29Nov

Understanding the impact of increased cost of living on gambling behaviour: Gambling Commission’s interim findings

29th November 2023 Chris Biggs 230

Last month, the Gambling Commission published its interim findings on the impact of increased cost of living on gambling behaviour. The Gambling Commission’s research aims to improve its understanding of the impact of increased cost of living by examining the behaviours and motivations of gamblers during the period of high cost of living in Great Britain (“COL Research”).

The Gambling Commission commenced the COL Research in December 2022 in partnership with Yonder Consulting, and undertook a “mixed-methodology research approach” with a longitudinal survey taking place over three waves between December 2022 and June 2023. This was followed by qualitative depth interviews to further understand the impact of the rise in cost of living on lifestyle and gambling behaviours.

In this blog, we summarise the COL Research, set out the Gambling Commission’s interim findings and identify key points for licensees in Great Britain to note.

What is the COL Research?

The Gambling Commission sets out its definition of ‘cost of living’, as:

“the amount of money that is needed to cover basic expenses such as housing, food, taxes, healthcare, and a certain standard of living.”

The COL Research specifically aims to test three core hypotheses:

The rise in cost of living is likely to impact consumers’ gambling behaviour in different ways, depending on their personal circumstances and the way in which gambling fits into their lives.
Some gamblers will report that the rise in cost of living has had a mediating effect on their gambling behaviour.
The rise in cost of living may negatively impact vulnerabilities for some consumers, putting them at an increased risk of gambling-related harm.

The project commenced with three waves of quantitative research, which sought to: (1) initially establish a baseline of key gambling behaviours; (2) explore the impact of external triggers for gambling; and (3) subsequently track any changes to the core gambling behaviours.

Wave 1

Between 21 and 22 December 2022 the Gambling Commission commenced the nationally representative survey of 2,065 adults aged 18 or over. 973 participants (47%) had engaged in gambling activity in the last four weeks.

Wave 2

Between 27 February and 3 March 2023, 1,694 of the same sample group were recontacted to capture changes in the core gambling behaviours surveyed. 820 participants (48%) had engaged in gambling activity in the last four weeks.

Wave 3

Between 26 May and 2 June 2023, 1,391 of the same sample group (who all took part in Wave 2) were recontacted to capture further changes in the core gambling behaviours. 666 participants (48%) had engaged in gambling activity in the last four weeks.

Qualitative wave

The qualitative phase took place in August 2023, with the aim to build a “more rounded impression and picture of each individual”. This phase engaged with 16 individuals who each completed a three-day “digital diary pre-task” to reflect on spending habits. 16 one-hour online interviews were then conducted with gamblers who engage in a variety of different gambling types and with different gambling behaviours (whilst it is not clear, we assume these were the same 16 individuals who participated in the digital diary pre-task).

The Gambling Commission’s interim report does not discuss findings from the qualitative phase; these will accompany further quantitative and longitudinal analyses in the final report expected in “early 2024”.

Key findings

The quantitative phase of the COL Research (i.e. the three waves) surveyed the participants across three broad topics. We set out the Gambling Commission’s key findings for each topic below.

Topic 1: Financial comfort and concerns, and wellbeing

Just under half of the respondents indicated they were “just about managing but felt confident that they would be okay” with the cost of living, whereas between 40% and 43% of individuals indicated they were “financially comfortable”.

The subgroups most likely to have broader concerns about their personal finances are those who gamble online and those who score 8 or more on the Problem Gambling Severity Index (“PGSI”), however most individuals signalled the need to take steps to make their income go further during the tracked period.

In terms of wellbeing, between 45% and 49% of respondents reported “not being able to enjoy the things that they used to due to the rising cost of living” throughout the tracked period.

Topic 2: Changes in gambling behaviours

Despite the rise in cost of living, a clear majority of gamblers reported that their gambling behaviours (amount of time and money spent, number of gambling occasions and typical stake placed) had remained stable, the majority ranging from 62% to 75% depending on the type of gambling behaviour.

If a change in gambling behaviour was reported, it was much more likely to be a decrease in gambling. For example, between 22% and 26% of individuals reported a decrease in the amount of time spent gambling, compared to 6% to 7% that reported an increase in time spent gambling.

69% of individuals who did report changes indicated that these changes were “at least partially a direct consequence” of increases in the cost of living.

Individuals who scored 8 or more on the PGSI were more likely to report an increase in the gambling behaviours surveyed, despite the rise in cost of living.

Topic 3: Motivations for gambling

Respondents who previously indicated they had changed their gambling behaviours were asked questions about four specific motivations in Waves 1 and 3, displayed in the Gambling Commission’s Table 4.1:

Between 10% and 20% of online gamblers indicated that bolstering their finances was their motivation for gambling, and this motivation applied to “significantly more” individuals who scored 8 or more on the PGSI.

Interim conclusions

The concluding remarks in the Gambling Commission’s report considered the interim findings in the context of the following two hypotheses:

Has the rise in cost of living had a mediating effect on gambling behaviour?

Initial quantitative evidence does not suggest that the rise in cost of living has had a mediating effect on gambling behaviours. However, the “small proportion” of those who did make changes to their gambling during this period were more likely to have deceased their gambling; the exception being individuals who scored 8 or higher on the PGSI, who were more likely to have increased their gambling compared to other groups of participants.

Has the rise in cost of living negatively impacted vulnerabilities for some consumers?

A small minority of gamblers who said that they have changed at least one of the surveyed gambling behaviours reported using gambling to support their finances in some way, with a greater proportion of those doing so being online gamblers and/or those who scored 8 or more on the PGSI. The individuals who did change their gambling behaviours indicated that the rise of cost of living has at least partially contributed to their change in behaviour.

Takeaway points

It can be inferred from the interim findings that online gamblers and individuals scoring 8 or higher on the PGSI may be more vulnerable to gambling-related harms when faced with a rise in cost of living.

Given that the interim findings come at a time when the spotlight is on affordability and customer interaction, it will be interesting to see whether the COL Research findings feature prominently in the Gambling Commission’s response to its summer consultation that closed on 18 October 2023 and included consideration of new obligations on licensees to conduct financial vulnerability checks and financial risk assessments.

For the meantime, online operators in particular, should bear these interim findings in mind while they are updating their safer gambling policies and procedures to reflect the Gambling Commission’s revised customer interaction guidance for remote gambling licensees; and evaluate whether they ought to take increased cost of living into account in their assessment of financial risk – pending formal direction from the Gambling Commission.

The Gambling Commission’s final report in “early 2024” will combine its interim findings with further quantitative analysis of the longitudinal impact of the increased cost of living across different demographic groups, and key findings from its qualitative phase of the COL Research.

Please get in contact with us if you have any questions about the Gambling Commission’s interim findings and/or your business’ approach to customer interaction and financial vulnerability.

28Nov

New Industry Code for Responsible Gambling (7th edition) comes into force this week

28th November 2023 Ting Fung 238

The seventh edition of the Industry Group for Responsible Gambling Code for Socially Responsible Advertising (the “IGRG Code”) was published by the Betting and Gaming Council on the 5 September 2023 and will come into force on 1 December 2023.

Pursuant to ordinary code provision 5.1.8, all licensees are required to follow the IGRG Code.

The IGRG Code has been strengthened following government’s indication in the White Paper to:

“take existing commitments in the industry code further, and use the full potential of available advertising technology to target all online advertising away from children and vulnerable people and those showing indicators of harm.”

What’s new?

The IGRG Code, which was last updated in October 2020, has been amended as follows:

Extension of the safer gambling messaging requirement to 20% of advertising space across online and broadcast media (previously, this commitment only applied to television and radio).
Extension of the 25+ rule to all digital media platforms, including those which operate age verification processes.

You can download a copy of the IGRG Code from the BGC’s website.

31Oct

Revised remote customer interaction guidance comes into effect

31st October 2023 David Whyte 262

The Gambling Commission’s revised remote customer interaction guidance (“CI Guidance”) has today (31 October 2023) come into effect, along with the requirement set out in Social Responsibility Code Provision (“SRCP”) 3.4.3 that remote licensees must take the CI Guidance into account.

As readers of our blog will no doubt be aware, we have provided several updates (for example, in December 2022 and January 2023) on, and been critical of, the evolution of the CI Guidance, since the first announcement by the Gambling Commission on 14 April 2022 of the new SRCP 3.4.3 and the associated CI Guidance.

The Gambling Commission has now set out its requirements. Irrespective of their views about the CI Guidance, it is vitally important that those remote licensees to which the CI Guidance applies are compliant with SRCP 3.4.3 and can demonstrate that they have taken the CI Guidance into account. We do not propose to further analyse the CI Guidance in detail in this blog. Rather, we set out below some key considerations for those licensees who must comply with these requirements.

Key considerations

Consideration 1: Be wary of the language used in the CI Guidance

We have previously raised concerns about the Gambling Commission introducing formal requirements through guidance, and about the risk that the language used in the CI Guidance might: (a) inaccurately reflect the requirements set out in SRCP 3.4.3; (b) cause confusion; and/or (c) expose licensees to the risk of broad interpretation by the Gambling Commission.

We note that the Gambling Commission has retained its use of “must” and “should” in the CI Guidance, having confirmed in its response to its consultation on the CI Guidance, published on 24 August 2023 (the “CI Consultation Response”) that it has “ensured that consistently appl ‘must’ language when quoting or referring to the requirements, and use ‘should’ language when referring to guidance which must be taken into account”. Licensees should take note of this distinction, but at the same time be aware that the requirement imposed by SRCP 3.4.3 to “take into account” the CI Guidance might effectively make such distinction irrelevant.

Consideration 2: Document your decision-making processes

As the Gambling Commission explains in the CI Guidance, SRCP 3.4.3 “sets out the requirements relevant licensees must comply with in relation to remote customer interaction. For compliance and enforcement purposes, will expect licensees to demonstrate how their policies, procedures and practices meet the required outcomes. This can be through implementing relevant parts of the guidance or demonstrating how and why implementing alternative solutions equally meet the outcomes”.

Licensees will likely be aware that the Gambling Commission has taken a very literal approach to the interpretation of its guidance in the past (e.g. its guidance for remote and non-remote casinos on the prevention of money laundering and combating the financing of terrorism). It is therefore likely that the Gambling Commission will take the same literal approach in relation to the CI Guidance. Licensees should ensure that they carefully document their decision-making process in relation to the CI Guidance, in particular in cases where their approach is inconsistent with, or diverges from, the CI Guidance. This documented decision-making process will enable licensees to demonstrate to the Gambling Commission that they have met their regulatory obligations in the event of future oversights and/or regulatory scrutiny.

Consideration 3: Licensees are not expected to screen all customers for every indicator of vulnerability

The Gambling Commission makes it clear in the CI Guidance that its “aim” for SRCP 3.4.3(3), which requires licensees to “consider the factors that might make a customer more vulnerable to experiencing gambling harms”, is to ensure that “where licensees know that customers are in a vulnerable situation, these customers are supported”. Licensees should note that the Gambling Commission also confirms that it does not expect licensees to screen all customers for each of the factors of vulnerability set out in the CI Guidance.. Rather, it expects that licensees “consider and act on information that they have available to them” (our emphasis added).

Consideration 4: Not all information included in the CI Guidance is required to be taken into account

The Gambling Commission clarified in the CI Consultation Response that certain information included in the CI Guidance is not required to be taken into account by licensees. Rather, that information has helpfully been included in an attempt to provide licensees with clarification or additional explanation to assist their understanding. Licensees should ensure that they are aware of this distinction, particularly when they are revising their policies and procedures and/or documenting their decision-making process.

A helpful example of this is the additional information – which is not required to be taken into account – set out below paragraph 5.3 of the CI Guidance. This lists further sub-categories of potential indicators of harm which, whilst not required indicators, may be of particular use to licensees when considering the formal indicators that they are required to incorporate into their approach to customer interaction by SRCP 3.4.3(5).

Consideration 5: No change to affordability requirements (yet!)

At present, the Gambling Commission’s position on customer affordability has not changed. Whilst the Government set out its proposed financial risk check model in the White Paper, upon which the Gambling Commission is consulting, the CI Guidance does not address those issues. Rather, it restates the current position at paragraph 4.6, reminding licensees that: (a) open source data that can assist them in assessing affordability exists; (b) thresholds should be realistic and based on average available income; and (c) they should be aware of the distinction between ‘disposable income’ and ‘discretionary income’.

Consideration 6: Manual reviews of automated decisions are only required if customers contest that decision

SRCP 3.4.3(11) requires that “icensees must ensure that strong indicators of harm, as defined within the licensee’s processes, are acted on in a timely manner by implementing automated processes”. It also requires that, where such automated processes are applied, “the licensee must manually review their operation in each individual customer’s case and allow the customer the opportunity to contest any automated decision which affects them”.

The Gambling Commission clarified its position in relation to this manual review in the CI Consultation Response and does so again in the CI Guidance, stating that its expectation is that “where a decision is made solely by automated means and which has legal effects or similarly significantly affects a customer the licensee contacts the relevant customer to inform them of the decision and their right to contest it”. It is only where the customer exercises their right to contest the decision that a substantive manual review must be undertaken.

Licensees should take steps to review their data protection processes and procedures to ensure that they are consistent with both data protection legislation and the Gambling Commission’s expectations as set out in the CI Guidance.

Consideration 7: Do not overlook evaluation

Licensees are likely to have gone to significant lengths to ensure their adherence to the burdensome requirements set out in the CI Guidance, with particular focus on indicators of vulnerability and harm. In doing so, there is a risk that they may have overlooked the importance of evaluation as required by SRCP 3.4.3 (12)-(14). Licensees should therefore ensure that their approach to customer interaction incorporates the mandatory evaluation processes both at the individual customer level and of the whole system, and that those evaluation processes are documented and audited.

Next steps

Please get in touch with us if you would like to discuss the CI Guidance, or if you would like assistance with drafting and/or updating your policies and procedures in light of the CI Guidance.

19Oct

Gambling Commission publishes response to consultation on changes to the LCCP

19th October 2023 Adam Russell 222

On 17 October 2023, the Gambling Commission published a response to their consultation which proposed changes to the Licence conditions and codes of practice (“LCCP”) in relation to: (1) the scope of the requirement for gambling operators to participate in GAMSTOP; (2) events explicitly listed by the Gambling Commission as “reportable” in the LCCP; and (3) the technical wording of an LCCP provision in relation to payment method services.

Background

The consultation opened on 28 February 2023 lasted 12 weeks, closing on 23 May 2023. As outlined in our blog in March 2023, the Gambling Commission proposed the following changes to the LCCP:

Change social responsibility code provision 3.5.5 – Remote multi operator self-exclusion to extend the requirement to participate in the GAMSTOP multi-operator scheme to all gambling licensees that make and accept bets by telephone and emails.
Add a requirement to licence condition 15.2.2 – Other reportable events that would require all gambling licensees to inform the Gambling Commission when they become aware that a person who has gambled with them has died by suicide.
Amend the text of licence condition 5.1.2 – Payment methods services to ensure that the condition reflects the current legislative provisions, plus a further amendment to ensure that the condition also reflects any further legislative amendments that might come into force in the future.

Consultation response

Having received 77 written responses to the consultation (including 29 from gambling businesses), the Gambling Commission have decided that they will implement each of the three proposed LCCP changes. The Gambling Commission’s rationale for the forthcoming changes, the timeline for implementation and the final wording of the provisions are outlined below.

1. Extend the multi-operator self-exclusion scheme to all gambling businesses that make and accept bets by email

The Gambling Commission’s decision to extend the requirement emanates from their “focus…on assessing the risk of harm (in particular for consumers who are vulnerable) as well as the benefits to consumers of clarity and uniformity of approach to self-exclusion…alongside the additional costs faced by gambling businesses.”

Specifically, they considered that the extension would yield the following benefits:

Consistency with the current approach applied to online gambling services;
Simplicity for consumers, gambling business, the Gambling Commission and GAMSTOP;
Providing the most comprehensive protection for vulnerable consumers.

The amended wording to social responsibility code provision 3.5.5, which is set to come into force on 1 April 2024, will read as follows:

“Applies to: All remote licences except: any remote lottery licence the holder of which does not provide facilities for participation in instant win lotteries, ancillary remote betting when relied upon to provide facilities for betting via a machine (commonly known as self-service betting terminals) on premises where a betting or track premises licence has effect, remote general betting (remote platform), remote betting intermediary (trading room only), gaming machine technical, gambling software, host, ancillary remote bingo, and ancillary remote casino licences.

1. Licensees must participate in the national multi-operator self-exclusion scheme.”

2. Reporting deaths by suicide to the Gambling Commission

The Gambling Commission considers that their decision to require gambling businesses to inform them upon becoming aware that a customer has died by suicide is “both reasonable and proportionate”. The Gambling Commission has clarified that they “are not expecting gambling businesses to determine whether the person’s death was caused by or connected to their gambling activity”, which is the responsibility “for a coroner or the police to determine”. Nonetheless, the Gambling Commission will “require notification as early as possible”.

The Gambling Commission cited further reasons for their decision, including in relation to data integrity, privacy and/or data protection issues and economic impact.

The added requirement to licence condition 15.2.2, which is set to come into force on 1 April 2024, will read as follows:

“Applies to: All operating licences.

2. The licensee must notify the Commission, as soon as reasonably practicable, 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.”

3. Payment services – technical update

The Gambling Commission confirmed that the amendment “simply updates the existing licence condition to reflect the current legislative provisions and also ensures that the condition is suitably future proofed against any further simple legislative changes.”

The updated wording of licence condition 5.1.2, which is set to come into force on 31 January 2024, will read as follows:

“Applies to: All remote casino, bingo and betting operating licences, except ancillary, host and remote betting intermediary (trading room only) licences.

1. Licensees must only accept payment from customers using their gambling facilities in Great Britain by a method which involves the provision of payment services as defined in Schedule 1 Part 1 of the Payment Services Regulations 2017 (SI 2017 No 752) if the provider of those services is a ‘payment service provider’ within the definition of that term in regulation 2 of those Regulations (or the equivalent requirements of any UK Statutory Instrument by which those regulations are amended or superseded).”

The consultation asked an additional question regarding any potential equalities impacts that could arise from the proposals. There were very few responses to this question, and the Gambling Commission noted that the responses did not give rise to “themes or major areas of concern”.

Please get in touch with us if you would like assistance on any licensing matters.

19Oct

White Paper Series: DCMS statutory levy consultation – polluters pay is the fairest way…

19th October 2023 Ting Fung 229

The Department for Culture, Media and Sport’s (“DCMS”) consultation on the statutory levy (the “Consultation”) was published on 17 October 2023.

The White Paper stated that the Consultation would consider:

the proposed total amount to be raised by the statutory levy;
how to construct the statutory levy in a fair and proportionate manner; and
consideration of the differing harm associations between sectors and/or associated fixed costs, for example, whether a “polluters pay” principle should be adopted.

We set out below the DCMS’ response to these and other key points of the Consultation.

Proposed total amount?

The Consultation indicates that the new gambling levy, which is expected to be in full force by 2026/2027, will raise an estimated £90 to £100 million per year for research prevention and treatment by 2027.

Construction of the levy

The levy will be calculated based on a percentage of gross gambling yield (“GGY”) and be applicable to both B2Cs and B2Bs. Where GGY is not applicable, percentages should be applied to gross profits instead.

Licensees with more than £500,000 GGY or gross profits will be expected to pay the levy.

Summary of proposed levy rates

Levy rates (% gross gambling yield) when fully in force (2026/27):
• 1% from all online operators (excluding society lotteries with remote licences)
• 1% from remote software licences
• 1% from remote machine technical licences
• 1% from remote pool betting licences
• 0.4% from land-based casino/betting
• 0.4% from non-remote software licences
• 0.4% from non-remote machine technical licences
• 0.4% from non-remote pool betting licences
• 0.1% from land-based arcades and bingo
• 0.1% from society lotteries (including External Lottery Managers and local authority lotteries licensed by the Gambling Commission)

Government emphasises that it is “committed to a proportionate, evidence-led approach” and states that the proposed rates may change depending on evidence received from the Consultation.

Subject to the Consultation response, payment of the levy will be either with the annual fee or on a fixed date, with Government priority being a streamlined process for levy payment and collection.

Government recognises in the Consultation that online providers of higher-risk gambling products “are associated with greater levels of ‘problem gambling’ and gambling-related harm” and therefore “can also reasonably be expected to contribute more to cover the costs of tackling and preventing gambling-related harms”. Nevertheless, Government acknowledges that a polluter pays principle would currently be difficult to implement by product, as the evidence base is not yet sufficient to confirm the particular share of harm by product. In addition, Government’s view of B2Bs as “a crucial part of the broader supply chain fundamental to the industry as a whole” has resulted in the same levy being applied between B2Cs and B2Bs.

Levy distribution

Oversight by:

A central Government levy board comprising the Department for Health and Social Care and Department for Science, Innovation and Technology;
Additional oversight by HM Treasury;
An expert advisory group comprising public bodies with relevant expertise and the third sector will also be established to help prioritise how funds should be used.

Administered by: the Gambling Commission, as directed by Government.

The proposed percentage allocations across the areas of research, prevention and treatment (“RPT”) respectively are:

10-20% to UK Research and Innovation for a Gambling Research Programme.
15-30% for a co-ordinated approach to prevention, early intervention, and education across Great Britain.
40-60% to the NHS, who will be the main commissioner of treatment in England, Scotland and Wales.

What about regulatory settlements and RET payments?

Subject to the final levy system, the Gambling Commission has indicated that it will review its process for approving the destination of settlements, should there be any, and consider how to avoid, as far as possible, a dual system or duplication of work alongside the levy.

Until the levy is implemented, licensees are expected to continue making RET payments as required by the Licence conditions and codes of practice.

Conclusion

Speaking on fairness, Gambling Minister Stuart Andrew has said that:

“Gambling firms should always pay their fair share and this new statutory levy will ensure that they are legally required to do just that.”

The Consultation lasts for 8 weeks, with a deadline of 14 December 2023. Responses should be provided via the Government’s online survey. If you cannot access the link, responses can be sent in PDF or Microsoft Word format to [email protected].

We encourage all to respond and let us know if you wish to discuss or require any assistance.

22Sep

DCMS Committee inquiry on gambling regulation

22nd September 2023 Harris Hagan 300

In case you missed it earlier in the month, on 5 September 2023, the Rt Hon Stuart Andrew MP (Gambling Minster), Ben Dean (Director, Sport and Gambling at DCMS), Andrew Rhodes (Chief Executive, Gambling Commission), Sarah Gardner (Deputy Chief Executive, Gambling Commission) and Tim Miller (Executive Director for Research and Policy, Gambling Commission) appeared before the DCMS Committee examining the Government’s approach to the regulation of gambling. The Gambling Commission gave evidence in the first session at 10am, and the Gambling Minister and DCMS gave their evidence in the second session at 11.30am.

Watch the recording of the DCMS committee oral evidence sessions:

24Aug

Gambling Commission publishes new remote customer interaction guidance

24th August 2023 Adam Russell 276

On 23 August 2023, the Gambling Commission announced that they have published new remote customer interaction guidance in relation to Social Responsibility Code Provision 3.4.3 (“SRCP 3.4.3”) of the Licence Conditions and Codes of Practice.

Context

In April 2022, the Gambling Commission introduced new “stronger and more prescriptive” remote customer interaction requirements for remote gambling operators under SRCP 3.4.3, which tightened the rules on identifying at-risk customers and taking “proportionate timely action to reduce harm”.

At the time, the new remote customer interaction requirements were due to take effect on 12 September 2022 and in June 2022, the Gambling Commission published associated guidance, designed to support compliance with the new requirements under SRCP 3.4.3.

However, to widespread surprise, in September 2022, the Gambling Commission announced their decision to delay the implementation of:

paragraph 3 of SRCP 3.4.3 (“Licensees must consider the factors that might make a customer more vulnerable to experiencing gambling harms and implement systems and processes to take appropriate and timely action where indicators of vulnerability are identified. Licensees must take account of the Commission’s approach to vulnerability as set out in the Commission’s Guidance”);

paragraph 10 of SRCP 3.4.3 (“Licensees must prevent marketing and the take up of new bonus offers where strong indicators of harm, as defined within the licensee’s processes, have been identified”); and

other references in SRCP 3.4.3 to the guidance,

until at least 12 February 2023.

In the intervening time, the regulator decided that it would “be beneficial to use the time now available” to conduct a consultation on the guidance itself.

The consultation on the remote customer interaction guidance closed in January 2023.

The Gambling Commission also announced that, irrespective of the consultation on the guidance, requirement 10 of SRCP 3.4.3 would come into force on 12 February 2023 in any event.

New customer interaction guidance now published

Seven months after the consultation closed, the Gambling Commission have finally published the new remote customer interaction guidance, together with the associated consultation response.

The new remote customer interaction guidance contains various updates to the guidance originally published in June 2022, which we will explore in an upcoming blog.

Remote operators will be required to take into account the new remote customer interaction guidance from 31 October 2023.

In addition, SRCP 3.4.3 requirements:

to take into account the guidance; and

to “consider the factors that might make a customer more vulnerable to experiencing gambling harms and implement systems and processes to take appropriate and timely action where indicators of vulnerability are identified”,

will come into force on the same date.

Next steps

We are closely reviewing the new guidance and consultation response, and will be sharing our analysis and insights in due course.

Please get in touch with us if you would like to discuss this development, or if you would like assistance on drafting/updating your policies and procedures in light of the new guidance.

24Aug

White Paper Series: Time to think – Gambling Commission consultation on land-based age verification measures

24th August 2023 Chris Biggs 268

On 26 July 2023, the Gambling Commission opened its first consultation (the “Consultation”) following the White Paper. This included proposals to strengthen age verification in land-based premises, which we consider in this blog.

In recent White Paper Series blogs, we discussed other proposals in the Consultation including changes to game design, personal management licences and direct marketing. We strongly encourage the industry to respond to the Consultation.

Background

Test purchasing, the hiring of seemingly underage customers to attempt to buy or participate in age-restricted items or services, is a well-known measurement tool for compliance in the land-based sector. It has been a requirement since 2015 for most non-remote licensees to ensure their policies and procedures designed to prevent underage gambling are effective by undertaking test purchasing. The requirement (as set out under social responsibility code provision (“SRCP”) 3.2) encompasses all casinos, betting premises, adult gaming centres (“AGCs”), licensed family entertainment centres (“FECs”) and bingo premises that fall within fee category C or higher. In other words, smaller operators (in fee category A or B) are currently exempt.

The Government was clear in the White Paper that it was concerned about poor test purchasing pass rates for some gambling premises. Noting the poor test purchasing results for on-course bookmakers and alcohol licensed premises in particular, the Government emphasised:

“We challenge these industries to take further measures to urgently improve age verification measures, including by obtaining commercial verification of increased pass rates. We will continue to monitor industry’s progress on this issue and will legislate to make provisions within the Gambling Commission’s code of practice for alcohol licensed premises binding when Parliamentary time allows.”

The Gambling Commission’s most recent comparative data on the test purchasing performance of licensed gambling venues highlights the following pass rates:

Casino: 98%
Betting: 87%
Bingo: 83%
AGCs: 80%

Whilst these pass rates compare well to pass rates in the liquor industry, the exemption for smaller operators leads to “an incomplete picture of risk from underage gambling in those premises.” To “strengthen age verification testing and assurance in premises”, the Consultation proposes to extend AV requirements to small operators so that it applies to all licensees, which is very much supported by Government.

Consultation proposals

Issue 1: Test purchasing by all licensees

The Gambling Commission acknowledges that the gambling sector is performing well at testing purchasing as a whole, but notes that “he risks to children who play underage do not differ depending on the size of the licensee.”

Due to the exemption for licensees in fee categories A and B, approximately 20% of premises are not covered by test purchasing requirements (although the Gambling Commission notes that some operators in these fee categories will participate in test purchasing through trade body membership). The Gambling Commission states that less than 20% of category A licensees and less than 50% of category B licensees had submitted test purchasing results by the requested deadline for 2022-23.

The Gambling Commission considers the “relatively low” cost of testing (can be well under £50) is a reasonable expense in a sector where licensees’ products are age restricted. Therefore, and with the above data in mind, the Gambling Commission is spurred to rectify the “‘gap’ in this picture of risk” and remove the test purchasing exemption within the LCCP for the non-remote licensees in fee categories A and B.

Issue 2: Replacing Think 21 with Think 25 as good practice for non-remote licensees

In addition to strengthening the test purchasing requirements, the Gambling Commission is considering updating the ordinary code provisions (“OCP”) for all non-remote casino, AGC, bingo and FEC and betting licensees to replace Think 21 with Think 25. This would reflect the Challenge 25 retailing strategy introduced by the Retail of Alcohol Standards Group to encourage anyone who is over the age of 18 but looks under 25 to carry acceptable ID if they wish to purchase alcohol. The Gambling Commission previously consulted on replacing Think 21 with Think 25 in 2015, noting the retention of Think 21 was dependent on the industry “continuing to deliver improvements in their ability prevent access to gambling by children and young persons…”

Primarily, the Gambling Commission’s current concerns stem from data indicating that 18% of AGCs and 16% of bingo premises did not challenge age verification test purchasers at any point (although it should be noted the Gambling Commission does not point directly to a specific dataset or figure in the Consultation). The Consultation also acknowledges calls from both industry and campaign groups to introduce Think 25 as standard for all gambling in premises, noting the position was shared by the Advisory Board for Safer Gambling in its 2018 report and echoed by the Government in the White Paper.

Issue 3: Improving the effectiveness of age verification in premises that are not directly supervised

Lastly, the Gambling Commission is seeking industry views and evidence on how licensees ensure their age verification procedures and controls are effective in premises that may not be directly supervised, such as AGCs in service stations.

Responding to the Consultation

The Consultation is open for 12 weeks, until 18 October 2023. Responses can be submitted through the Gambling Commission’s online survey, or sent by post to the Policy Team at the following address: Gambling Commission, 4th Floor, Victoria Square House, Birmingham, B2 4BP. Additionally, the Gambling Commission remains open to direct engagement with stakeholders during this period through existing meetings, networks and fora.

We strongly encourage all licensees and stakeholders to consider the impact of the Gambling Commission’s proposals at Issues 1 and 2, and to make evidence-based submissions for all three issues.

Please get in touch with us if you would like assistance with preparing a response to the Consultation or the DCMS consultations.

18Aug

White Paper Series: Gambling Commission’s remote game design proposals – simply following suit?

18th August 2023 Jessica Wilson 267

On 26 July 2023, the Gambling Commission’s opened its first consultation (the “Consultation”) following the White Paper. This included proposals to amend the Remote Gambling and Software Technical Standards (“RTS”) “to reduce the speed and intensity of on online products while making them fairer and increasing consumer understanding about game play”. In the White Paper, Government concluded that products other than slots should be considered to create wider design codes and safer product design standards for other online products. In this blog, we summarise the proposals.

The Gambling Commission last made changes to the RTS in October 2021 when it introduced design requirements for online slots products, including limitations on speed of play, auto-play and the illusion of false wins. In June 2023, the Gambling Commission published a report assessing the impact of those changes, noting that they have “reduced play intensity…and not resulted in harmful unintended consequences”. Tim Miller, Director for Policy and Research, noted that whilst the results are positive, “we aren’t complacent and will continue to monitor this specific part of the sector for both any unintended circumstances, or non-compliance.”

The Gambling Commission made it clear in its response to its consultation regarding slots game design that those changes were “just one step in reducing the risk of harm”. Given the positive outcome from the October 2021 design changes for slots, it is not surprising that requirements for other products are likely to follow suit.

Summary of Gambling Commission proposals:

Proposal 1: Player-led “spin stop” features. Removing features which can speed up play to reduce the harm experienced by consumers who are gambling particularly quickly or intensely

Impact: Amendment of RTS requirement 14E – The gambling system must not permit a customer to reduce the time until the result is presented.

Applies to: all gambling (not just slots).

Proposal 2: 5 second minimum game speed

Impact: New RTS requirement 14G – It must be a minimum of 5 seconds from the time a game is started until the next game cycle can be commenced. It must always be necessary to release and then depress the start button or take equivalent action to commence a game cycle.

Applies to: all casino games (excluding peer to peer poker and slots)

Proposal 3: Prohibition on autoplay extended to all online products

Impact: Replacement of current RTS8. New RTS8 – The gambling system must require a customer to commit to each game cycle individually.

Applies to:all gaming.

Proposal 4: Prohibition of features which may give the illusion of “false wins” extended to all casino products

Impact: Amendment to RTS requirement 14F – The gambling system must not celebrate a return which is less than or equal to the total stake gambled.

Applies to: all casino games (not just slots).

Proposal 5: Prohibition on operators offering the ability to play multiple products simultaneously

Impact: amendment to RTS requirement 14C – The gambling system must not offer functionality which facilitates playing multiple games or products at the same time.

Applies to: gaming (including bingo) and betting on virtual events (not just slots).

Proposal 6: Extending requirement to display elapsed time and net spend

Impact 1: amendment to RTS requirement 13C – The elapsed time should be displayed for the duration of the gaming session.

Impact 2: amendment to RTS requirement 2E – All gaming sessions must clearly display a customer’s net position, in the currency of their account or product since the session started.

Applies to: casino (excluding peer to peer poker) (not just slots).

Proposal 7: Technical update to RTS security requirements to reflect the 2022 update to ISO 27001

Impact 1: the addition of 11 new controls in line with the 2022 update.

Impact 2: the addition of ISO27001 2022 standard section 5.23 regarding information security for use of cloud services as an RTS requirement for security audits.

Applies to: remote operating licensees (excluding betting intermediary) and non-remote gaming machine technical and gambling software operating licensees.

As anticipated, the majority of the proposals aim to align the requirements currently in place for slots with other online gambling products. Given the positive impact of the October 2021 changes, and the important harm minimisation effects, it is unsurprising that the Gambling Commission is taking this approach.

However, we note the Gambling Commission is mindful of the fact that certain online gambling products have different features to slots, and therefore certain RTS requirements cannot have a blanket application across all online products. For example, the Gambling Commission has noted that the majority of games it sampled (including online roulette, blackjack, and live versions of games) have a slower minimum game speed than the 2.5 second restriction applied to slots products. Proposal 2 (to introduce a 5 second minimum game speed) is therefore more reasonable and appropriate than simply extending the current restriction for slots to other products.

Further, in respect of Proposal 6 (display of elapsed time and net spend), the Gambling Commission notes that this should not be a requirement for peer to peer poker as, whilst time spent gambling is a risk factor, poker does not require a customer to be staking every hand to participate, unlike other casino games. The Gambling Commission itself notes that it is “mindful of imposing unnecessary regulatory burden” and we welcome this considered and reasonable approach.

Respond to the consultation

The Gambling Commission is accepting responses until 18 October 2023. We strongly encourage gambling businesses to respond to the Consultation.

Please let us know should you require any assistance preparing a response.

11Aug

White Paper Series: Give your two pounds’ worth on DCMS’ consultation for online slots stake limits

11th August 2023 Chris Biggs 256

The consultation season well and truly began on 26 July 2023, with the Department for Culture, Media and Sport (“DCMS”) publishing the first two of its promised consultations from the White Paper. In this latest edition of our White Paper Series, we discuss DCMS’ proposals and reasoning for a maximum stake limit for online slots games in Great Britain (the “Slots Consultation”) and strongly encourage the industry to respond.

1. Background

As discussed in our previous White Paper Series blog on stake limits, DCMS foreshadowed its reasons for the Slots Consultation in the White Paper.

It noted that slots have the highest average losses per active customer of any online gambling product, the highest number of players, the longest play sessions and the greatest potential for financial harm, due to the velocity at which people can stake, with no statutory limit on the amount they can stake. On the other hand, it was acknowledged that online operators are uniquely able to regularly monitor and scrutinise their customers’ spending on slots and intervene where necessary.

In the end, having considered the evidence available to it, DCMS concluded that reform was necessary. Although evidence of a clear causative relationship was limited, there was sufficient evidence of an association between higher stakes on online slots and identified risks of harm. DCMS determined it was time for change: there would be a consultation in summer 2023 on a stake limit for online slots of between £2 and £15. In addition, DCMS would also consult on a preferred £2 limit for those aged 18 to 24.

2. The proposals – General population

The Slots Consultation has now been published and DCMS has proposed four options for the maximum stake limit which should apply for online slots, seeking opinions on which option “strikes an appropriate balance between preventing harm and preserving consumer freedoms”.

We discuss the options and DCMS’ headline reasoning for each stake limit below:

Option 1 – A maximum online slots stake limit of £2 per spin

The industry knew £2 stake limits were going to be the starting point for the Slots Consultation and unsurprisingly, this option would have the greatest impact on consumers and businesses alike. DCMS recognises that 97% of all individual online slot stakes are below £2. However, up to 35% of players stake over £2 on a single spin at least once a year. Of course, £2 is a relatively low bar especially given that stakes over this threshold contribute to an estimated 18% of annual slots gross gambling yield (“GGY”). Option 1 would therefore have a significant impact on online casino operators and the industry’s GGY broadly.

Option 2 – A maximum online slots stake limit of £5 per spin

A £5 maximum stake per spin, as DCMS notes, is equal to the highest limit currently permitted on any land-based gaming machine.

There may be a superficial attraction to aligning online slots with the limits imposed on their land-based counterparts, but it would not come without a significant impact to the online industry which already has a wider system of safer gambling protections in place. Indeed, DCMS acknowledges this in the White Paper:

“The stake limits already applied to electronic gaming machines in the land-based sector could be a sensible starting point. However, taking an equitable approach to product regulation should take account of the wider system of protections in place online. For instance, the opportunity for data-driven monitoring of online play may justify a higher limit for online products than in relatively anonymous land-based settings.”

DCMS estimates stakes over £5 represent only 0.5% of online slots staking events but represent approximately 7.4% of slots GGY.

Option 3 – A maximum online slots stake limit of £10 per spin

Although a £10 maximum stake per spin is higher than any stakes permitted on a land-based gaming machine, DCMS is considering whether these higher limits are appropriate in the online world given that there are additional protections for online players, who are required to create an account to play and can therefore be more adequately monitored by licensed operators for signs of gambling-related harm (as suggested in the above quote).

This is particularly relevant given that DCMS does not anticipate severe disruptions to the majority of slots players if Option 3 is implemented, noting that 37% of all stakes placed above £10 were made by high and medium risk players.

As we hinted in our previous blog, it is possible DCMS will be drawn to setting £5 (Option 2) as the maximum stake limit for online slots, noting this figure appeared in an earlier leaked version of the White Paper. However, given its acknowledgement in the above quote, we believe DCMS is open to considering evidence-based responses which favour a higher limit. This is of course dependent on the industry submitting compelling evidence-based responses to the Slots Consultation.

Option 4 – A maximum online slots stake limit of £15 per spin

As with Option 1, the industry was aware a £15 stake limit would represent the maximum stake per spin in the Slots Consultation. Broadly, DCMS considers this stake limit would impact only a small minority of “habitually or occasionally high-staking players”, where stakes over £15 represent 0.05% of all stakes on online slots and 2% of GGY. We consider it unlikely that Option 4 is the option that will finally be adopted.

3. The proposals – 18 to 24 year olds

As we previously discussed, the White Paper committed to consulting on additional protections for young adults aged between 18 to 24 years on the basis that this age group may be a “particularly vulnerable cohort”.

The Slots Consultation cites the Gambling Commission’s Advice to Government for the Review of the Gambling Act 2005 in identifying a number of potential factors influencing gambling behaviours in young adulthood, including continuing cognitive development, changing support networks and inexperience with money management. DCMS separately noted that problem gambling rates are highest in the 16 to 24 years age group, according to the Public Health England and Gambling-related harms evidence review of 2019.

Accordingly, the Slots Consultation seeks views on the following three options:

Option A – A maximum online slots stake limit of £2 per spin for 18 to 24 year olds
Option B – A maximum online slots stake limit of £4 per spin for 18 to 24 year olds
Option C – Applying the same maximum stake limit to all adults, but building wider requirements for operators to consider age as a risk factor for gambling-related harm.

In setting out its evidence, DCMS acknowledges that typical online slots stakes for those aged 18 to 24 are lower than for other adult age groups. Data captured between July 2018 to June 2019 indicates the mean stake in this cohort was £1.05 compared to £1.30 across all adults aged 25 and over, and DCMS cites data indicating the age group’s average stake is 20% lower than the average for all adults (according to Patterns of Play).

In respect of the specific limits proposed in Options A and B, DCMS does not cite data that specifically indicates either maximum stake limit would be best suited to this age group. The reasoning simply appears to be that as a potentially vulnerable cohort, there should be extra protections in place, i.e. lower maximum stake limits than those for the general population.

Option C would of course be the least intrusive option for operators and their customers, and any action required of operators would likely align with the Gambling Commission’s consultation on, and likely increase to, the requirements for operators to check customers’ individual financial circumstances in respect of indicators that their losses are harmful. Watch out for more on this in a forthcoming White Paper Series blog.

4. DCMS data and considerations

The status quo

In the Slots Consultation, DCMS cites Gambling Commission data in summarising the best available statistics about current slots play, set out below:

Furthermore, DCMS sets out staking behaviour for the 2022/23 financial year (representing more than 76 billion spins) which it uses to underpin its consideration of the likely impact of each maximum stake limit:

(The estimated % of slots GGY in Figure 2 assumes that all slots games have a 95% return to player and the distribution of spend within each bucket is modelled as non-linear.)

Aside from the sheer scale of online slots activity in the last financial year, the data presented in the Slots Consultation (including that shown in the above two figures) breathes life into DCMS’ proposals which, if we return to first principles, have been drafted in order to address the fact that there is evidence of a relationship between higher staking on slots and gambling-related harm.

By removing the ability for an arguably very small proportion of slots players to stake high(er) amounts on slots, will this aim be achieved? From the above data, we can see that most online slots spins from the last financial year would not be impacted by any of the proposed stake limits. However, the changes would result in a significant reduction in the industry’s GGY (we discuss this in further detail below).

Potential impact

So, has an appropriate balance been struck? Whilst we do not think there is a straightforward answer to this question (hence DCMS releasing the Slots Consultation), the potential impact of each of the options considered are set out in DCMS’ Online Slots Stake Limit Impact Assessment (the “Impact Assessment”), published alongside the Slots Consultation.

Interestingly, the Impact Assessment models the estimated reduction in annual GGY in the industry for each option considered in Slots Consultation, as follows:

To summarise this data, the Impact Assessment suggests that there will be an estimated reduction in the current annual online slots GGY of between 0.5% to 13.8%, ranging in real terms, from a £16.1m to £413.5m reduction in revenue annually.

Aside from the costs to business, the Impact Assessment also sets out the potential benefits of the maximum stake limits and shares the associated assumptions that DCMS made in coming to these conclusions. It is particularly worth noting that DCMS acknowledges it is difficult to accurately estimate gambling harm reduction from stake limits, stating:

“Gambling harm is complex and often the result of numerous factors both within and external to the actual gambling environment. It would be difficult to isolate the causal mechanism between staking at various levels (that will no longer be available) and the reduction in gambling harm.”

However, it goes on to note that there are clear, qualitative benefits to the stake limits for both the customer and the public sector. To pick a crucial example, the Impact Assessment identifies that each stake limit will have an impact on a customer’s risk of incurring runaway losses, and suffering gambling harm as a result of these losses.

Additionally, public sector benefits would include potential reductions in costs incurred by the public sector in respect of harmful gambling costs which include:
a) Primary care mental health services, secondary mental health services, and hospital inpatient services;
b) Job seekers allowance claimant costs and lost labour tax receipts;
c) Statutory homelessness applications; and
d) Incarceration costs.

We encourage all licensees and stakeholders to review the Impact Assessment, in addition to the Slots Consultation, for a closer look at the estimated costs and benefits of the proposed stake limits and to better inform views on where the balance between protection from harm and consumer freedom lies.

5. Responding to the Slots Consultation

The Slots Consultation will be open for responses for eight weeks only, until 11:55pm on 20 September 2023. Responses can be submitted through DCMS’ online survey, or as a Word or PDF document to [email protected]. DCMS is encouraging evidence from all parties who have an interest in the way gambling is regulated in Great Britain, including any international evidence.

Following the consultation period, DCMS will publish a formal response setting out its decisions in relation to the maximum stake limit proposals and its reasoning, as well as a final impact assessment, before implementing the changes. Changes will likely be made by way of the introduction of secondary legislation, e.g. the creation of a new licence condition for Gambling Commission licensees.

In the short time before the Slots Consultation closes, we strongly encourage all licensees and other stakeholders to consider the impact the proposals would have on their businesses and respond with evidence-based submissions. Now is the opportunity to influence positive change for consumer protection whilst tempering a potentially damaging blow to the commercial viability of the online slots industry in Great Britain.

Please get in touch with us if you would like assistance with preparing a response to this or any other DCMS and Gambling Commission consultations.
With thanks to Gemma Boore for her invaluable co-authorship.