoCC application, the Gambling Commission has a binary choice, it may, in law, only grant the application or refuse it. If the latter, the licence is revoked.

The complexity of corporate structures and financing have increased the burden on both the Gambling Commission and licensees to investigate and/or evidence proof of ownership and source of funds related to CoCC applications and this, along with suitability considerations, means increasingly prolonged investigations. The Gambling Commission recommends: (a) the removal of the binary nature of the CoCC decision, to allow for the possibility of it granting the application subject to its imposition of conditions on the licence; (b) an amendment to allow for the appeal by a licensee against the Gambling Commission’s decision not to grant an extension of the five-week period for the submission of a CoCC application, which at present can only be appealed by means of judicial review; and (c) that it be given the ability to apply a financial penalty for the submission of CoCC applications outside the five-week reporting window.

In the main, these proposals are proportionate and reasonable. The removal of the binary nature of the CoCC decision will benefit both licensees and the Gambling Commission, as will the introduction of the proposed appeal process. The Gambling Commission has become increasingly strict in relation to the late submission of CoCC applications, so licensees will be unsurprised that it is now proposing the imposition of a financial penalty in those circumstances. Whilst a financial penalty is certainly better than the alternative of revocation, licensees may wish to seek clarification in relation to how the quantum of the proposed financial penalty will be calculated. A fixed fee would most certainly be preferable to the application of the Statement of principles for determining financial penalties (the “FP Statement”), which incudes no formula for calculating quantum, allows for uncapped financial penalties, and contains various criteria that may be not be appropriate to the late submission of a CoCC application.  

Refusal of licence surrender

The Gambling Commission recommends that the Government considers amending the 2005 Act to permit it to refuse a licence surrender under certain circumstances when an investigation is taking place, so that it retains “regulatory authority” over licensees, post surrender, primarily with a view to it imposing a financial penalty. The implication from the Gambling Commission’s proposal, which is supported by little more than reference to “vidence from casework” is that, in its view, licensees may be utilising surrender as a means of avoiding a financial penalty, and that they may “move finances during, or in anticipation of, an investigation” to avoid the same.

Potential options proposed by the Gambling Commission are: (a) requiring its consent before the surrender of a licence in circumstances where enforcement action has been commenced; (b) extending the application of the relevant sections of the 2005 Act that provide the power for the Gambling Commission to impose a financial penalty, such that for a specified period they apply to a licence that has lapsed or been surrendered; and (c) amending the 2005 Act to prevent licensees from triggering a mandatory licence revocation by failing to pay their annual licence fee.

We have several concerns about this proposal and the Gambling Commission’s justification for it:

  1. Licences are valuable assets that are difficult to obtain. Reputable licensees subject to enforcement action will: (a) wish to continue to operate in the British market, clear their name and protect their asset; and/or (b) be very concerned at having to disclose their surrender to regulators in other jurisdictions without having defended the alleged licence condition breach to a conclusion; and/or (c) be aware their previous standing will be taken into account in the context of any new licence application, as will that of the PML holders and controllers involved. Surrender is much more likely to be due to a desire to exit the market in Great Britain, likely influenced by ever-increasing regulatory requirements, the inordinate length of time taken by the Gambling Commission to carry out a licence review, or by other commercial or economic factors. Some licensees who do surrender might not even have considered doing so, but for the reminder included by the Gambling Commission in much of its enforcement related correspondence that a licence can be surrendered at any time. The implication of widespread manipulative intent in the Advice to Government is therefore wrong and perhaps provides valuable insight into how the Gambling Commission perceives the integrity of its licensees.
  2. Very exceptionally, an unscrupulous licensee may surrender their licence deliberately to avoid a financial penalty. In those very rare instances, those who do so might better be dealt with by means of criminal prosecution and the consequence and protection that brings, rather than be subject to sanction by what will, at that stage, be an exacerbated Gambling Commission.
  3. One of the reasons given by the Gambling Commission for its recommendation is that “a surrendered license leaves unable to protect consumers or take regulatory action to hold the licensee accountable for their actions.” We struggle to understand how imposing a financial penalty on a licensee that has surrendered their licence will further protect consumers. The surrender itself, prompted by the Gambling Commission’s action, must surely both protect consumers and hold licensees accountable.
  4. Punitive sanctions form an important part of the Gambling Commission’s regulatory toolkit but when a licence surrender has already removed all risk, are not critical to its upholding of the licensing objectives set out at section 1 of the 2005 Act. We question whether it is appropriate for the Gambling Commission, or any other regulatory body, to retain regulatory authority over a former licensee in those circumstances, when the sole objective is to facilitate the imposition of a punitive financial sanction. If, as the Gambling Commission suggests, licensees have moved finances deliberately to avoid a financial penalty, the refusal of surrender is not going to guarantee a different outcome.
  5. A financial penalty can only be imposed if there has been a breach of a licence condition, which, by virtue of section 33 of the 2005 Act, is a criminal offence. The Gambling Commission is therefore able to prosecute should it wish to seek to impose a punitive sanction. However, the Gambling Commission may be less inclined to take this approach because: (a) it would be obliged to prove the offence beyond reasonable doubt, rather than to the lower burden of proof of balance of probabilities applicable to its imposition of a financial penalty; (b) it would likely be held to higher investigative standards and more restrictive time limits by the criminal courts; and (c) unlike a financial penalty which is unlimited and paid into the Consolidated Fund, the quantum of court fines is restricted by statute and fines are paid to the courts.

Licensees would be wise to monitor the Gambling Commission’s next steps in this area so that they may challenge the logic of this recommendation when it is revisited by either the Gambling Commission or the Government in consultation.

Flexibility for penalties that can be imposed on licensees

Statutory time limits

In the Advice to Government, the Gambling Commission refers to the 12-month time limit for laying criminal charges and the 24-month time limit for imposing a financial penalty prescribed by the 2005 Act. It suggests that these time limits have restricted its ability to prosecute or impose a financial penalty in cases where “establishing a breach” is “very complicated” and proposes amendments to the 2005 Act to: (a) introduce greater flexibility in the time limits for bringing prosecutions; and (b) explore extending the cut-off period for the imposition of a financial penalty.  

Although the Gambling Commission states that it has “sound evidence from regulatory experiential knowledge and casework” that underpins its recommendations, the examples used by the Gambling Commission as justification are very broad and insufficiently detailed. As most licensees who have been involved in Gambling Commission enforcement action have experienced, the primary reason for the delay is not that “the increasing complexities of gambling businesses make establishing a breach in some cases very complicated” but rather the Gambling Commission’s inefficiency.

Licensees subject to the Gambling Commission’s enforcement process are often required to adhere to relatively short deadlines, whereas the Gambling Commission operates to much longer deadlines. Some licensees have had to wait six months or more to receive a response or update from the Gambling Commission, often only to receive a preliminary findings or findings letter that largely repeats the content of its previous correspondence. It is this inefficiency that leads to the expiration of statutory time limits. A significant factor that has led to the increasing complexity of the Gambling Commission’s investigations will likely be its inconsistent application of its regulatory requirements or a lack of clarity about the same, particularly given its increasing introduction of formal requirements through guidance, and the lack of clarity as to its expectations in relation to affordability.

Furthermore, it is not, as the Gambling Commission states in the Advice to Government, its charge to “establish a breach”: this is again an indication of its mindset. As a regulator it is obliged to investigate suspected breaches on a fair, reasonable and proportionate basis, and to reach a conclusion on the facts. A cynic might suggest that it is this determination to “establish a breach” that is prolonging its investigations. This is particularly so when Licensees’ have raised their standards significantly in recent years and therefore, despite published enforcement action, breaches may be harder to come by.

Long, process driven, delays do not only impact statutory time limits. They have a commercial impact on licensees, detract valuable resource from day-to-day compliance activities, and when related to individuals, impact their wellbeing. It is in all parties’ best interests that matters are dealt with expeditiously. Before amending primary legislation, the Government might wish to consider a careful and fact-based examination of the Gambling Commission’s productivity, including in relation to past enforcement cases. Efficient, proportionate, reasonable, and timely investigations are the very reason for the statutory time limits being imposed in the first place.

Extending the scope of financial penalties

The Gambling Commission sets out in the Advice to Government that extending the scope of financial penalties (which currently only apply to breaches of licence conditions) to encompass suitability concerns, would give it more opportunity to take action. It goes on to state that every case of a financial penalty “has also included suitability concerns which we have been unable to take into account when imposing the penalty” in inference being that if suitability concerns were to have been in scope, the financial penalties it has issued would have been greater.

We agree with the Gambling Commission’s statement: most of its cases of a financial penalty do include reference to it having suitability concerns. However, those suitability concerns are almost always directly linked to a breach of a licence condition. We therefore question whether extending the scope in the manner proposed is necessary, as a financial penalty can be imposed in those cases anyway.

If the Gambling Commission wishes to increase the quantum of the financial penalties it imposes, it has the ability to amend its FP Statement. At present, the FP Statement does not include a formula for calculating the quantum of financial penalties, much to the frustration of licensees and advisors alike. The FP Statement does, however, set out the criteria that is considered by the Gambling Commission when imposing a financial penalty. Much of those criteria could just as easily be relevant to any consideration of a licensee’s suitability: it could therefore be argued that the Gambling Commission is already taking suitability into account. Furthermore, should the Gambling Commission have serious concerns about a licensee’s suitability, it has the ability to suspend or revoke their licence. Licensees may again wish to challenge the necessity of this proposal, if it is introduced in future consultations.

Please get in touch with us if you would like assistance with any compliance or enforcement matters.

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03Jul

White Paper Series: Cashless payments – finally bringing the land-based sector into the digital age?

3rd July 2023 Bahar Alaeddini Anti-Money Laundering, Harris Hagan, Responsible Gambling, White Paper 287

In the year ending March 2021, nearly £910 million was generated from gaming machines in Great Britain (excluding those located in pubs).  In total, there were nearly 170,000 gaming machines located in bingo premises (41%), adult gaming centres (35%), betting premises (15%), family entertainment centres (8%) and casinos (4%).  In the period April 2020 to March 2021 (during the pandemic), the largest revenues, by a country mile, were generated by gaming machines located in bingo premises (41%) and adult gaming centres (35%), with revenues slowly declining in most sectors.  There is no reliable data on the number located in pubs, or associated revenues, but the figure is likely to be in the region of 70,000.

A lifeline in the White Paper is the proposed review of cashless payments on gaming machines with the plan to remove the current legislative prohibition, set out in the Gaming Machine (Circumstances of Use) Regulations 2007 (the “2007 Regulations”), banning cashless payments directly on gaming machines. 

The original purpose of the prohibition was to protect players from over-spending as it was assumed players would have more control over their play if they were playing with cash, providing natural interruptions in play by stopping their gambling to obtain more cash.  The lack of a break in play is viewed as a lost opportunity for the player to consider whether they wish to continue to play and spend more. 

The lifeline offered in the White Paper is hugely positive and could result in the long-overdue modernisation of the land-based sector, bringing it into the digital age.

Cash is dead

Since the 2007 Regulations, especially with the advent of contactless payments and global pandemic, non-cash payments have grown exponentially.  Use of cash has declined across society with the expectation that it will not be used by 2035.  In 2011, 72% payments in pubs were made by cash and, in 2020, this reduced to only 13%.  In 2021, almost a third of all payments in the UK were made using contactless.  This societal change has negatively impacted the land-based sector beyond belief, and it has been compounded by pubs no longer giving cashback and ATMs being removed.  We now live in a world where hardly anybody uses cash.  I – almost exclusively – use Apple Pay and regularly leave the house without cash or a bank card! 

The restriction on using debit cards directly on gaming machines (credit cards are banned) has meant the land-based sector has been left behind.  Whilst industry has been creative and found ways to make indirect debit card payments and protect players (in collaboration with DCMS and the Gambling Commission), take up has been slow and these are “not a fix-all solution”.

2018 Gambling Commission cashless advice

In March 2018, and in response to significant payment innovations in the retail economy, the Gambling Commission published advice on cashless payments in gambling premises (which remains in force), crystallising its position and key considerations for operators, as follows:

  • tracking play and collecting better data on player behaviour to make an informed assessment of those at risk of gambling-related harm;
  • providing tailored safer gambling information to players including transactional information on money spent/withdrawn;
  • player-led controls to enable better self-management such as a player’s own spend or withdrawal limits; and
  • the importance of gathering data both before and after the implementation of any measure to demonstrate the impact of control measures.

The guidance places responsibility squarely on operators to consider what measures are most effective and appropriate to their businesses.  Further, it acknowledges the lack of evidence to suggest the optimum duration of a break, but sets out the expectation that, wherever possible, players should at least cease gambling and physically leave the gaming machine. Where players can access new gambling funds with only a limited or no physical break from the gaming machine, operators must nevertheless ensure players are otherwise provided a break from, or an interruption in, gambling before those funds can be used.  The guidance also states the Gambling Commission “may consider taking regulatory action in individual cases if, for example, an operator was to increase the risk of harm to its customers without providing appropriate mitigations.”

DCMS will work with the Gambling Commission to develop “specific consultation options for cashless payments” (expected Summer 2023).  DCMS is clear that any new or additional player protection measures will need to be in place before the legislative prohibition is lifted.

The Gambling Commission’s view is that the onus is on industry to demonstrate cashless payments can be offered without increasing gambling harm or crime.  So, what does this mean for industry?

The White Paper has created a staggering volume of work for both DCMS and the Gambling Commission.  As such, all proposals will not be treated equally, and a sceptical view is that cashless will not be a priority.  As an important lifeline, it will require great effort by industry to keep it high on the agenda for DCMS and the Gambling Commission.  One way to achieve this would be through an industry code, backed by evidence wherever possible, and promoting the associated benefits of cashless payments given, for example, low test-purchasing scores for gaming machines in alcohol-licensed premises.  The greater the industry support, the more likely it is the proposed reform will be delivered in a timely, sensible and workable way.

Cashless industry code

Two of the challenges of developing an industry code are, firstly, gaming machines are in different types of gambling premises (each with their own unique “person, product, place” considerations), highlighting the difficulty of agreeing standards or codes of practice.  By way of example, pubs are not regulated premises by the Gambling Commission.  They are automatically entitled to offer gaming machines as part of their alcohol licence granted by the local licensing authority.  Pubs and gambling premises will very likely have different baselines and priorities, and industry must inevitably set higher standards.  The industry is better placed to do so and both DCMS and the Gambling Commission will expect them rise to the challenge.  It is unclear what this means for pubs, particularly given their unsupervised nature, but given the 84% test purchasing fail rate (in 2019), they would be best placed to embrace a cashless industry code through amendment of the Social Responsibility Charter for Gaming Machines in Pubs issued by the British Beer and Pub Association.

Secondly, there are several types of cashless payment technologies each with different functionality.  Unless banks facilitate player protection tools (for example, through online banking), physically or virtually presenting a debit card is very different from using a cashless gaming app or eWallet which connects to a gaming machine.

A practical solution would be to develop a cross-sector industry cashless code to reflect best practice and aim to install a minimum set of standards to address issues of risk.  The central commitment would be to allow cashless payments whilst minimising the risks of gambling-related harm and protecting players.  Standards may include the following:

  1. a meaningful forced delay before the funds can be used (for example, 2 minutes, although in a cross-sector industry code it might be sensible to steer away from prescribing a timeframe);
  2. personalised financial limits (deposit/spend) with clear messaging and calls to action;
  3. personalised time limits with clear messaging and calls to action;
  4. time and money spent totals with clear alerts;
  5. prescribed maximum deposit in a single transaction or day etc.;
  6. time-outs;
  7. transaction history (ideally, searchable by last 24 hours, last week, last month etc.);
  8. self-exclusion;
  9. safer gambling messaging;
  10. tracking player data to provide targeted messaging and/or interventions;
  11. automatic disconnection from the gaming machine after inactivity with credit returned;
  12. digital age verification to prevent underage gambling;
  13. withdrawals must only be made to registered / the same card; and
  14. restricted to one debit card.

Once agreed with DCMS and the Gambling Commission, compliance with the industry code could be incorporated as a licence condition in the Licence conditions and code of practice and/or gaming machine technical standards.

At the appropriate juncture, we will of course be happy to assist clients with their responses to the consultation where that would be helpful.

With credit and sincere thanks to Jessica Wilson for her invaluable co-authorship.

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30Jun

Judgement by the company you keep: Licensees’ responsibilities for third parties

30th June 2023 Chris Biggs Anti-Money Laundering, Harris Hagan, Marketing, Responsible Gambling 296

On 19 June 2023, the Gambling Commission released its new hub addressing licensees’ responsibilities for third parties (the “Hub”). In its announcement, the Gambling Commission explained that the Hub sets out its expectations and requirements for licensees which enter into business relationships with third parties. This includes white label and other unlicensed partners.

The announcement comes as a warning to licensees who contract with third parties. There is a strong undertone of compliance in the announcement, reminding the industry that the Gambling Commission’s release of the Hub follows its recent “enforcement action against operators for failures related to due diligence checks on third parties.”

What is included in the Hub?

Primarily, the Hub sets out the Licence Conditions and Codes of Practice (“LCCP”) including social responsibility code provisions (“SRCP”) that impose obligations on licensees relating to their business with third parties.

SRCPs

The Hub sets out the following relevant SRCPs:

SRCP 1.1.2 Responsibility for third parties – all licences

This SRCP applies to all licensees who contract with third parties for the provision of any aspect of their business related to their licensed activities, and makes clear that they are responsible for third parties. It also requires licensees to ensure any contracted third parties conduct themselves, in so far as they carry out activities on behalf of the licensees, as if they were bound by the same licence conditions and subject to the same codes of practice.

SRCP 1.1.3 Responsibility for third parties – remote

This SRCP applies to all remote licensees.

The Gambling Commission further explains the requirements imposed on licensees by SRCP 1.1.2. It reiterates that it expects licensees will: (1) conduct adequate due diligence on third parties to “ensure (amongst other things) that they are competent and reliable”; and (2) have sufficient oversight and controls in place to ensure all activities are carried out in accordance with the LCCP.

The Gambling Commission warns that a failure to maintain adequate control of third parties can result in regulatory action against licensees, including suspension or revocation of an operating licence.

White label partnerships

There is limited detail included within the Hub specific to white label partnerships. However, the Gambling Commission importantly reminds licensees that the responsibility for compliance of all B2C gambling websites, including white labels, sits with the licensee and cannot be transferred to any other party. Licensees must know their customers and implement their controls to minimise any risk to the licensing objectives. A failure to do so may bring into question the licensee’s suitability to hold a licence.

The Gambling Commission directs licensees to section 7 of its Compliance and Enforcement report 2019 to 2020 for guidance on how it expects licensees to conduct their white label partnerships.

Early action after the White Paper

Echoing the Gambling Commission’s commitment in its Advice to Government, the White Paper sets out that:

“To ensure all licensees fully understand their responsibilities when entering into such arrangement, the Gambling Commission will consolidate existing information and good practice for operators on contracting with third parties, including white labels.”

Given the Hub was released less than two months after the White Paper, the Gambling Commission will consider this announcement as a box ticked, despite the relatively basic information provided.

Additional requirements or new guidance has not been published. This is, as expected, following the Gambling Commission’s view (as stated in its Advice to Government) that it considers the existing legislative and regulatory framework provides sufficient controls to address the current risks.

The release of the Hub is a timely reminder to all licensees contracting with white labels or other unlicensed third parties for any aspect of their business in Great Britain, that they, as the licensees, are ultimately responsible for the third parties with whom they contract.

Key takeaway

We recommend that all licensees review their policies, procedures and controls relating to third parties, including due diligence processes and contractual agreements to ensure they are fit for purpose and mitigate the risk of regulatory enforcement action, as the Gambling Commission will judge licensees based on the company they keep.  

Please get in touch with us if you would like assistance with any due diligence, compliance or enforcement matters, or any aspect of your business and its arrangements with third parties.

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30Jun

Match or no match: the million-pound question for the High Court

30th June 2023 Gemma Boore Harris Hagan 234

The High Court’s decision to dismiss an application for summary judgment in Parker-Grennan v Camelot UK Lotteries Ltd EWHC 800 (KB) is welcome news for B2C gambling operators.

Background

Ms Joan Parker-Grennan (“JPG”) first opened an online National Lottery account on 27 February 2009 and, in doing so, she ticked a box to confirm that she had read and agreed to be bound by Camelot UK Lotteries Ltd’s (“Camelot”) terms and conditions, as well as the rules for Instant Win Games (“IWGs”) and Game Procedures for specific games.

On 25 August 2015, JPG bought a £5 ticket to play the IWG, £20 Million Cash Spectacular, on Camelot’s website, with prizes ranging from £5 to £1 million. In accordance with the game rules, in order to win a prize one of JPG’s numbers in the “YOUR NUMBERS” section had to match another number in the “WINNING NUMBERS” section of the screen.

These are the screenshots used in the judgment to illustrate the game format and rules:

During the IWG, an interim (and optional) animated display appeared showing that JPG had matched two numbers:

a) one of the matches (15) would have resulted in JPG winning a prize of £10 and was flashing with a corresponding message to confirm the win;

b) the second match (1) would have resulted in JPG winning £1 million, but there were no flashing lights or message to reflect this.

This is the screenshot of the interim screen seen by JPG, that was presented as evidence in the High Court:

The final game outcome screen (which was not provided in the High Court’s judgment) showed that JPG had won £10 only.
Camelot refused to pay out the £1 million prize, arguing that the result of the game was predetermined as £10 and the second match on the interim screen was a coding-related error in the optional animated display.

JPG’s claim and Camelot’s defence

JPG applied for summary judgment on the basis that it was clear that she was entitled to £1 million in addition to the £10 prize.
In their defence, Camelot argued that JPG was entitled to the £10 prize only. As previously conveyed to JPG, Camelot reiterated that a coding issue had generated an error in the software responsible for the optional animations for the IWG and that the £10 prize had been “predetermined” by a computer as the prize that would be won in conjunction with JPG’s ticket.

In support of their defence, Camelot referred to the relevant Game Procedures, IWG rules and account terms, stating that these made it clear that the interim animated display was irrelevant to the question of whether a player had won a prize, which was predetermined by Camelot’s computer system as outlined in clause 3 of the IWG rules.


Clause 6 of the IWG rules went on to provide:

“Validation Requirements

6.1 Before a Prize can be paid on a Play, it must be successfully validated in line with Camelot’s reasonable validation procedures adopted from time to time. Camelot’s decision about whether the Play is valid will be final and binding.

6.2 Without limiting the effect of Rule 6.1, Camelot will declare a Play invalid (and will not, therefore, pay any Prize) if:

…(e) the outcome of a Play as displayed on the Game Play Window is inconsistent with the result of that Play as predetermined by Camelot’s Computer System;”

The Game Procures also provided that:

…”If You match a number from the WINNING NUMBERS Section to a number in the YOUR NUMBERS Section, the two matching numbers will turn white and flash in a green circle indicating that you have won the Prize for the matched YOUR NUMBERS.

When You have revealed all numbers and Prizes a message will appear at the top of the Game Play Window indicating the amount You have won, if any. The word ‘FINISH’ will appear underneath the message. You must select FINISH to complete the Game.”

Mr Justice Jay’s judgment

The High Court judge, Mr Justice Jay, dismissed JPG’s application for summary judgment on the following three grounds:

1. Incorporation

The relevant terms were properly incorporated into Camelot’s contract with JPG via accessible hyperlinks and drop-down menus. The terms on which Camelot relied to defeat JPG’s application for summary judgment were not “onerous or unusual”, and were “clearly drafted”, so did not require special treatment to draw them to JPG’s attention.

2.Fairness

None of the terms on which Camelot relied to avoid liability were unfair, as per the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCRs”), which were the applicable consumer protection laws when JPG played the IWG.

Mr Justice Jay drew a contrast to the case of Green v Petfre (Gibraltar) Ltd (t/a Betfred) (the “Green Case”), in which Mrs Justice Foster DBE found for Mr Andrew Green (Betfred’s customer) on every point, holding that in the Green Case, Betfred’s applicable terms were too onerous to be incorporated into a contract with a consumer.

3.Interpretation

It was only the amount shown on the final game outcome screen and Camelot’s official list of winning numbers that was conclusive as to the amount won. Mr Justice Jay provided the following explanation:

“ submission that the Defendant may have intended an outcome of £10 but the actual outcome was £1,000,010 cannot be accepted. It entirely ignores: (a) what the Claimant saw after she pressed the finish button, (b) the Game Procedures, (c) the relevant parts of clause 6, and (d) the Defendant’s evidence about how its computer system worked. The outcome of £10 was both the intended and the actual result.”

Although JPG’s application for summary judgment was dismissed, this did not preclude JPG from continuing to trial. However, Mr Justice Jay’s concluding remarks strongly suggested that without further expert evidence, the High Court would be minded to dismiss her claim. It is now apparent that JPG has decided against pursuing to trial, ostensibly due to a lack of further evidence.

Conclusion

Although this case involved an interpretation of the UTCCRs, which have now been superseded by the Consumer Rights Act 2015 in the United Kingdom, the High Court’s finding in favour of Camelot in this case is great news for gambling operators. This is because (as many readers will know), the Green Case, which involved the application of the same principles in a different context, cast doubt over gambling operators’ ability to limit liability for software errors in a consumer context. However, in his judgment Mr Justice Jay clearly distinguished the present case with Betfred, noting that:

“In the Green case, Foster J found for on every point: the term was poorly drafted and did not provide the exclusion from liability which the Defendant sought, the term was too onerous to be incorporated; the term was unfair… …To my mind, Green is an example of an egregious case of bad drafting and unfairness at all relevant stages. In addition, Green was a strong case on the facts: there could be no dispute that had won; the issue was whether could avoid having to pay.”

In our view, the opposite outcomes for Betfred and Camelot, albeit with slightly different facts, provide much needed clarity in this area and pave the wave for future success by B2C gambling operators in defending consumer claims in relation to software errors and malfunctions. They also underscore the importance of taking proper legal advice on customer terms and conditions and game / betting rules. Ensuring that these documents are clearly drafted, properly incorporated and fair, could make all the difference in the event of a consumer claim.

Next steps

We have a strong and experienced commercial practice at Harris Hagan. Please get in touch with us if you require any assistance reviewing and/or drafting website terms and conditions, rules of play or other commercial gambling contracts.

With credit and sincere thanks to EGR Global for publishing a version of this article in the EGR Global magazine (www.egr.global) and to Adam Russell for his invaluable research and co-authorship.

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26Jun

White Paper Series: DCMS speaks at IAGA 40th Annual Gaming Summit in Belfast

26th June 2023 Harris Hagan Harris Hagan, White Paper 248

On 21 June 2023, Ben Dean, Director of Sport and Gambling from the Department for Culture, Media and Sport (“DCMS”) participated in the International Association of Gaming Advisors (“IAGA”) 40th annual International Gaming Summit in Belfast.

Dean delivered a keynote and joined the subsequent panel discussion on the Government’s plan for reform of gambling regulation following the review of the Gambling Act 2005, and its potential impact on the future of the regulated UK gambling industry. This was the first time that DCMS had spoken publicly since the publication on 27 April 2023 of its White Paper: High stakes: gambling reform for the digital age (the “White Paper”).

Keynote – White Paper on Gambling Reform in Britain – Overview and Next Steps

Dean recognised the importance of the gambling industry in Great Britain and that gambling is enjoyed by a large percentage of the population each month, with the majority of gamblers suffering no ill effects. He made clear however that gambling comes with risks and that problem gambling can have a devastating impact, noting it was important that Government put their best efforts into making gambling safer. Dean acknowledged the delay in publishing the White Paper, attributed to the numerous changes in Prime Ministers, and underlined that the many Secretaries of State he had supported during the Gambling Act Review had consistently pointed out that it is not the job of a Conservative Government to tell people how to spend their money.

A key challenge faced during the Gambling Review was finding the balance between freedom and protection. Dean said DCMS believes that the balance is probably right because campaigners complain Government did not go far enough and industry believe it went too far.  

Dean highlighted DCMS’ strong desire to keep working with the industry, continuing to hear views on both sides, and recognised the importance of getting the detail right as the 62 measures come into force to protect those most vulnerable without interfering with the freedoms of the majority. He noted that the under-25 cohort was of particular importance and focus for DCMS, and said that the White Paper includes specific protections taking into consideration the continuing brain development of that group.

One encouraging remark by Dean, regarding the proposed frictionless financial risk checks, was that:

“We know how important the frictionless commitment is and have said the measures won’t come into force until they genuinely are frictionless.”

Though they will not of course be frictionless for those customers in respect of whom flags are raised.

Dean said DCMS will launch two of its consultations, including one relating to land-based modernisation measures, before the summer recess (July) and a further consultation immediately following that recess over the Summer.  Government aims to implement the majority of key measures by Summer 2024, but Dean acknowledged this will require Government to “keep their feet to the fire” and those requiring primary legislation will likely take longer.   

In conclusion, Dean praised submissions in the call for evidence for the White Paper and encouraged stakeholders to engage in the consultations and speak with DCMS directly so as to ensure the successful implementation of the commitments in the White Paper.

Panel – The Long-Awaited White Paper on Gambling Reform in Britain

Moderated by Dan Waugh from Regulus Partners, the following panel of experts then discussed next steps in Great Britain following publication of the White Paper:

  • Andrew Herd, Managing Director, Lancashire Court Capital Ltd
  • Antony Gevisser, Senior Vice President – Legal & Operational Affairs, Super Group
  • Ben Dean, Director of Sport and Gambling, DCMS
  • Helen Rhodes, Director of Major Projects, Gambling Commission
  • Wes Himes, Executive Director, Betting & Gaming Council

The panel discussion was a lively and engaging debate. The panel agreed that credit should be given when it is due: the White Paper was balanced, proportionate and evidence-based and had generally been well-received by the industry and its stakeholders as a whole. However, the focus now is on implementing the many commitments therein in both a timely and an effective manner.

Rhodes noted that 24 of the 62 measures in the White Paper were in the Gambling Commission’s court, with many not involving consultations and some measures requiring increased resources at the Gambling Commission.  Rhodes was “very confident” with the Gambling Commission’s structured consultation programme, which will include pre-consultation briefings and a phased implementation to ease the effect on the industry, and emphasised the Gambling Commission would keep communication lines with the industry open and that it was “absolutely keen to collaborate”. She also confirmed that financial risk checks would be in the first batch of consultations this summer.

It was also interesting to find out that the long overdue response to the Gambling Commission’s consultation on customer interaction guidance (about which we have previously written) would be published before the further White Paper consultations were launched in Summer 2023.

Dean confirmed that the Secretary of State wanted to get the consultations within its remit out as soon as possible and that it would not wait to release the consultations in one batch, preferring instead to keep the ball rolling.

It was noted by the panel that frictionless financial risk checks involved competing interests which need to align prior to the introduction of that requirement – and that it would be important to test the accuracy of the final methods that would be used to determine financial risk. Herd described this as an “existential issue”, and Gevisser emphasised the “need for th industry to survive and thrive”.

Himes stated that one of the biggest challenges is that the technology relating to frictionless checks is still evolving, with the accuracy of such checks needing to be tested. Himes notes that if it can be done right, there will be a positive future.

Rhodes acknowledged that checks could not be frictionless for every customer but considered that, if implemented properly, the introduction of financial risk checks would represent a positive change for the industry as a whole and would affect only c.5% of customers. Rhodes also said that the Gambling Commission is 100% committed to working with the finance sector and the Information Commissioner’s Office to deliver the frictionless checks. It will be for the operator to use the results of those checks to support identified customers and reduce their risk profiles. Dean also recognised that creating and implementing a system for frictionless checks would not be easy, particularly given the importance of proportionality and the risk of driving people to the black market.

All panellists agreed that it would be paramount that the industry continues to engage, and encouraged those present to participate in the various consultations being run by DCMS and the Gambling Commission and also to contribute to any supplementary work undertaken by industry bodies, such as the Betting and Gaming Council’s work on industry codes.

We extend our thanks to DCMS, the Gambling Commission and other panellists for their valuable contributions.

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01Jun

White Paper Series: Gambling Ombudsman – a new approach to consumer redress

1st June 2023 Bahar Alaeddini Harris Hagan, Responsible Gambling, White Paper 296

One of the cornerstone proposals of the White Paper is the formation of an independent non-statutory ombudsman to improve consumer protection and ensure fairness for consumers relating to social responsibility (“SR”) complaints about both land-based and online gambling (the “Gambling Ombudsman”). This means providing an independent, non-litigious, route to adjudicate complaints relating to SR or gambling harm where an operator is not able to resolve these.

Under section 116 of the Gambling Act 2005, the Gambling Commission has the power to investigate complaints and commence a licence review after receiving a complaint about a licensee’s activities.  However, it does not have the power to: (a) adjudicate complaints; or (b) compel a licensee to return money to customers (note: the Gambling Commission uses the word “victims” in its Advice to Government), although licensees often propose divestment as part of a regulatory settlement. 

We welcome Government’s acknowledgement of the important division between regulation and dispute resolution, emphasising the importance of the Gambling Commission not investigating customer complaints or forcing customer refunds. With the very clear expectation that the Gambling Ombudsman is established and ruling within one year, with the appointment process starting in Summer 2023, in this blog we explore this cornerstone proposal and unpick a handful of the knotty issues to be navigated.

What is an ombudsman?

The term “ombudsman” originates from the Old Norse word umboðsmaðr, meaning “representative”, and is a protected term in the UK.  An ombudsman is a person appointed to receive complaints from a complainant (free of charge), providing recourse without the costs of complaining through the courts. Generally, complaints are against a public authority although schemes do exist for the private sector. Unlike the court system which generally considers lawfulness, an ombudsman’s role is much broader and will consider and resolve individual complaints about poor service or unfair treatment. As the Ombudsman Association (the professional association for ombudsman schemes and complaint handlers in the UK) acknowledges, “his is not an easy task, as it requires the scheme to balance the views of the complainant against those of the organisation and, based on the merits of the case, achieve a just result for both.”

The first ombudsman scheme in the UK was created in 1967 as a new type of public official, investigating complaints from citizens about government maladministration.  There are now over 10 public and private sector ombudsmen in the UK – including the Financial Ombudsman Services (likely to be the closest relative to the Gambling Ombudsman), Parliamentary Standards Ombudsman, Pensions Ombudsman and Rail Ombudsman – and very soon there will be another one to add to the list.

The Gambling Ombudsman

The Government wants the Gambling Ombudsman to be:

  1. “fully operationally independent”, in line with Ombudsman Association standards and commitments to complainants and organisations complained about, namely: accessibility, communication, professionalism, fairness and transparency;
  2. “credible with customers”; and
  3. provided by all “licensed operators…to ensure all customers are protected equally”.

If the scheme is not delivered as expected by Government or “shortcomings emerge regarding the ombudsman’s remit, powers or relationship with industry, will legislate to create a statutory ombudsman.”

Once the Gambling Ombudsman has been established, Government “will explore how best to require that all licensees ensure customers have effective access to the ombudsman” for SR complaints, potentially through licence conditions introduced by the Gambling Commission or Secretary of State. In our view, logically, this can only mean B2Cs, given that B2Bs do not have a contractual relationship with customers.

Potential scale of unresolved complaints

2021/2022 statistics:

  • 200,000 complaints are made by customers directly to operators 
  • 5% of these are referred to an ADR provider, thereby becoming a dispute
  • 6% of disputes referred to an ADR provider related to SR failings and therefore outside scope (there are limited circumstances in which an SR complaint can be considered)
  • The Independent Betting Adjudication Service (“IBAS”), the largest ADR provider, received 80% of all ADR disputes across the gambling industry
  • 20% of all complaints referred to IBAS related to SR, with most of this outside scope
  • The Gambling Commission received 1,305 so-called SR complaints via its contact centre

Government acknowledge that current statistics are not necessarily representative of the likely volume of work that lies ahead for the Gambling Ombudsman. By way of example, it refers to the Financial Ombudsman Service that received 31,000 cases in its first year (2000/2001) rising to over 219,000 by 2021/2022. Whilst Government does not expect this overall volume, it believes “a significant increase is likely” and this seems inevitable to us, particularly with certain personal injury law firms already ready with webpages dedicated to “gambling harm claims”.

Potential issues

The concept of an ombudsman is a good one; however, it raises several knotty issues including:

  1. Remit: The Gambling Commission’s Advice to Government recommended “a new single ombudsman scheme for consumer redress… replace all current ADR providers and consider all disputes between gambling operators and consumers”. Plainly, the Government decided otherwise with the Gambling Ombudsman being limited to SR issues only! Clarity of the purpose of the new ombudsman and the scheme’s role, intent and scope, including its clear objectives, types of disputes that will and will not be investigated, when complaints can be escalated to the Gambling Ombudsman (for example, after reaching “deadlock” through the operator’s internal complaints process and if/when an operator can refer disputes) and what is a legitimate concern, will be critical for complainants and gambling businesses (“Service Users”). The ombudsman concept is rooted in claims of maladministration and injustice, which whilst fitting in a public service setting does not lend itself, at least easily, to gambling. One risk is the confusion the Gambling Ombudsman may create in an already fragmented landscape given the number of different ADR entities. 
  2. “A just result for both”: More serious risks, to achieving quality outcomes and promoting the integrity of the scheme, are:
    • How the Gambling Ombudsman will navigate the meaning of ‘excessive’ or ‘unaffordable’ gambling and determine the point at which the operator should have intervened, which is not an objective assessment, and it will be very heavily case specific. In its Advice to Government (at paragraphs 6.21-6.25), the Gambling Commission referred to a “helpful precedent” set by the Financial Ombudsman about irresponsible lending and considering what is “fair and reasonable”, taking into account relevant laws, regulations and regulatory guidance, standards, codes of practice and what is considered to be the good industry practice at the time. One of the biggest practical challenges for the Gambling Ombudsman will be getting to grips with ever-changing requirements for operators (which are sometimes opaque to say the least) and ensuring its decision-making process is consistent, something which will be critical for all Service Users. 
    • Whether operators have a duty of care to customers and what this means?
    • Suggesting gambling is “risk-free” with customers using the scheme as a way to recover losses, reinforcing negative and harmful behaviours.
  3. Complainant: Who will be able to refer a dispute to the Gambling Ombudsman?  Will it be limited to the player, or could it include a family member, solicitor, claims management company or other appointed representative (including an executor in the event of death)? 
  4. Non-statutory: As a non-statutory body (again, against the Gambling Commission’s advice which considered legislation and a statutory body to be “essential for it to be implemented effectively”), the Gambling Ombudsman will not have the power to force operators to comply with recommendations. For the scheme to have credibility in the eyes of complainants, it will be vital for operators to accept findings and implement recommendations made by the Gambling Ombudsman, which was no doubt one of the drivers for the Government mandating the Betting and Gaming Council’s involvement in the “foundational aspects” to ensure “operators are held to account…and public confidence in the scheme is high”. Will it become a licence condition to implement the recommendations of the Gambling Ombudsman?
  5. Time limit: Will there be a time limit to bringing a complaint? A reasonable cut off point (perhaps, 12 months) should be introduced.
  6. Litigation: Complaints should not be considered if legal proceedings have commenced against the operator. It will be interesting to see if the scheme prioritises complaints where legal action is being contemplated.
  7. Independence: How will independence from both the Gambling Commission and gambling industry be achieved? Whilst we acknowledge, as the Government does, the importance of the Gambling Commission having a “strong relationship” with any ombudsman, for the scheme to have credibility with operators it will be essential for it to be impartial.
  8. Remedies: To secure its success, the Gambling Ombudsman will need to ensure remedies are “appropriate and take account of the impact any identified faults have had on the complainant” and explain what action can be taken if remedies are not implemented. Remedies could include practical action, an apology, a financial award (or fair compensation looking to put the complainant back in the position had the operator not “got it wrong”) and/or recommendations to the operator to prevent recurrence. The appropriateness and timing of certain remedies will need to be approached carefully, considering potential impact on therapy.  Additionally, we will need to watch this space to see whether the scope of redress arrangements blurs the lines between powers typically reserved for the regulator.
  9. Financial award or compensation: Assessing the quantum and recipient of any financial award or compensation will be very complex, and may include:
    • the impact on a customer’s health (as is the case with the Financial Ombudsman Service);
    • whether the customer could have done anything to reduce the impact of the operator’s mistake, acknowledging that sometimes – in a chain of events – it would not be fair to hold an operator responsible for all the resulting effects;
    • in cases where the complainant is not the customer, whether certain remedies should be precluded; and
    • directing an operator to make a payment to a problem gambling charity, or repay a debt, instead of a payment directly to the customer given the potential risk of fuelling their gambling addiction.
  10. No appeal: Decisions will be final and not appealable. Also, as the Gambling Ombudsman will be a non-statutory body, its decisions cannot be judicially reviewed. So, in what circumstances, if any, will Service Users be allowed to request the Gambling Ombudsman to review the decision? This is likely to be limited to a mistake, or if the complainant has new information with a clear reason, why it was not submitted earlier.
  11. Funding: As the scheme will be free for complainants, it will inevitably be funded by operators. This could involve a fee for each case reviewed, or per year. Although this detail did not feature in the White Paper, the Gambling Commission recommended “learly defined funding arrangements, including the power for to set the fees payable by licensees” which seems wholly inappropriate (especially with a non-statutory body). 

Frontrunner

IBAS is the clear frontrunner to become the Gambling Ombudsman on the basis it is the largest ADR provider, handling about 80% of the ADR disputes. This is certainly a jolly good start, but only about 20% of their 860 complaints dealt with in the last year were SR-related, so a steep learning curve still lies ahead, despite advance planning.

Back in August 2022, no doubt following the leaks in July 2022, IBAS unveiled its roadmap for becoming the Gambling Ombudsman in the Fast Track to Fair Play briefing. This included an outline of its aims and governance framework setting out the remit of the new ombudsman, the need for new and compulsory funding from industry whilst ensuring “impartiality remains at the heart of all gambling dispute decisions” and a Fair Play Code with criteria for deciding complaints and “harmful gambling” (which remains unpublished at the time of writing). Although the White Paper is silent on funding, IBAS estimated an annual budget of approximately £3.5m and £1m to fund the transition process. In its first year, IBAS – as the Gambling Ombudsman – expects to:

  • receive approximately 7,500 complaints and resolve 5,000 complaints, anticipating that some 2,000 will need to be referred back to operators to complete their internal complaints systems and approximately 500 requests will fall outside an expanded redress remit;
  • receive a further 10,000 requests for advice or support from Service Users that do not progress to a dispute;
  • deal with claims management companies exploring historic complaints on behalf of customers; and
  • charge an average resolved case fee of £400 and a lower median fee and may charge an average handling fee of £25 per enquiry/request for assistance from operators.

Next steps

With the appointment process expected to begin in Summer 2023, we need to await the formation of (or transformation into) the Gambling Ombudsman to see how the scheme, challenges and risks will be navigated on this cornerstone proposal to improve consumer protection. Delay will only serve to antagonise the anti-gambling lobby and displease Government, increasing the possibility of a statutory ombudsman.

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31May

White Paper Series: “Hurry up and wait”

31st May 2023 John Hagan Anti-Money Laundering, Harris Hagan, Marketing, Responsible Gambling, Training, White Paper 312

As the dust settles (at least temporarily) following the publication of the White Paper, we have “take time to think” so that we may share our insights in a series of blogs and vlogs on the many and varied aspects of the proposed gambling reforms. With the Gambling Commission already seeking to manage expectations by saying that the implementation of the White Paper “will likely take a number of years to fully complete” and urging “more haste, less speed”, this may be a long running series… We will focus on what we consider is important or interesting, ideally both, and our content will be concise and hopefully thought provoking.   

Speaking about the White Paper recently in the House of Lords, Lord Grade referred to a saying in the film industry – “hurry up and wait” (also a song by Stereophonics and a military motto) – describing where you get to the location after being forced to spend a lot of time waiting, everybody is standing around, ready, but nothing happens. Having waited nearly 30 months for the publication of the White Paper, coupled with the latest (estimated) indication from the Gambling Commission that the first wave of consultations will not be seen until mid-July, this saying seems apt.

1. Spirit and intention of the White Paper

Throughout our White Paper Series, we will have as our touchstone the aim of the Gambling Review when it was published on 8 December 2020:

“The Government wants all those who choose to gamble in Great Britain to be able to do so in a safe way. The sector should have up to date legislation and protections, with a strong regulator with the powers and resources needed to oversee a responsible industry that offers customer choice, protects players, provides employment, and contributes to the economy.”

The White Paper is true to that laudable aim. As the Secretary of State says in her Ministerial Foreword, at the heart of the Government’s Review is making sure it has the balance right between consumer freedoms and choice on the one hand, and protection from harm on the other. The Government seeks to achieve this balance through an extensive package of measures across all facets of gambling regulation. If it is to be successful, the Government – and Gambling Commission – will need to retain an unerring focus on this balance, essentially the spirit and intention of the White Paper, as it is inevitably buffeted by vested interests through consultation, regulation, and legislation.

2. All things to all people

The first thing to say about the White Paper is that it has been broadly well received; when it was delivered in Parliament, within all sectors of industry, by the NHS, in the third sector and at the Gambling Commission. This was equally broadly unexpected, given the acrimony and divergence of views between stakeholders during the “hurry up” phase, so why has the White Paper been such a resounding success? At the risk of oversimplifying, but not wishing to overlook the obvious (including the lack of detail and long grass kicking), it is precisely because the Government has achieved a healthy balance in its proposed reforms, for which it deserves enormous credit, and it is because there is something valuable in the White Paper for everyone.

Responding to its publication, and demonstrating some of the “wins” for the respective stakeholders, comments on the White Paper included:

“Given the correct powers and resources, the Gambling Commission can continue to make gambling safer, fairer and crime free. This White Paper is a coherent package of proposals which we believe can significantly support and protect consumers, and improve overall standards in the industry.” Gambling Commission CEO, Andrew Rhodes.

“BGC members will now work with Government and the Gambling Commission to deliver targeted and genuinely ‘frictionless’ enhanced spending checks to further protect the vulnerable, a new Ombudsman to improve consumer redress, and overdue plans to modernise the regulation of UK casinos.” Betting & Gaming Council CEO, Michael Dugher.

“..it should not be left to the health service to pick up the pieces left behind by a billion-pound industry profiting on vulnerable people, so I fully endorse the statutory levy set out in today’s White Paper and look forward to reading the proposals in detail.” NHS Mental Health Director, Claire Murdoch.

“At GamCare, our priority is making sure that people who need help receive it as quickly as possible. We therefore welcome the clarity the Government has provided on how research, education and treatment will be funded.” Gamcare CEO, Anna Hemmings.

“As chair of the all-party parliamentary group on gambling related harm, I welcome this long overdue White Paper. In the APPG’s 2019 interim report, we asked for affordability checks, parity between land-based and online stakes, an independent ombudsman, a curb on advertising and, most importantly, a statutory levy. Job done.” Carolyn Harris MP.

The introduction of a statutory levy paid by licensees and collected and distributed by the Gambling Commission under the direction and approval of the Treasury and DCMS ministers, is a flagship reform. The long debate as to whether there should be a statutory levy is at an end, there will be a DCMS consultation on the details of its design and, critically, the total amount to be raised. The statutory levy will fund research, education and treatment of gambling harms and is a load-bearing pillar of the reforms for those advocating the “polluter pays” principle.

Financial risk checks, maximum stakes for online slots and the creation of an independent gambling ombudsman have also been very warmly received by key stakeholders and will all be consulted upon by DCMS. The new non-statutory ombudsman will be the subject of our next blog in this White Paper Series.

The Gambling Commission most certainly did not get everything its own way, with Government not religiously following the advice from the regulator, but the Gambling Commission will be the recipient of powers and resources intended to make sure that all gambling is overseen by a “beefed up, better funded and more proactive” regulator. Licence fees will be reviewed (upwards of course) to ensure it has the resources to deliver the commitments across the White Paper. When Parliamentary time allows, it will even get greater power to set its own fees. Detailed analysis of the Gambling Commission’s additional enforcement powers will be the subject of one of our early blogs in this White Paper Series, including some which may have passed below the radar in all the excitement.

The industry positives from the White Paper are more nuanced. The land-based industry can certainly look forward to the long overdue modernisation of casinos and bingo clubs – including greater machine entitlements, credit in casinos for non-UK resident customers, sports betting in all casinos, and additional opportunities for customers to win on the main stage bingo game – and cashless payments across all land-based gambling sectors (following consultation by the Gambling Commission on the player protections which would be required).

From an online industry perspective, the White Paper is arguably as good as could reasonably have been expected in the present political, media and regulatory environment. The Government has resisted calls for bans on advertising, rejected demands for blanket and intrusive low-level affordability checks, and will consult on maximum stakes for online slots at higher levels than leaked previously. However, in outlining the Government’s vision for the future of gambling in moderately business-friendly terms, the White Paper does provide policy direction to which to hold the Gambling Commission accountable, the beginnings of some certainty and a glimpse of what political and regulatory stability might look like, not to mention the hope that the next gambling review might be a generation away.

3. The upcoming consultations

Yes of course everyone wishes the White Paper had gone further (in their direction, naturally). Yes of course there is a lot of work to be done to implement the reforms, once we are no longer “waiting”. Yes of course the devil will be in the detail. But as even the Gambling Commission and the Betting and Gaming Council (the “BGC”) agree in their welcoming press releases, the White Paper is a “once in a generation” opportunity for change. All the key stakeholders will now be seeking to secure their respective prize and imploring Government to prioritise their interests and deliver on its promises at the earliest opportunity, not least through Government and Gambling Commission consultations.

If the risk of the reform process descending into warring factions and reaching a standstill is to be mitigated, and this would not be in anybody’s interests, it is imperative that the process itself remains balanced and that all the key stakeholders see comparable progress in relation to their interests. From an industry perspective, this means engaging positively, constructively, and wholeheartedly with the upcoming consultations, proposing pragmatic and sensible solutions to the difficult challenges the Government and the Gambling Commission face, not least in relation to cashless solutions and frictionless checks, substantiated by evidence wherever possible. It also means holding the Gambling Commission to account on what is expected of it by the Government in the White Paper, with fair prioritisation of its (no doubt stretched) resources and no reforms being left far behind, even when the Gambling Commission is not in favour of them. It means focusing on its prize and not seeking to “re-litigate” settled issues or actively seeking to frustrate other stakeholders, or indeed otherwise antagonising Government which has delivered upon a balanced vision.   

The proposed reforms are going to take longer than any of the stakeholders want as they seek to claim their prizes, but they are worth waiting for, the consultation phase will be critical, with both Government and the Gambling Commission under immense pressure to listen, and we will of course be happy to assist clients with their responses where that would be helpful, as we did in the last once in a generation opportunity in 2005!

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19May

Summary of first-ever inquiry into crime linked to gambling

19th May 2023 Adam Russell Anti-Money Laundering, Harris Hagan, Responsible Gambling 261

Background

The Howard League for Penal Reform (“Howard League”), which is the oldest penal reform charity in the UK, launched a Commission on Crime and Gambling Related Harms (the “Howard League Commission”) in June 2019.  The primary objective of the Howard League, which extends beyond gambling, is “less crime, safer communities and fewer people in prison”.

The Howard League Commission, chaired by Lord Goldsmith KC with a team of 12 Commissioners, was the UK’s first-ever inquiry into the relationship between crime and gambling, and focused on understanding/determining:

  • the links between gambling related harms and crime;
  • the impact these links have on communities and society; and
  • what steps could be taken to reduce crime and make people safer. 

A call for evidence was issued, attracting submissions from a range of stakeholders including the gambling industry, academics, practitioners, policy makers and people with lived experience.  Evidence sessions took place with Ministers and senior stakeholders; minutes from these sessions can be found here.

The Howard League Commission published its final report in April 2023.  It has also published its submission to Government’s call for evidence as part of the review of the Gambling Act 2005, and related research projects, for example, on sentencers’ understanding and treatment of problem gamblers and prison culture and gambling.

The Commission found that there is “an urgent need for ownership to be taken to reduce gambling harms related to crime both at political and strategic level and at operational policy and professional stakeholder level” and that there is “appetite for reform” within the police, courts, prisons and probation, but found an “apparent absence of scrutiny” within Government.

Key findings

The Howard League Commission found that:  

  • The impact of gambling-related harm and crime touches all aspects of life, for example, finances, employment, relationships, health.
  • There are a high number of people committing a wide range of crimes as means to fund their gambling. These include white-collar/acquisitive crimes, as well as street robbery, domestic abuse and neglect, criminal damage and drugs offences.
  • Victims of gambling-related crime include employers, as well as social/familial networks.
  • There is scope to improve understanding of gambling-related harm among criminal justice agencies including in relation to sentencing, rehabilitation, recovery and support.
  • Certain criminal justice responses, such as Proceeds of Crime Act (POCA) orders, are counterproductive.
  • The impact of gambling-related harms and crime on affected others, women and individuals from ethnic minority communities is disproportionate and poorly understood.

Key recommendations

  1. A strategic approach should be developed. The report calls on the Government, health bodies and criminal justice agencies to take a strategic approach to tackling the issue of gambling-related crime. It also recommends the creation of a national board to address crime linked to gambling – including senior representatives from the police, police and crime commissioners, prosecution, courts, probation, prisons, public health, victims’ advocates, and representation from those with lived experience of gambling-related harms related to crime.
  2. Further funding. More funding needs to be provided locally and regionally, to develop a treatment and support infrastructure through the police, courts and prisons, which would help to reduce crime and enable more people to access services. For example, Gambling Commission revenues could be channelled into funding criminal justice and health infrastructure around treatment and support.  
  3. The role of criminal justice agencies should be enhanced. Examples include further development of the screening and assessment processes for problem gambling, integrating the voice of individuals with lived experience and improving sentencing guidelines in relation to gambling disorder. The Equal Treatment Benchbook should also be reviewed and gambling disorder considered alongside drug and alcohol use.
  4. Gambling-related crime should be integrated into cross-government action. This could include the development of a Parliamentary select committee inquiry and cross-departmental oversight body. The report also recommends an external review regarding regulator/operator steps to address criminal activity, gambling-related harms, and provision of support.
  5. Areas for further research should be explored. Examples of topics include the prevalence and drivers of the relationship between gambling and crime, the nature and efficacy of support/treatment (what constitutes effective support/interventions; upstream prevention; affected others; appropriate outcome measures) and the wider societal and system impact (the financial costs to society of gambling-related harms in the criminal justice system; impact on prosecution practices e.g. culpability, mitigation).

Concluding thoughts

The report comes as the Government announces planned reforms in its long-awaited White Paper, High stakes: gambling reform for the digital age. Although the niche areas of development/focus arising from the final report of the Howard League Commission will be a helpful ancillary to the proposals in the Government’s White Paper, its timing is not fortuitous given that the attention of the UK Government and the Gambling Commission will be on implementing the numerous reforms set out in the ambitious White Paper. We therefore suspect that the most likely avenue for change will be via the criminal justice agencies. They may be best placed to use the evidence presented in the Howard League Commission’s report to promote positive change in relation to the identification of gambling-related harm during the sentencing process, and provide appropriate support to affected offenders during their prison sentences and subsequent rehabilitation into society.

Download the Howard League Commission final report
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16May

Reporting of Deaths by Suicide: consequence and practical implementation

16th May 2023 David Whyte Harris Hagan, Responsible Gambling 232

The Gambling Commission’s consultation on three changes it proposes to make to its Licence Conditions and Codes of Practice (the “Consultation”) is due to close on 23 May 2023 and there is one issue to which licensees should pay careful attention: the proposal to add a specific reporting requirement to Licence Condition 15.2.2 requiring licensees to notify the Gambling Commission when they become aware that a person who has gambled with them has died by suicide.

The Gambling Commission’s proposed wording is:

“The licensee must notify the Commission, as soon as reasonably practical, if it knows or has reasonable cause to suspect that a person who has gambled with it has died by suicide, whether or not such suicide is known or suspected to be associated with gambling. Such notification must include the person’s name and date of birth, and a summary of their gambling activity, if that information is available to the licensee”.

There is no question of licensees not wishing to prevent suicide and ostensibly, the arguments in favour of this proposed requirement are logical and reasonable. However, this is an incredibly sensitive issue about which stakeholders will have opposing views. Indeed, we have some concerns ourselves: that a gambler commits suicide does not necessarily mean that the gambling is a contributory factor, nor is the Gambling Commission qualified to make such a judgement. It is therefore questionable whether it is appropriate for the Gambling Commission to require the provision of information of this nature.

As has been the case on many occasions in the past, the Gambling Commission is likely to proceed with imposing this requirement, irrespective of the responses it receives to the Consultation. Consequently, rather than explore the basis of the proposed requirement, this article considers its wording and impact, which as presently drafted potentially exposes licensees to a risk of regulatory bias, imposes a disproportionate burden upon them and is likely to be interpreted inconsistently.

Intention and consequence

The Gambling Commission explains in the Consultation that, in the past, some licensees have notified it when they have become aware that a customer has died by suicide; likely under ordinary code provision 1.1.1 which suggests that, as a matter of good practice licensees should inform the Gambling Commission “of any matters that the Commission would reasonably need to be aware of in exercising its regulatory functions”. However, to enable it to “assess the licensee’s compliance with conditions of its licence” and to help “inform ongoing consideration of policy” the Gambling Commission has determined it necessary to make this notification a licence condition, the breach of which would enable it to commence enforcement action and if appropriate impose a regulatory sanction.

The Gambling Commission also states in the Consultation that, to avoid placing a burden on licensees to determine which deaths by suicide they should notify it about, it proposes that “licensees are required to notify us where a person who has gambled with them has died by suicide irrespective of whether any link between the person’s death and gambling has been established or suggested” and that “the death should be notified to the Commission irrespective of the period of time that has elapsed between the death and the most recent gambling activity.”

The Gambling Commission, many of its key stakeholders, and indeed many of its critics, have made it abundantly clear that gambling related suicide must be a key focus, and rightly so. However, suicide is almost invariably the result of a complex array of factors, and it cannot be the case that irrespective of the time that has lapsed between an individual’s gambling and their suicide, gambling will necessarily have been a contributory factor. An investigation is therefore inevitable, and care needs to be taken by the Gambling Commission when conducting that investigation to ensure that there is no internal regulatory bias on its part: its focus should be on licensee’s adherence to their regulatory requirements and not to the tragic circumstances that have led to the notification being submitted.  

A regulatory bias in relation to gambling related suicide, or at least an indication of it, is evident in the Gambling Commission’s consultation Customer Interaction – Guidance for remote operators, where the Gambling Commission tells licensees that their staff “need to be trained on the skills and techniques they need to help them carry out customer interactions, including what to do if a customer becomes distressed or there is a risk of suicide”. Wording such as this suggests that, in the Gambling Commission’s view, it is the responsibility of licensees or their employees to identify the risk of suicide, and to act upon it. As we have set out in a previous article, this cannot be right: it is the responsibility of qualified professionals to identify that risk, not licensees, and it is dangerous on multiple levels, including in relation to the wellbeing of licensees’ employees, to suggest otherwise. Further, this risks suggesting there is a duty of care at law on the part of licensed gambling operators to prevent suicide, which is a dangerous precedent.

Whether or not licensees are expected to investigate, the Gambling Commission will be doing so. The extent of that investigation is likely to extend beyond the licensee who has submitted the notification: how else will the Gambling Commission ensure that all licensees are adhering to the licence condition and/or that the individual concerned has not gambled elsewhere? Having been identified it is therefore inevitable that the Gambling Commission will have to request information from other licensees; the burden on licensees potentially extending considerably and a consistent and proportionate response difficult to maintain. If gambling is a contributory factor, we suggest it is more likely than not the individual will have gambled with many operators.

As most licensees who have been through a burdensome compliance or enforcement investigation process with the Gambling Commission have experienced, the Gambling Commission can be very unforgiving in its approach, 20/20 hindsight is applied and it is rare that such a process leaves a licensee unscathed. Many licensees have found themselves subject to criticism, and in some cases may have agreed a regulatory settlement, in cases where theirs and the Gambling Commission’s view about some failings identified are not perfectly aligned. Following a notification under this proposed requirement, licensees might be forgiven for being concerned about how any Gambling Commission investigation will be conducted and any consequences of that investigation, particularly given the risk of unintentional bias and the imbalance of power between the regulator and its licensees.

Practical implementation: expectation versus reality

The Gambling Commission states in the Consultation that:

  1. its “current view is that licensees should notify when they become aware that a person who has gambled with them has died by suicide”;
  2. it proposes a specific reporting requirement that “would impose a requirement on gambling licensees to notify the Commission if they become aware that a person who has gambled with them has died by suicide”;
  3. that licensees “would only be able to notify us that a person who has gambled with them has died by suicide if they themselves are aware of this, either through direct contact or other means, such as media reports”; and
  4. it “would not expect licensees to actively investigate or verify the information in order to make such disclosures – rather, would expect licensees to notify the Commission if they become aware of a death by suicide of any person who has gambled with them (for example, through media reports or notification from relatives of the deceased).”

However, the draft wording of the proposed license condition is ambiguous and goes further than the Gambling Commission’s stated intention in the Consultation. It not only refers to actual knowledge but also to a much broader “reasonable cause to suspect”. This risks imposing a disproportionate regulatory burden on licensees. What amounts to reasonable suspicion will almost certainly be interpreted differently and will ultimately be determined by the Gambling Commission subjectively and in hindsight. Further, the breach of a licence condition amounts to a criminal offence under the 2005 Act, and can lead to various regulatory sanctions, including revocation and the imposition of a financial penalty. Licensees are therefore likely to take a precautionary approach when considering whether a notification is required.

Unlike actual knowledge, which is precise and unambiguous, a licensee’s reasonable cause to suspect that a customer who has gambled with it has died by suicide could be considered to arise in various ways, for example: (1) if they are informed by a customer that they are having suicidal thoughts following which all customer contact ceases without any known explanation or reason; (2) if public information about an individual who has died by suicide exists; or (3) if a licensee is informed that a customer who has self-excluded with them has died, but the cause of death is unknown. To avoid criticism in hindsight from the Gambling Commission about what amounted to reasonable cause to suspect, licensees will inevitably carry out an active investigation or verification exercise. The draft provision therefore appears to conflict with the Gambling Commission’s stated position in the Consultation that an active investigation is not required and this imposes a disproportionate burden on licensees.

This complication is most likely caused by ambiguous drafting, rather than by a malicious desire by the Gambling Commission to extend the reach of the draft provision.  However, to ensure clarity of understanding, mitigate the risk of inconsistent interpretation by the Gambling Commission, and prevent the unreasonable or disproportionate use of the draft provision in the future, the Gambling Commission should be encouraged to address this ambiguity. Clarity could easily be achieved either by including additional wording in the draft provision that expressly states that active investigation or verification by licensees is not required, or by amending the draft provision entirely. Alternative and more appropriate wording that will retain the Gambling Commission’s desired objective might be:

“The licensee must notify the Commission, as soon as reasonably practicable, if it knows that a person who has gambled with it has died, and knows or has reasonable cause to suspect that the person has died by suicide.”

Please get in touch with us if you would like assistance with any compliance or enforcement matters.

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28Apr

Gambling Commission Advice to Government

28th April 2023 Harris Hagan Anti-Money Laundering, Harris Hagan, Marketing, Responsible Gambling, White Paper 278

The Gambling Commission has published its advice to Government (the “Advice”), as part of the review of the Gambling Act 2005 terms of reference and call for evidence, providing advice on each of the following topics:

  • effectiveness of the regulatory system;
  • online protections, players and products;
  • safer gambling and public health messaging;
  • advertising, marketing and sponsorship;
  • the Commission’s powers and resources;
  • wider funding for research, prevention and treatment;
  • consumer redress;
  • age limits and verification;
  • protections for young adults; and
  • land-based gambling.

In the Introduction, the Gambling Commission explains:

“In forming our advice, we have considered the widest range of evidence and applied a rigorous, consistent, and transparent evidence assurance process. The evidence assurance process enabled us to determine the strength of the evidence base and the weight that could be applied to the formulation of our recommendations. Where there was a lack of conclusive evidence, we took the position that this did not automatically mean that conclusions could not be reached or that action should not be taken. In some of our recommendations we have applied the precautionary principle where the potential for harm existed. We have, however, been transparent in our advice where we are advocating a precautionary approach.”

Andrew Rhodes, Gambling Commission CEO, said:


“The gambling industry has changed significantly since 2005 and our advice sets out changes that will ensure Britain is the safest and fairest place to gamble in the world. The review is a once-in-a-generation opportunity to deliver positive change for gambling in Great Britain and for all people impacted by it. Everyone at the Commission welcomes today’s publication of the White Paper and is determined to work with Government and partners to make these changes a reality. Given the correct powers and resources, the Gambling Commission can continue to make gambling safer, fairer and crime free. This White Paper is a coherent package of proposals which we believe can significantly support and protect consumers, and improve overall standards in the industry. As the detailed implementation of the review now begins, we will also be reiterating to all operators that the Commission will strongly maintain its focus on consumer protection and compliance.”

The Advice was published very shortly after the long-awaited publication of the Gambling White Paper on 27 April 2023.

We will review the Advice in detail and will be publishing our insights over the coming weeks and months.

Download the Advice to Government
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