09Nov

Unlicensed gambling – Part 1: Growing threat or exaggerated myth?

9th November 2023 Gemma Boore 195

Earlier this month, Andrew Rhodes, the Chief Executive Officer and Commissioner of the Gambling Commission, took part in a two-part podcast discussion with The Gambling Files to reflect on and discuss topical issues affecting the gambling industry. Amongst the subject matter covered, Rhodes touched in Part 2: HE REVEALS MORE! on black market activity and the steps the Gambling Commission is taking to disrupt illegal gambling in Great Britain – which Rhodes claims to have resulted in significant drops in traffic to illegal operators.

This reflected themes in Rhodes’ keynote speech at the International Association of Gambling Regulators (“IAGR”) conference in Botswana on 16 October 2023, in which he noted whilst illegal online gambling market exists in Great Britain, as it does elsewhere:

“it is not a significant concern and this position hasn’t fundamentally changed. However, that does not mean there is no illegal market or no risk”.

In other news, Lucy Frazer, the Secretary of State for Culture, Media and Sport recently digested the contents of a letter from eight UK horseracing industry leaders. In the letter, the signatories reportedly warned that affordability checks, which the Government recommended be introduced in the Gambling White Paper, will cost racing £250 million in funding over the next five years and that this would be a disaster for British horseracing as punters either walk away from the sport or turn to the black market to gamble.

Potentially to back up this claim, the Racing Post then published the results of its “The Right to Bet” survey, which found that (1) one in four of the respondents would be prepared to switch to the black market if faced with stringent affordability checks; and (2) nearly one in ten have already used black market betting sites.

A petition was then posted on the UK Government and Parliament website, calling for the Government to abandon the planned implementation of affordability checks because “more intrusive checks triggered at a higher threshold risks bettors moving to the black market where there are no consumer protection or safer gambling tools”. This petition has – as at the time of writing – accumulated 76,204 signatures, three quarters of the number needed to trigger a debate in Parliament.

So, is the black market really a growing threat, or an exaggerated distraction? What are the Gambling Commission and the Government doing to curb illegal gambling? And what can businesses do if their proprietary content (intellectual property (“IP”)) turns up on unlicensed sites?

Read on for our discussion along with a helpful checklist for licensees that receive communications from the Gambling Commission regarding black market activity.

What is black market gambling?

The term ‘black market’ gained popularity during World War II (when common household products were rationed to avoid hoarding) and generally refers to an illegitimate market in which commodities are being traded, exchanged or performed in an illegal manner.

With regard to modern gambling in Britain, section 33 of the Gambling Act 2005 (as amended) (the “2005 Act”) makes it clear that it is an offence to provide facilities for gambling to customers in Great Britain from anywhere in the world, without holding a licence from the Gambling Commission unless a relevant exemption applies. Accordingly, it is common within the industry to refer to unlicensed online operators that illegally provide facilities for gambling to customers in Great Britain, without the appropriate licence or falling under a relevant exemption, as the “black market”.

Why is unlicensed gambling bad?

As Rhodes notes in his keynote speech at the IAGR conference, every gambling jurisdiction in the world has illegal online gambling:

“Whether online gambling is prohibited or not, if you can access the internet, then you will be able to find a way to gamble. We all know this. It’s also worth pointing out at this point that what is an illegal, unlicenced operator for me in Great Britain may be a legitimate, licensed business for you and vice versa.”

From a consumer perspective, one of the fundamental problems is that black market websites are not always distinguishable from those that are locally licensed – at least to the untrained eye. This means a consumer may be gambling on an illegal gambling site without even knowing it and, in this “Wild West” of the remote sector, unlicensed operators are not constrained by regulation. It is common to see consumer reports of problems, such as the inability to withdraw funds and difficulties contacting support in the event of a complaint. Indeed, Rhodes acknowledged in The Gambling Files podcast, that recent research has shown that illegal websites actively seek to advertise to people that have self-excluded from gambling on GAMSTOP and others allow unlawful activity in itself by, for example, allowing children to gamble.

So, what is the Gambling Commission doing?

One of the Gambling Commission’s key functions is to investigate and prosecute illegal gambling and other offences committed under the 2005 Act. As Rhodes noted in his IAGR keynote speech, the Gambling Commission typically deploys an “intelligence-led approach” to combat black market operators.

This means that ordinarily, they will initially issue a cease-and-desist letter to require the unlicensed operator to suspend their operations. Failing this, the Gambling Commission will implement “disruption techniques, using its partnerships or relationships with other companies”, which can include:

asking web hosting companies to suspend or ‘block’ British consumers from accessing the websites;
contacting payment providers to remove payment services;
liaising with internet search and service providers to prevent websites appearing on search engines;
working with social media firms to take down posts which promote illegal gambling; and
engaging with international regulators, including by sharing information and raising the prominence of the issue – and Rhodes used the keynote as an opportunity to call for collaboration in this regard.

In addition, Rhodes described in his speech more novel steps that the Gambling Commission is taking to disrupt unlicensed, illegal online operators through collaboration with others:

“…this means we’ve been going further upstream, further away from where our formal powers begin and have been looking to work with others to get between those illegal operators and British consumers and generally frustrate their business and force them out of our market.”

And this has included:

working with software licensees to prevent access to popular products when their games appear to be available on illegal sites; and

engaging with licensees if we discover their affiliates have placed adverts on illegal sites – ensuring licensees remove advertising and encouraging an assessment of business relationships with these affiliates.

By taking these steps, Rhodes claimed that the Gambling Commission has “increased… enforcement actions by over 500 percent between 2021-22 and 2022-23” and “more than doubled the number of successful positive disruption outcomes” leading to a “a 46 percent reduction in traffic to the largest illegal sites coming into market”.

Notwithstanding the bountiful fruit of its recent efforts, the Gambling Commission has always acknowledged that stronger measures are required. In its Advice to Government relating to its review of the 2005 Act, the Gambling Commission explains that:

“Under our current framework, we cannot compel third party providers to take action such as to block British access to the website, remove payment services or prevent websites from appearing in search engines. Moving to criminal prosecution has had limited effect, largely because websites can immediately disappear and reappear with a different identity (a phenomenon known as ‘phoenixing’), and their ultimate owners and lines of responsibility are very difficult to fully trace. This also makes it very difficult to accurately scope the size of the black market”.

How does this play into the White Paper?

Before it was even published, the black market was the backbone of many highly politicised debates concerning the White Paper and the proposals to be made therein. Affordability (and more specifically, mandatory deposit and/or loss limits) in particular, led to outcry from the sector and various interested parties commissioned research to try to truly gauge the extent of illegal, unlicensed gambling in Great Britain.

In particular, a 2021 PwC report entitled “Review of unlicensed online gambling in the UK” commissioned by the Betting and Gaming Council, claimed that the proportion of UK online gamblers using unlicensed operators in November 2020 had increased to 4.5 per cent – or around 460,000 people – from 2.2 per cent over the previous one to two years. In addition, the study found that stakes with unlicensed operators had doubled to £2.8 billion.

Neil McArthur, the then Chief Executive of the Gambling Commission, poured cold water on the PwC report in a letter to cross-party MPs investigating the harmful effects of gambling, reportedly stating it was “not consistent with the intelligence picture” and that the impact of the black market “may be being exaggerated“.

When the White Paper was finally published in April 2023 – some 30 months after the call for evidence – it was broadly accepted to be balanced and evidence-led. Chapter 3, which considered the potential for reform in the Gambling Commission’s powers and resources, outlined the Government’s views on black market gambling and whether it presented a tangible risk. Specifically, the Government acknowledged that although estimating the size of the black market is difficult, it was clear that “excessive commercial caution risks driving customers to the black market where they can be exposed to a variety of risks”. The Government further noted that there has been a rise of illegal operators in other jurisdictions with:

“either extremely permissive regulatory regimes or no regulatory oversight, and/or are being run by individuals with suspected links to serious and organised crime.”

It then went on to acknowledge the Gambling Commission’s disruptive approach was working well to an extent (a statement with which we agree), but recommended that the Gambling Commission’s powers to action be strengthened to create a safety net, giving the Gambling Commission the versatility to “apply to court as a last resort” if required:

“When Parliamentary time allows, we will introduce legislation that will give the Gambling Commission the power to apply to the court for an order that requires ISPs , payment providers and other providers of “ancillary services” to implement measures aimed at disrupting the business of an illegal gambling operator”.

While a laudable aim, changes to legislation take time and given other legislative pressures and the impending General Election, it is not clear when these changes will take effect – there certainly was no mention of such a bill in The King’s Speech on 7 November 2023. This contrasts with affordability checks (which the White Paper recommends become mandatory for operators to carry out when consumers reach specific loss thresholds), which have already been subject to a public consultation by the Gambling Commission and may take effect much sooner.

Lessons for licensed operators

For the meantime, Rhodes emphasised in his keynote that the Gambling Commission will continue to use its existing powers (and authority) to tackle illegally, unlicensed gambling. As noted earlier, this may include the Gambling Commission contacting its own licensees to try to persuade them to take steps to disrupt illegal gambling.

If you hold a British licence and are contacted by the Gambling Commission about a black market website, we recommend that you take professional advice. You may also want to consider taking one or more of the following steps:

verify that your content is being used / your adverts are being placed on an illegal website. Involve your tech teams as they should be able to confirm whether the content is legitimate or an infringing copy of your IP;

check that games / links are accessible in Great Britain and if they are, whether you receive any British traffic from the site in question;

identify the operator of the website and/or the affiliate that is placing advertisements on the illegal site;

consider whether you have a contractual relationship with the operator / affiliate or any member of its group. If you do not have a direct contract with the operator/ affiliate or one of its group companies, consider whether there may be an indirect relationship (for example, via a content distributor or affiliate program);

if a contractual relationship exists, investigate how this arose and review all due diligence you conducted on the third party/ies during the contractual relationship;

send a cease-and-desist letter (takedown notice) to all entities that you can identify as being involved; cite restrictions in your contract (if relevant);

if the third party does not cease the activity or justify their actions:

terminate any contracts with them promptly. Note that inclusion of such a termination right is a requirement under Social Responsibility Code Provision 1.1.2 of the Licence Conditions and Codes of Practice;

consider contacting third parties such as hosting providers, domain registrars and third-party search engine such as Google who may otherwise be able to stop the website being accessible by customers in Great Britain;

engage professionals to review:

your systems and processes for identifying use of your content / placement of your ads on illegal websites; and

your standard contracts,

to mitigate the risk that your IP rights are exploited illegally in the future; and

update the Gambling Commission within the deadline they have set on the outcome of your investigation and the steps you have taken to:

address the present infringement of your IP rights; and

mitigate the risk of a similar situation occurring again.

Please get in touch with us if you would like assistance responding to a Gambling Commission request, or if would like to discuss the themes in this blog more generally.

07Nov

Personal management licensee: What do you need to know?

7th November 2023 Chris Biggs 185

Individuals who hold a personal management licence (“PML”) issued by the Gambling Commission undoubtedly play the most important role in ensuring business decisions are underpinned by the licensing objectives, building a strong foundation of compliance and raising standards. Ultimately, they are personally accountable and responsible for compliance failings. As personal licensees, PMLs can face enforcement action by the Gambling Commission. We expect to see more enforcement action taken against PMLs on the basis that people make decisions, not businesses.

The White Paper included a proposal to extend the requirement to hold a PML, set out in licence condition 1.2.1 of the Licence conditions and codes of practice (“LCCP”), with the goal to drive “personal accountability and responsibility”, allowing the Gambling Commission to “take necessary action against individual (personal) licensees when failures are found”. In our previous blog, we discussed who (currently) needs to hold a PML, how PMLs drive corporate culture, the Gambling Commission’s proposed changes to PML requirements following the White Paper and the reasons for those potential changes.

With the spotlight on PMLs, in this blog we provide an overview of PML requirements and our top pointers for staying compliant.

PML requirements

One of the key challenges for PMLs is that, unlike many other regulated professions, there are no standards of: (a) conduct, performance and ethics; or (b) competence, which set out the minimum requirements. Instead, the PML regime is based on broad principles as detailed below. It is worth noting that if the Gambling Commission commences a licence review against a PML, it will be based on the PML’s failure to comply with the following licence conditions and/or expectations:

Licence conditions

There are three licence conditions attached to PMLs, set out in Part 3 of the LCCP, summarised as follows:

Licence condition 1: PMLs “must take all reasonable steps” when carrying out their responsibilities in relation to licensed activities to ensure they do not place their employer’s operating or premises licence in breach of their licence conditions. This is evidently broadly drafted and widely interpreted by the Gambling Commission.
Licence condition 2: PMLs must keep themselves informed of “developments in gambling legislation, codes of practice and any Commission guidance … relevant to their role”.
Licence condition 3: PMLs must report key events (see below) within 10 working days of becoming aware of the event’s occurrence.

“Expectations”

Additionally, section 4.3 of the Gambling Commission’s Statement of principles for licensing and regulation sets out the expectations of individuals occupying senior positions, whether or not they hold PMLs, to (amongst other things):

uphold the licensing objectives and ensure compliance of operations with the LCCP;
organise and control their affairs responsibly and effectively;
have adequate systems and controls to keep gambling fair and safe;
conduct their business with integrity;
act with due care, skill and diligence;
manage conflicts of interest fairly;
work with the Gambling Commission in an open and cooperative way;
disclose to the Gambling Commission anything which it would reasonably expect to know; and
comply with both the letter and spirit of their licence, the licence of their operator and associated Gambling Commission regulations.

PML key events

As set out in licence condition 3, PMLs are required to notify the Gambling Commission of the occurrence of certain key events, “within 10 working days after the licensee becomes aware of the event’s occurrence”. These are:

a change in name (for example, following marriage);
a change in address;
any current or pending investigation by a professional, statutory, regulatory or government body in Great Britain or abroad, and the imposition of any sanction or penalty against them following such an investigation (this would include another gambling regulator);
being subject to (a) any criminal investigation, or (b) conviction of any offence, listed under Schedule 7 – Relevant Offences of the Gambling Act 2005;
the imposition of a disciplinary sanction against them, including dismissal, for gross misconduct;
resignation from a position for which a PML is required following commencement of disciplinary proceedings in respect of gross misconduct;
disqualification from acting as a company director; and
the presentation of a petition for their bankruptcy or sequestration or their entering into an individual voluntary agreement.

Further guidance to PMLs about personal key events can be found here.

Online service and contact details

PMLs must ensure their registered contact details are accurate. In addition to this being a licence condition, it will ensure critical correspondence is not missed, including relating to any revocation (generally, for failure to undergo PML maintenance) or licence review.

When granted, we strongly encourage PMLs to register for the Gambling Commission’s Manage your personal licence online service for PMLs. This service allows PMLs to update contact details, submit key events and submit maintenance checks (see below).

PMLs:

must – personally – keep their registered email address up to date; and
should ensure the Gambling Commission’s email domain is trusted, to avoid emails going to junk or spam folders.

PML maintenance

PMLs are indefinite in duration, meaning that the licence does not renew or lapse.

PMLs are subject to a mandatory maintenance check every five years. This is an automatic process (not an application, as the Gambling Commission incorrectly describes it), the purpose of which is solely the provision of updated information about the PML, such as current address and position, and payment of the fee. It is for the Gambling Commission simply to check and record the information. As we have written previously, the Gambling Commission is not legally empowered to delay or put on hold PML maintenance on the misconceived ground that enforcement action is ongoing or imminent.

The Gambling Commission will contact PMLs by email to advise of the upcoming PML maintenance. We recommend that PMLs and any supporting compliance/licensing teams separately diarise the five-year anniversary. A failure to submit the PML maintenance check will result in the PML being revoked.

To complete the check, PMLs need to sign into the online service. PMLs cannot submit the maintenance check before the PML anniversary date, and have only 30 days from the anniversary date to submit the check. Upon submission, a fee of £370 needs to be paid.

At the time of writing, if a check is not submitted within 30 days, the Gambling Commission will send a notice of revocation by email, providing a further 28 days from this notice to complete the maintenance check, otherwise the PML will be revoked.

Tips for PMLs

Keep contact details up to date;
Ensure the “gamblingcommission.gov.uk” email domain is whitelisted;
Register for the online service;
Understand the meaning of a key event, including changes of name or address and criminal investigations (without charges);
Understand the PML licence conditions and expectations;
Document structured and unstructured training; and
Diarise the five-year maintenance check.

Tips for employers

Remind PMLs to provide personal contact details (i.e. not a work email address) to the Gambling Commission upon or shortly before departure from the business;
Provide or arrange for annual refresher training to be provided for PMLs on PML licence conditions and expectations (we can help with this!);
Keep a record of internal and external training provided to PMLs;
Diarise each PML’s five-year maintenance check for both the business and the PML;
If a PML leaves or changes roles within the business and they held a specified management office, the business needs to notify the Gambling Commission as soon as reasonably practicable, and in any event within five working days of the PML’s departure under the operating licence condition 15.2.1(4); and
Remind the PML to notify the Gambling Commission of their departure if they leave the business and update their contact details, if required.

Please get in touch if you have any questions or would like to discuss your training needs.

31Oct

Revised remote customer interaction guidance comes into effect

31st October 2023 David Whyte 194

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.

27Oct

Regulatory returns update: Gambling Commission conducting user research sessions

27th October 2023 Chris Biggs 167

In its fortnightly E-bulletin released earlier this week, the Gambling Commission called for licensees to sign up to its User research programme for the purpose of participating in upcoming regulatory returns user research sessions.

As we previously discussed, the Gambling Commission has recently signalled its intention to “sharpen” the dataset currently received from licensees in regulatory returns, increase the frequency of the reporting requirements and aligning licensees’ reporting dates (see its Making better use of operator data blog), which are proposals we very much welcome. The Gambling Commission also indicated that there would be a consultation on the frequency of regulatory returns in November.

User research programme

The user research programme, which is an initiative we welcome, has been introduced to help the Gambling Commission “test new services, websites and features with people who use them” and sessions can take place face-to-face, over the phone or remotely.

Getting involved may include:

responding to questionnaires: 5-10 minutes;
telephone or video call session: 60 minutes;
face-to-face session: 60 minutes; or
workshop: half a day.

You can register as a participant of the Gambling Commission’s user research programme here.

Registration takes approximately two minutes, whereby you will be required to provide your full name and answer general questions pertaining to your involvement in the gambling industry and use of the Gambling Commission’s services. This information will be used to select suitable participants for the regulatory returns sessions, as well as other research sessions.

Regulatory returns user research sessions

The regulatory returns user research sessions will, as the Gambling Commission states, help it “improve the data, while reducing the burden for operators”. The Gambling Commission has asked that a diverse range of licensees from all sectors sign up to the programme, as it will be hosting a series of workshops on the topic with the aim of producing “a more focused dataset”.

The Gambling Commission has not given further details about the regulatory returns user research sessions, nor an indication of when these sessions will be held. We expect that these sessions will take place very soon to inform the Gambling Commission’s consultation on regulatory returns, which we expect in November 2023.

Why participate?

As we discussed previously, in looking to update the regulatory returns system, the Gambling Commission has the opportunity to refocus its dataset and provide clarity and further guidance on the system. Doing so will ensure the evidence it collects from licensees is accurate and therefore useful. It is equally important to ensure the system is fit for purpose and there is consistency in the responses provided.

We encourage licensees and other relevant industry stakeholders to sign up and participate in the regulatory returns user research sessions, and to provide feedback to the Gambling Commission.

Please get in contact with us if you have any questions about the regulatory returns process.

01Sep

Gambling Commission sets its sights on late regulatory returns and incorrect fee categories

1st September 2023 Gemma Boore 176

In its latest E-Bulletin, the Gambling Commission has reminded operators that it is a licence condition (15.3.1 of the Licence Conditions and Codes of Practice) to submit regulatory returns on time.

The update goes on to note that the Gambling Commission is aware that some regulatory returns have been overdue since 1 April 2023, and advises operators to bring these up to date “immediately”.

“Operators who fail to submit returns on time will be escalated to our Enforcement team to consider regulatory action and may result in a financial penalty under section 121 of the Gambling Act 2005.”

This is an important reminder from the Gambling Commission, which should not be taken lightly, and it is clear a tougher approach is now being taken.

Background

Gambling licence holders in Great Britain are required to submit a regulatory return for each type of activity for which they hold a licence.

Depending on licence type, regulatory returns must be submitted on a quarterly or annual basis. Quarterly returns must be submitted within 28 days of the end of each quarterly reporting period. Annual returns must be submitted within 42 days of the end of each annual reporting period.

All returns must be submitted via the online regulatory returns system within the Gambling Commission’s eServices Hub.

The Gambling Commission uses the information to publish bi-annual industry statistics and to inform its understanding of its licensees and the wider gambling industry. The information also helps the Gambling Commission ensure licensees are within the correct fee category for their licensed activities.

An imperfect system

The Gambling Commission publishes information on when and how to submit regulatory returns in its Regulatory Returns Guidance, which is split by licence type.

However, the guidance is simple, and a repetition of what is asked within the regulatory return forms. There is no additional detail as to the type of information that should be captured in the form, and where. The lack of clarity, in our experience, has sometimes resulted in incorrect data being provided with the regulatory returns, or being provided under the wrong licensable activity.

In our experience, licensees often require assistance with the following:

Non-GB revenues – they should only be reported if taking place in reliance on the Gambling Commission operating licence;

B2B online casino revenues that are not revenue shares – the form only allows for GGY (revenue share) to be reported, and not fixed fee revenues, although the Gambling Commission is now aware of this issue from us.

It is important that information provided in regulatory returns is accurate. If a licensee misrepresents or fails to reveal information that it is asked to provide, unless it has a reasonable excuse it will commit an offence under section 342 of the Gambling Act 2005.

Beware exceeding your fee category

Regulatory returns go hand in hand with ensuring a licensee is in the correct fee category and, recently, we have noticed an increase in the Gambling Commission using regulatory returns to identify and contact licensees that it believes have exceeded the upper threshold of their fee categories.

Fee categories are a licence condition, included on the face of an operating licence. Therefore, an application to vary the fee category must be submitted before the upper threshold has been exceeded and it is a licensee’s responsibility to proactively monitor its fee category to ensure the upper threshold is not exceeded.

We urge licensees to routinely consider whether they are approaching the maximum limit of their fee category and whether a change of fee category is warranted. Licensees should be aware that the fee category licence condition follows the licence year, and will not necessarily align with the regulatory returns reporting period.

The process for submitting an application to vary is relatively simple. The applications can be completed through the eServices portal and carry a fee of £40. It is important to note that:

fee category increases by one level do not require any supporting documentation;
fee category increases by two levels or more must be supported by:
- new or updated financial projections;
- new or updated business plan;
- evidence of how the expansion of the business is funded;
decreases in fee categories must be supported by a full explanation.

Gambling Commission working group

In order to address some of the issues with the regulatory returns system, the Gambling Commission has established a working group and is seeking feedback from licensees on the questions currently posed in regulatory returns.

The last time the regulatory returns process was reviewed was in 2020 when, following a Consultation on changes to information requirements in the LCCP, regulatory returns, official statistics, and related matters, the Gambling Commission simplified the regulatory returns processes. In its consultation response, the Gambling Commission also committed: (1) to publish guidance for regulatory returns (which went live on 4 May 2021); and (2) to improve the usability, accessibility and availability of the regulatory returns system.

Three years on, the system is under review again – but it appears there will be no consultation and, consequently, fewer licensees will be aware there is an opportunity to help shape forthcoming improvements.

Next steps

We strongly recommend licensees use the online contact form to tell the Gambling Commission about their concerns with the regulatory returns process, forms and guidance as soon as possible, so they can be improved.

We hope that the working group will use this, as well as our recent feedback on the Gambling Commission’s guidance, to improve the current system.

In the meantime, licensees should also:

submit any outstanding regulatory returns as soon as possible;

endeavour to submit complete and accurate regulatory returns within the timeframes set by the Gambling Commission. The Gambling Commission is taking a much tougher approach and late and/or inaccurate regulatory returns will be referred to the Enforcement Team; and

routinely review whether they are in the correct fee category and, if necessary, submit an application to vary before exceeding the upper threshold of a fee category.

Please get in touch if you have any questions regarding the regulatory returns process and/or if you would like our assistance preparing a regulatory return or changing your fee category.

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

11Aug

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

11th August 2023 Chris Biggs 188

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.

11Aug

White Paper Series: Transforming corporate culture by “driving personal accountability and responsibility” for lookers-on seeing most of the game?

11th August 2023 Bahar Alaeddini 205

The White Paper included a fleeting mention of extending the requirement to hold a personal management licence (“PML”). In the recent first wave of consultations, the Gambling Commission recently announced plans to change licence condition 1.2.1 to “clarify and extend the roles” that trigger a requirement to hold a PML. The goal is “ personal accountability and responsibility”, allowing the Gambling Commission to “take necessary action against individual (personal) licensees when failures are found.” The key proposed changes are to extend the requirement to hold a PML to a licensee’s Board Chair and, on a case-by-case basis, to CEOs and directors of “parent companies or subsidiaries in the group”. In this blog, we consider the current requirements, the proposals and what they mean. Before we do so, we pause to consider the correlation with corporate culture.

Corporate culture

These proposals come at a time when regulatory uncertainties in the British market remain a daily challenge for gambling businesses, their Boards, their PMLs and their other key decision-makers. Every decision must be underpinned by the licensing objectives if it is to minimise harm and help ensure the success and sustainability of the industry we cherish. There is no one-size-fits-all approach, but business leaders undoubtedly play the most important role in building a strong foundation and effective corporate culture that protects the most important asset – a gambling licence. It is corporate culture that tends to be the key driver of conduct and deficient culture which results in poor standards of behaviour.

Corporate culture is not mentioned in the White Paper or consultation, but we think both DCMS and the Gambling Commission would agree that it is inextricably linked with personal responsibility and accountability.

What is culture?

Culture is a set of behaviours and mindsets that characterise a business. As we know from our client experience, whilst there are commonalities, the culture of every gambling business is individual.

Why is it important?

Business leaders are generally expected to manage the drivers of behaviour to create and maintain culture. Designing a good culture is obviously easier than implementing and embedding the culture, particularly in large multinationals with hundreds or thousands of employees. In sophisticated regulated industries, the regulator is also considered to play an important role given its central position, unique viewpoint and often a desire to drive change. However, trust in the Gambling Commission is low and seemingly not many gambling stakeholders place much trust in the Gambling Commission’s own culture. The Gambling Commission was however named last year as one of the UK’s Best Workplaces, so maybe we can expect to see improvement soon.

Financial services

The Financial Conduct Authority has been very alive to the topic of transformational culture, since at least 2015, seemingly working collaboratively with financial services, having identified culture as the key cause of harm in firms:

“We are working to promote healthy cultures across the industry. Firms’ cultures have been a major root cause of conduct failures, and our work supporting firms in delivering real and sustainable culture transformations will help prevent harm caused by inappropriate behaviours.”

The Financial Conduct Authority has a Culture and governance webpage dedicated to this topic, including publication of a discussion paper and hosting a conference dedicated to transforming culture, in 2018:

“The success of our work depends not only on the involvement of firms and their leaders but everyone with an interest in transforming financial services culture for the better. Our work so far includes how we are transforming culture by improving the accountability of individuals in financial services, including leaders, by extending the Senior Managers and Certification Regime (SM&CR) to all authorised firms.”

SM&CR was initially introduced, in 2016, following the global financial crisis in 2007-2008 and Libor scandal in 2012 following concerns that the regulatory system did not have sufficient focus on individual accountability. The regime’s core aim is to instil “a culture of compliance and good behaviour within firms, rather than being a reactive regime that relies on regulatory enforcement action.” Although certain aspects of SM&CR are currently subject to Government consultation, with the response awaited, there is widespread support for the regime amongst industry and regulator. Over 90% of respondents to UK Finance agreed that the regime had brought about meaningful change for the better and many firms expressed the view it was “having an impact on the mindset of senior managers, with a stronger tone and ownership from the top.” It is therefore difficult to see any major drawback from the Gambling Commission’s proposals, other than self-preservation for the person holding a PML. As a PML is personal to the individual he/she could have their PML reviewed, potentially affecting their future employability in the gambling or another regulated industry.

Who needs a PML currently?

Under licence condition 1.2.1, any person responsible for a “specified management office” must hold a PML. The purpose of this requirement is to ensure individuals with certain responsibility are suitable, which is checked every 5 years (not, “renewed” as the Gambling Commission incorrectly states because PMLs are indefinite in duration!).

“Management office” is defined in section 80(5) of the Gambling Act 2005 as:

the “office of director” (where the licensee is a company); and
any position where the appointment terms require the person “to take or share responsibility for”:
“the conduct of a person who performs an operational function in connection with a licensed activity”; or
“facilitating or ensuring compliance with terms or conditions of the operating licence”.

What are the proposed changes?

The Gambling Commission proposes to:

make clear that the person responsible for “overall management and direction of the licensee’s business or affairs” (which triggers a PML requirement) “is likely to be the CEO, MD or equivalent”;
require the person “chairing the Board (where the licensee has such a body)” to hold a PML (note: this does not mean you need to appoint a Chair and it specifically refers to the licensee rather than a parent company);
make it clearer that those responsible for AML and CTF, including the Money Laundering Reporting Officer and Nominated Officer, need to hold a PML; and
assess, on a case-by-case basis, whether CEOs and directors of “parent companies or subsidiaries in the group” need to hold PMLs too.

Why is it changing?

The consultation is very clear on this; the Gambling Commission is “concerned” by the number of enforcement cases and repeated failures by the same licensee:

“In cases over the last five years, eleven licensees have been subject to enforcement action multiple times. The majority of these cases relate to similar, repeated failings linked to anti-money laundering and social responsibility. By increasing the personal accountability of individuals within a licensee, seek to reduce this risk. This also supports wider work to raise standards, including through tough enforcement action at operator level.”

Individuals make decisions, and, therefore, these individuals will determine whether or not a gambling business is compliant. These proposals therefore come as no surprise. They are a blunt instrument for, firstly, “driving personal accountability and responsibility” and, secondly, ensuring the Gambling Commission has “adequate regulatory reach over individuals when failures are found”. From our extensive enforcement work, both for gambling businesses and PMLs, the Gambling Commission, has a mounting focus on identifying who (generally within senior and executive management) was responsible for failures. So, what does “responsibility” mean? It could mean day to day responsibility or executive responsibility. In our experience, not enough consideration is given by gambling businesses or the Gambling Commission – outside enforcement action – to mapping out individuals’ responsibilities (in full or shared) and considering governance and control aspects.

In principle, and against the backdrop of the SM&CR, it seems to us that the Gambling Commission is striking the right balance with these proposals, particularly with the requirement that Chairs must hold PMLs. Increasing the number of PMLs, particularly at a senior level, will drive personal accountability and responsibility, and thereby hopefully enhance the corporate culture.

Where the licensee has a Chair, they play a critical role in promoting the effectiveness of the Board and directors. This role is very different from the role of a CEO, with the Harvard Business Review noting “he Chair is responsible for and represents the Board, while the CEO is responsible for and is the public face of the company.” Unlike a CEO who is accountable to the Board, the Board is accountable to shareholders. A key aspect of that accountability is risk management so, arguably, the Board should be promoting a culture of compliance and good behaviour, and be concerned by excessive risk-taking that would threaten the company’s financial and economic stability. As the 16^th century proverbial saying goes, “lookers-on see most of the game”!

By personally licensing the Chair of the Board, the Gambling Commission will “ensure that those responsible for scrutiny, strategy and leadership at the most senior level within the organisation” will improve Board focus on, and accountability for, the licensing objectives and encouraging them to set the tone from the top and lead a culture of compliance.

It is worth noting, the Gambling Commission could have proposed that each member of a licensee’s Board hold a PML. Whilst it did consider this option, it decided it would have unintended consequences of diluting accountability and making it harder to take enforcement action.

“Implementation issues, timelines and practicalities”

Question 106 of the consultation requests feedback about implementation issues, timelines and practicalities. Unpicking the proposals, we make the following initial observations:

Will there be a grandfathering period?
How will the new Chair and potential director PML requirements be applied to large multinational gambling businesses? Will it extend to the Chair of a parent company? Based on the current wording, this seems unlikely, but clarity is required.
Although not expressly mentioned, it seems clear to us that the requirement as presently drafted applies to both Executive and Non-Executive Chairs.
Will Part III of the LCCP, setting out the personal licence conditions for PMLs, remain unchanged? Or will the Gambling Commission use this is an opportunity to set an enhanced standard of conduct for a Chair or business leader? Note, the Financial Conduct Authority and Prudential Regulation Authority have an enhanced standard of conduct applicable only to Senior Managers and certain other individuals, regulated under the SM&CR.
Will there be a delineation between the responsibilities of Board members’ holding PMLs and others? Note, the SM&CR requires firms to submit documentation on the scope of a Senior Manager’s responsibilities known as the Statement of Responsibilities. This includes a statutory requirement for senior managers to take reasonable steps to prevent and/or stop regulatory breaches in their areas of responsibility.

Harris Hagan services

PML applications

We regularly work with clients to prepare PML applications for their employees, senior managers and Board members. Please get in touch if you would like our assistance.

Training

Borne from our strong desire to help clients navigate the complex framework and landscape in Great Britain, we offer Partner-led PML training covering the key legal, regulatory and licensing issues for PMLs, Boards, Compliance Committees, employers and those in supporting roles, as well as scanning the horizon on key changes, including the Gambling Review, and providing practical advice based on our extensive knowledge, experience and expertise. Please get in touch if you would like to discuss your training needs.

Next steps

There are 8 questions in the consultation about these proposals which appear at questions 102-109. The consultation will last for 12 weeks and will close on 18 October 2023.

Please get in touch if you would like to discuss the consultation further or receive a deck about our training services, including client testimonials.

A specified management office is defined in licence condition 1.2.1(2) as:

the overall management and direction of the licensee’s business or affairs
the licensee’s finance function as head of that function
the licensee’s gambling regulatory compliance function as head of that function
the licensee’s marketing function as head of that function
the licensee’s information technology function as head of that function in so far as it relates to gambling-related information technology and software
oversight of the day to day management of the licensed activities at an identified number of premises licensed under Part 8 of the Act or across an identified geographical area
in the case of casino and bingo licences only, oversight of the day to day management of a single set of premises licensed under Part 8 of the Act.

“Operational function” is defined in section 80(6) of the 2005 Act as: (a) any function which enables the person exercising it to influence the outcome of gambling, (b) receiving or paying money in connection with gambling, and (c) manufacturing, supplying, installing, maintaining or repairing a gaming machine.

30Jun

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

30th June 2023 Gemma Boore 181

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.

22Mar

Getting it right: how to comply with the “strong appeal” test when using sports personalities to advertise sports betting

22nd March 2023 Gemma Boore 239

Nearly half a year has passed since the introduction of the “strong appeal” test for gambling advertisements in the United Kingdom, and it has been a whirlwind of a six months for sport:

the Rugby League Men’s and Women’s World Cups took place in October and November 2022 after being postponed due to Covid-19 and the Cricket ICC World T20 (Men)’s event was hosted in Australia at the same time;

the FIFA World Cup took the world by storm between November and December 2022; and

2023 has not disappointed yet either – sports fans have been treated to numerous events in Q1 including the Tennis Australian Open, the Rugby Six Nations and the Cricket ICC World T20 (Women)’s event.

For betting operators, the resurgence of live sports presents a rich (and well overdue) opportunity to re-engage with existing and attract new customers. However, regulatory restrictions on advertising gambling products in Great Britain have tightened in recent years and operators must be mindful not to fall foul of current advertising rules including the new “strong appeal” test, which came into force on 1 October 2022.

In this article, we explain the strong appeal test, consider the impact of recent rulings by the Advertising Standards Authority (“ASA”) concerning its implementation, and share our top tips for gambling operators, marketing agencies and affiliates that want to ensure they comply with the strong appeal test when advertising sports betting to UK customers.

The strong appeal test – how does it work?

The UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (the “CAP Code”) and the UK Code of Broadcast Advertising (the “BCAP Code”) (collectively, the “UK Advertising Codes”) set out the rules relating to marketing communications in broadcast and non-broadcast media in the UK.

Parts 16 of the CAP Code and 17 of the BCAP Code set out rules bespoke to gambling advertisements. In particular, since 1 October 2022, each section has contained the following requirement (in rules 16.3.12 and 17.4.5 respectively):

“Advertisements for gambling must not be likely to be of strong appeal to children or young persons, especially by reflecting or being associated with youth culture.

They must not include a person or character whose example is likely to be followed by those aged under 18 years or who has a strong appeal to those aged under 18.

Where appropriate steps have been taken to limit the potential for an advertisement to appeal strongly to under-18s, this rule does not prevent the advertising of gambling products associated with activities that are themselves of strong appeal to under-18s (for instance, certain sports or playing video games).”

These ‘strong appeal’ tests effectively prohibit content (including imagery, themes etc.) that has a strong level of appeal to under-18s regardless of how it is viewed by adults. It extends to the use of celebrities (including footballers) to promote sports betting or convey responsible gambling messaging.

The new strong appeal tests replace the ‘particular appeal’ test in the previous edition of the UK Advertising Codes, which generally allowed marketing communications regarding gambling to feature celebrities (including footballers) who were well known to under-18s, provided the vast majority of their fans were adults. A typical barometer used was the proportion of the celebrity or footballer’s fans on social media: if 25% or less of their fans and followers were under 18, it was generally accepted that they did not have a particular appeal to children and could therefore feature. The new “strong appeal” tests are much stricter as they focus only on whether there is strong appeal to children – appeal to adults is irrelevant.

The guidance published by CAP and BCAP relating to the strong appeal tests: “Gambling and lotteries guidance: protecting under-18s” Advertising Guidance (non-broadcast and broadcast) (the “Guidance”) notes that “determining the likely appeal of a marketing communication is not always straightforward and is, to an extent, subjective… …Advertising approaches or pieces of creative content of ‘strong’ appeal to under-18s can take a variety of forms”.

The Guidance goes on to give several examples of approaches that are likely to be problematic, two of which are of particular relevance to sports betting advertisements:

Content linked to activities that are very popular or common among younger people (both in terms of their direct participation and viewing)

In its Guidance, the ASA confirms that it considers certain subjects and activities to be of inherently strong appeal to under-18s and gambling advertisements relating to these subjects and activities will be prohibited unless they fall under one of the exemptions. Two examples of sports with strong appeal are cited in the Guidance: football and eSports.

Other national sports such as cricket and rugby are also discussed and it is noted that by comparison, these sports have low-to-moderate levels of participation and interest among under-18s. However, the national teams in these sports attract more media interest and are more likely to be considered of inherent strong appeal. Conversely, sports such as horseracing, greyhound racing, darts, snooker, boxing, motorsports and golf are noted to be more adult-orientated and unlikely to be of inherent strong appeal.

In order to advertise betting opportunities concerning sports that strongly appeal to under-18s, gambling operators must ensure that their product falls within one of the exemptions cited in the Guidance, five of which are of relevance to sports betting:

Exemption A: Products in general terms. This permits betting advertisements to promote licensed products in general terms. The Guidance notes that the rules focus principally on imagery, themes and characters that are of strong appeal to under-18s. They are not intended to restrict simple text or audio references to sports, teams or individuals generally held to be popular with under-18s.

Example: An advertisement stating that bets are available on the outcome of a particular football or eSports match would not be prohibited as this falls within Exemption A.

Exemption B: Generic descriptions. This permits generic depictions of or references to the subject of the licensed product. The Guidance notes that the generic depictions must be suitable and not, of themselves, likely to appeal strongly to under-18s.

Example: An advertisement using suitable characters or CGI to depict a sport held to be of strong appeal to under-18s (e.g. football or eSports) or generic items or places associated with the sport (e.g. a ball, goal post, trophy, or stadium) would not be prohibited as this falls within Exemption B provided that the depictions are not stylised to appeal strongly to under-18s (e.g. cartoons).

Exemption C: Logos and other identifiers. This permits the use of logos and other identifiers for the subject of a betting activity.

Example: An advertisement showing that bets are available on the outcome of a particular match, tournament or other event that includes the logo for the event or the teams playing in it would not be prohibited as this falls within Exemption C.

Exemption D: Branding. This permits material relating specifically to an advertiser’s brand identity. The Guidance notes that this exemption does not extend to brand characters, which will need to be assessed under the strong appeal test for persons and characters (discussed below).

Example: An advertisement including the brand or livery of the operator advertising the bet (e.g. an advertisement featuring the logo of Mr Green in green and white colours) would not be prohibited as this falls within Exemption D. However, the use of the character “Mr Green” would need to be assessed separately to see whether it is of strong appeal to under-18s.

Exemption F: Certain persons and characters. This permits the use of persons or characters associated with subjects of strong appeal (e.g. football and eSports) provided marketers are satisfied that they are not, in and of themselves, of strong appeal to under-18s. Again, this will be assessed separately under the strong appeal test for persons and characters.

Example: An advertisement featuring a football player would not be prohibited as this falls under Exemption F provided the football player is not themselves of strong appeal to under-18s. See below for further discussion.

2. Persons and characters who have a strong appeal to under-18s

As set out above, the UK Advertising Codes require that gambling advertisements must not feature any person or character who has a strong appeal to those aged under 18.

Persons and characters generally fall into one of five categories: (a) personalities/celebrities, (b) brand ambassadors, (c) licensed characters (e.g. a movie or video game character), (d) characters played by actors; and (e) brand-generated characters (e.g. characters created by the advertiser).

The ASA makes its assessment of appeal of these persons and characters to under-18s based both on (i) their appearance and behaviour in the advertisement, and (ii) their profile and relevance outside the advertisement for personalities, brand ambassadors and licensed characters (but not characters played by actors and brand-generated characters as these have no external profile).

In determining the extent of a person’s appeal to under-18s, advertisers are encouraged to use as many insights and sources of data as they can. Having determined what a person or character is known for (in terms of activities, roles or associations) marketers can then identify information and data sources that provide insights on the likely level of a person or character’s appeal to under-18s.

For example:

Profiles outside the context of the advertisement. In determining whether a person or character is likely to appeal strongly to under-18s on the basis of their profile, the ASA will consider factors such as: (a) whether they have obvious and direct links to activities for, or highly popular with, under-18s; (b) the general audience for, and popularity of, what the person or character is known for; and (c) the likelihood that their inclusion in an advertisement will strongly attract the attention or interest of under-18s.

Example: Persons and characters with obvious and direct links to under-18s should be avoided (e.g. current or recent children’s TV personalities, popstars associated with youth culture, licensed characters from popular board games and influencers that focus on youth-related themes).

If a person or character does not have an obvious and direct link to under-18s that would render them of ‘strong’ appeal, advertisers must still assess their likely level of appeal. Social and other media audience demographics are an important and quantitative source of data.

Example: Football players in national or other well-known teams such as Manchester United may be viewed in an aspirational or influential way among under-18s and should be avoided. The same principle applies in relation to leading sportspeople in other sports and those involved in World Cups or other high-profile tournaments. Players in lower-level teams and other individuals involved in sports (e.g. managers) are more likely to be acceptable if it can be demonstrated that the individuals have a negligible following of under-18s on social media and/or there is a negligible proportion of under-18s in the audience (either for their sport or other programmes in which they feature).

The ASA notes that more weight should be attached to present and recent activities. Personalities whose appeal has shifted away from under-18s over time are less likely to fail the strong appeal test.

Example: An individual that played in a national sports team in 2002, such as David Beckham, is less likely to appeal to under-18s now compared to an individual that played in a national sports team in 2022, such as Raheem Sterling.

Appearance and behaviour within the advertisement. The second part of the ASA’s assessment of ‘strong’ appeal for persons and characters is how they appear and behave in advertisements.

Marketers must avoid featuring behaviour that is likely to strongly appeal to under-18s. This includes youth culture themes (e.g. disregard for authority, rebelliousness, immature adolescent or childish behaviour and participation in practical jokes), speech and language (e.g. sounding like a child or using slang terms or text abbreviations), humour (e.g. slapstick or juvenile jokes) and other behaviour (e.g. dancing, singing or reciting rhymes).

Example: A person that is behaving in a manner associated with under-18s (such as Simon Bird from The Inbetweeners) is more likely to appeal to under-18s.

In addition, persons and characters played by actors must not be presented in a way that renders them likely to be of ‘strong’ appeal to under-18s. They should not wear clothing, accessories, jewellery, body art, piercings or hair styles that are obviously associated with a current trend or style popular with under-18s.

Example: A person that is wearing clothing associated with teenagers (e.g. a crop top, oversized hoodie, baggy jeans or a bucket cap) should typically be avoided.

Finally, characters that are colourful or have exaggerated features are more likely to be of strong appeal to under-18s and this includes ‘cuddly’ or ‘cute’ animals. Licensed characters (for example, from games and movies) will be assessed based on the popularity of the game or movie with under-18s.

Example: Characters with similarities to soft toys and exaggerated features such as enlarged eyes should typically be avoided. Characters related to stories or themes that are popular among children like pirates, princesses, superheroes, robots and fairy tale characters should also be avoided unless they are from traditional fairy tales, not stylised with exaggerated features and are not otherwise associated with childhood (e.g. characters such as Santa Clause, the tooth fairy and the Easter bunny are cited in the Guidance as being associated with childhood and should therefore be avoided).

There is a helpful checklist at the beginning of the Guidance that summarises the risk-based scenarios of featuring different types of persons in gambling advertisements:

High risk	o Anyone with direct connections to under-18s through their role like children’s TV presenters or film stars o Anyone with a significant under-18 following on social media o UK footballers who play for top clubs, UK national teams or in high-profile competitions – this would apply also to managers o Non-UK ‘star’ footballers, particularly those at top European clubs – this would apply also to managers o Other prominent sportspeople involved in sports like cricket, tennis and rugby that, at the highest levels, have a significant national profile o Leading eSports players

Moderate risk	o Footballers from teams outside the top-flight will be assessed on the basis of their social and other media profile o Footballers with lower profiles at top Euro/world clubs might be acceptable o Retired footballers who have moved into punditry/commentary will be assessed on the basis of their social and other media profile o Other eSports players dependent on their social media and general profile o Sportspeople involved in clearly adult-oriented sports who are notable ‘stars’ with significant social media and general profiles making them well-known to under-18s o A small but notable following of under-18s on social media will be considered alongside the personality’s general profile and could contribute to an ASA decision to categorise the individual as being of ‘strong’ appeal

Low risk	o Footballers at lower league and non-league clubs o Footballers at lesser Euro/world clubs o A long-retired footballer now known for punditry/commentary o Sportspeople involved in sports like cricket, tennis and rugby that don’t have a significant role in the sport or general profile o Sportspeople involved in clearly adult-oriented sports (e.g. darts, snooker, golf, horseracing, and motorsports)

Exception for narrowly targeted advertising

There is one key exception to the strong appeal rules: they do not apply in media where under-18s can, for all intents and purposes, be entirely excluded from the audience.

Principally, this applies in circumstances where the marketer can robustly age-verify the potential recipients of the advertisement as being 18 or older such as:

direct mail, email and SMS communications sent to recipients who have been verified as being 18 or older;
areas of websites and applications that can only be viewed/accessed those who have been verified as 18 or older on sign-up; and
online platforms (such as social networks or publications) that provide advertisers with functionality enabling them to target users that have been age-verified to a very high degree of accuracy.

In the event of challenge, the ASA expects advertisers to provide evidence to demonstrate that the systems used to identify audiences from which under-18s are, for all intents and purposes, excluded are robust. Gambling Commission licensed websites are cited as a good example of a media environment where under-18s are extremely unlikely to form part of the audience. Other sources of marketing data may also be acceptable where robust means of age verifications have been employed (e.g. payment data or credit checking). More general marketing data, such as that inferred from user behaviour, is unlikely to be sufficient.

Recent ASA rulings – what do they tell us?

To date, there have been three ASA rulings regarding the strong appeal tests, each of which provides helpful context – particularly in relation to footballers who, as noted as above, can be potentially low, medium or high-risk depending on the individual.

Philippe Coutinho, Jesse Lingard and Kalidou Koulibaly – of strong appeal

In December 2022, the ASA upheld a complaint for a promoted Tweet featuring the text “Can these big summer signings make the question marks over their performances go away?” and an embedded video that featured three current Premier League footballers: Philippe Coutinho, Jesse Lingard and Kalidou Koulibaly, set against a background of question marks.

The advertiser argued that although football and topflight footballers could strongly appeal to under-18s, targeting and age-gating tools had been used to remove under-18s from the advertisement’s audience. This included self-verification by the audience and targeting techniques designed to ensure the advertisement would only reach users aged 25 or over.

The ASA did not accept these arguments and upheld the complaint. In its view, both football and the players used (who were Premier League and international footballers at the time) were likely to be of strong appeal to under-18s; and the targeting techniques were not sufficiently robust to exclude under-18s from the audience with the highest level of accuracy, as required.

Peter Crouch and Micah Richards – not of strong appeal

In February 2023, the ASA did not uphold two complaints regarding advertisements featuring retired footballers.

The first complaint concerned two TV advertisements featuring Peter Crouch conducting a choir and celebrating (amongst other activities) with the text “COMPLETELY FREE BET BUILDER ON ALL ENGLAND GAMES”. During the advertisement, a voice-over was heard saying, “You hear that? That’s the sound of Christmas and the world cup colliding. So come on all ye faithful, let’s be having ya. Glory to the king of headbutts. Knit those kits. Cross those sprouts. Stuff those turkeys. And attack those carols. Cause from this day we’ll forever ask where were you in twenty-two.”

The second complaint concerned a promoted Tweet featuring the text “Club football returns following the international break… Get £20 IN FREE BETS when you place a £5 bet!” and an image of Micah Richards.

Both Crouch and Richards had retired in 2019 and the ASA took a pragmatic approach that although this meant “not long retired”, the teams and the games in which the players featured during the later years of their career (e.g. Burnley and Stoke City for Crouch, and Aston Villa for Richards) meant that they were unlikely still to be of strong appeal to under-18s. The players were therefore assessed on the basis of their social and other media profiles:

Peter Crouch
Crouch did not have public accounts on TikTok, Facebook or Twitch at the time the advertisements were broadcast, and his Instagram account had not been updated since 2014. He did have a public account on Twitter that, at the time the advertisements were seen, had almost 1.5 million followers but demographic data from September to December 2022 showed that 0.46% of his followers were aged 13-17 years. Even though Twitter is a media environment where users self-verify, the ASA accepted this as evidence that a very small number of Crouch’s followers on Twitter were aged under 18.

The ASA further noted that the TV programmes in which Crouch appeared (such as BT Sport, the documentary ‘Save Our Beautiful Game’ and Crouch’s own TV shows, ‘Peter Crouch: Save Our Summer’ and ‘Crouchy’s Year Late Euros’) and his podcasts were primarily aimed at adult audiences and not of strong appeal to children. The exception being ‘The Masked Singer’ in which Crouch appeared as a panellist. The ASA noted this to be a family entertainment programme and of appeal to children. However, Crouch appeared as one of four panellists, the programme was of broad demographic appeal and there was no evidence that his role in the programme had led to him being viewed in an aspirational or influential way by under-18s. Accordingly, the ASA concluded that Crouch’s appearance in this programme was unlikely to make him of strong appeal to under-18s.
Micah Richards
Richards did not have active public accounts on YouTube, TikTok or Twitch and audience demographics on Instagram and Twitter showed that: 0.07% of Richards’ Instagram followers were aged 0-16 years and 2.19% were aged 17-19 years; and 0.04% of his Twitter followers were aged 0-16 years and 2.15% were aged 17-19 years. Again, the ASA accepted that this data demonstrated that his social media profile was unlikely to make Richards of strong appeal to under-18s.

In terms of TV programmes, the ASA noted that Richards was a regular and well-known pundit on Match of the Day but BARB data in the lead up to the advertisement confirmed that a significant number of children had not watched live. The regulator also noted that Richards appeared as a pundit on Sky’s live coverage of Premier League matches which would be of strong appeal to under-18s, but that the strong appeal did not extend to the pundit-based discussion that took place around the game. Accordingly, Richards’ appearance in this context would be unlikely to hold strong appeal to under-18s.

Aside from his role as a football pundit, Richards had appeared on ‘A League of their Own’ and ‘Gogglebox’. Both programmes were scheduled post 9pm and primarily aimed at an adult audience.

In addition, Richards appeared on a CBBC programme ‘Football Academy’, which was considered likely to be of strong appeal to under-18s but the episode had not aired at the time the advertisement was seen. The ASA noted that if Richards had appeared regularly and prominently on such a programme, it was likely he would have been considered to have strong appeal to under-18s.

Top Tips

Below are our key takeaways for operators, marketing agencies and affiliates that want to comply with the strong appeal rules when advertising sports betting in the UK.

Be careful of using anybody in the advertisement that has an active presence on YouTube, TikTok or Twitch. These platforms are known to have particular appeal to under-18s. Although recent rulings do not expressly state that an active account on these platforms would denote someone as having strong appeal, it is notable that neither Crouch nor Richards had a presence on these platforms.

Do not assume that retired players will automatically fall outside the strong appeal category.Consideration should be taken of the individual’s complete career history including the time since they played topflight sport, when they stopped playing completely, and whether they played for a national team during their career, as well as recent appearances on television and other media. The sport that was played is also relevant: football and eSports are highest risk, whereas adult-orientated sports such as darts, snooker, golf, horseracing, and motorsports carry a much lower risk and the use of current or more recently retired players in these sports may be acceptable.

Do not automatically exclude football pundits. Even recent appearances as a football pundit covering football matches that are of strong appeal to under-18s, do not automatically mean that the individual will be of strong appeal themselves. Consideration should be taken of their overall appeal to under-18s.

Be cautious of links with children’s or family entertainment programmes, but do not assume this precludes all individuals featuring in them. Although an appearance in the television show that is aimed at children or is otherwise of strong appeal to under-18s is relevant and should carefully be considered, this will not automatically preclude an individual from appearing in a gambling advertisement provided the advertiser can demonstrate this did not alter the individual’s appeal to under-18s as a result.

Make use of available, verifiable data regarding social media and other followings. Be prepared to defend selections by use of robust data including individual’s social media followings and audience demographics for other media appearances. The ASA’s recent rulings on the strong appeal test are lengthy by usual standards and it is clear significant data was considered. Being able to produce relevant data is going to be vital in cases like this going forward.

Keep the position under review. Where advertisements appear on multiple occasions and/or an individual is used to represent a brand on an ongoing basis (e.g. as a brand ambassador), evidence that the individual does not strongly appeal to under-18s should be kept under regular review. An individual that did not appeal strongly to under-18s yesterday may do so today if they have featured in a new children’s or reality TV show, for example. To mitigate this, consider adding restrictive covenants to commercial agreements with brand ambassadors and others used in gambling advertisements, restricting them from participating in other programmes or media that appeals strongly to under-18s before or during the period that an advertisement is broadcast.

Review commercial scripts to ensure advertisements do not feature characters that appear or behave in a way that is likely to strongly appeal to under-18s. Avoid behaviour, speech / language and humour that is associated with youth culture. Ensure the individuals are dressed in an adult manner and do not feature other characters (e.g. cartoons or licensed characters) in the advertisement that may strongly appeal to under-18s.

If you are not satisfied that you can demonstrate that the advertisement is unlikely to appeal strongly to under-18s, exclude under-18s from the audience. It is imperative that reliable age-gating mechanisms are utilised. These may include validation by payment data and credit checking, but do not extend to self-verification or the use of data inferred by user behaviour.

Summary

This article has explained the strong appeal test, considered the impact of recent rulings by the ASA concerning its implementation and outlined key takeaways for gambling operators, marketing agencies and affiliates that want to ensure they comply with the strong appeal test when advertising sports betting to UK customers.

If you would like to discuss any of the matters raised, please do get in touch with us.

21Mar

The Gambling Commission’s consultation on proposed changes to the Licence Conditions and Codes of Practice

21st March 2023 Adam Russell 238

On 28 February 2023, the Gambling Commission launched a consultation proposing three changes to the LCCP (the “Consultation”), 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.

The Consultation is open to all stakeholders, including gambling operators, to share their views on the proposals. The Consultation opened on 28 February 2023 and will last 12 weeks, closing on 23 May 2023. We outline below the three topics on which the Consultation focuses, and the practical considerations for licensees who wish to submit responses as part of the Consultation.

Proposed changes to the LCCP

1. Extending the multi-operator self-exclusion scheme to additional categories of betting licensee

Since 31 March 2020, the Gambling Commission has required all remote gambling operators to participate in GAMSTOP, which is an online multi-operator self-exclusion scheme.

The Commission is “consulting on changes to social responsibility code provision 3.5.5 to “extend the requirement to participate in the GAMSTOP scheme to all licensees that make and accept bets by telephone and email.”

2. Reporting deaths by suicide to the Gambling Commission

Licence condition 15.2.2 outlines a range of events which licensees must report to the Gambling Commission via their eServices account.

The Gambling Commission is “consulting on adding a requirement to Licence Condition 15.2.2 that would require all licensees to inform when they become aware that a person who has gambled with them has died by suicide.”

3. Payment services – technical update

Licence condition 5.1.2 prescribes the method by which certain operating licence holders accept payment from customers using their gambling facilities in Great Britain.

The Gambling Commission proposes to amend the text of licence condition 5.1.2 to “ensure that the condition reflects the current legislative provisions”. In particular, the Gambling Commission wishes to ensure that it mirrors any “future legislative amendments to the Payment Services Regulations”.

Responding to the Consultation

There are practical steps and considerations which licensees should consider should they wish to respond to the Consultation. Whilst it is not intended to be exhaustive, a list of key factors is provided below:

The Gambling Commission will consider all responses submitted, whether or not all the questions in a given survey have been answered.

Licensees can respond to the Consultation using the online survey. Alternatively, responses can be submitted by post to: Policy Team, Gambling Commission, 4^th Floor, Victoria Square House, Birmingham, B2 4BP.

When responding to the Consultation, the Gambling Commission will request your consent to publish your name (if responding in a personal capacity), or the name of your company (if responding on behalf of your organisation) on their website. The publication of such details would indicate that you responded to the Consultation exercises.

We encourage licensees to respond to the Consultation, which closes on 23 May 2023, to express their views on the proposed changes.

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