26Oct

Andrew Rhodes’ speech at the International Association of Gambling Regulators Conference: A call for collaboration

26th October 2023 Adam Russell 190

The current Chief Executive Officer (“CEO”) of the Gambling Commission, Andrew Rhodes, delivered a keynote speech at the International Association of Gambling Regulators (“IAGR”) Conference in Botswana on 16 October 2023. In this blog, we sum up the key messages from Rhodes’ speech, which was delivered to gambling regulators from across the world. Part One outlines Rhodes’s commentary on implementation of the UK Government’s Gambling White Paper, and Part Two summarises what was said regarding the Gambling Commission’s increasingly innovative approach to tackling black market gambling.

Part One: The White Paper

Background

Rhodes introduced the White Paper by stating that the Gambling Commission is “pleased to see so many of recommendations adopted”. He proceeded to describe “the publication of the White Paper an important moment”, citing the need to update the gambling regulatory framework with “evidence-based changes” to keep pace with digitisation in society.

Priorities

Rhodes acknowledged that “the White Paper is a key priority for the Commission”. However, he managed expectations by stating that “this will not be the work of a few months” given that the “Gambling Commission is either leading or supporting on the implementation of Government policy” in relation to “over 60 areas of work”. Rhodes then distinguished between priorities for the Government versus priorities for the Gambling Commission, the latter of which included to:

“ensure bonus offers and incentives do not lead to excessive or harmful gambling,
set further product controls for safer online games,
require operators to identify and take action for financially vulnerable consumers and to tackle significant unaffordable gambling through frictionless checks that are not disruptive for consumers.”

Rhodes noted that some of these themes would be common to all regulators at the conference and that while “attitudes, politics, regulatory frameworks and so on may be quite different”, human behaviour is similar cross-jurisdictionally, which may lead to “some commonality in the way approach these areas”.

Prior and upcoming consultations

Rhodes confirmed that the Gambling Commission has received “over 2,300” responses to its first round of White Paper consultations and that those responses “can and will help us improve the changes we make to our rules and to how gambling is regulated in Great Britain”. He considered, however that there have “been some misunderstandings” in relation to financial risk checks, some of which he put down to the complexity of the issue the Gambling Commission is facing. However, according to Rhodes, in other cases, misunderstandings have arisen as a result of “deliberate misinformation designed to muddy the waters of debate and to torpedo the implementation of Government policy.” This is potentially (we think) a not-so-subtle reference to the open letter to Racing Post readers published in September 2023, in which the Gambling Commission complained that the Racing Post has been writing imbalanced stories about the financial risk consultation.

Rhodes went on to confirm that progress is underway on launching “the next tranche of consultations”, which will initially include:

socially responsible incentives (such as bonuses and free bets), and
gambling management tools (including online deposit limits and opt-outs),

with further consultations to follow in 2024.

Gambling data and the evidence base

Rhodes noted that besides consultations, the Gambling Commission is “leading on” improvements to “gambling data” and “the evidence base”. He mentioned that the Gambling Survey of Great Britain will launch early next year. It is set to be the “largest survey of its type” worldwide and attract around 20,000 respondents annually.

He proceeded to outline the “inherent conflict” in relation to the use of problem gambling data, particularly in the context of polarised debate. Rhodes noted that some may seek to cite a low problem gambling rate of between 0.3 percent and 0.5 percent of the population, at the same time as arguing that the same “sometimes limited” sample sizes create “insufficient evidence to support intervention in areas of higher risk”. Although this is contradictory, Rhodes acknowledged that the evidence base requires improvement and promised that the Gambling Survey of Great Britain would help to achieve this – with updated questions for the digital age and “predictable, regular data” for study.

With regard to the broader evidence base, Rhodes reiterated the six priority objectives which were set out in the Gambling Commission’s three-year evidence gaps paper, namely:

early gambling experiences and gateway products;
the range and variability of gambling experiences;
gambling-related harms and vulnerability;
the impact of operator practices;
product characteristics and risk; and
illegal gambling and crime.

Part Two: The black market

Background

In the second half of the speech, Rhodes explained that the Gambling Commission has been taking an increasingly robust approach towards the black market. As above, the tackling of illegal gambling is a priority area of the Commission’s three-year evidence gaps paper, published in May 2023. Rhodes emphasised that while the black market is an issue, it “is not a significant concern” due to the high rate of channelisation. Channelisation refers to the proportion of consumers who gamble in the licensed market in comparison to the illegal market.

Actions

Rhodes outlined some of the actions that the Gambling Commission has been taking to “disrupt unlicenced , illegal online operators through collaboration with others”, which has broadly involved “going upstream, further away from where formal powers begin”. This means working with others to intervene between illegal operators and British customers to “generally frustrate their business and force them out of the market”.

Rhodes gave examples of what this work entails:

increasing engagement with payment providers and financial institutions,
collaborating with internet search and service providers to delist illegal operators from search results and geo-block their websites,
working with social media companies to remove posts which promote illegal gambling,
cooperating with Gambling Commission software licensees to prevent access to products which appear to be available on illegal sites, and
engaging with Gambling Commission licensees where affiliates have placed adverts on illegal websites.

Results

Rhodes revealed that the Gambling Commission’s combative approach has:

“more than doubled the number of successful positive distribution outcomes”
“close down hundreds of illegal lotteries”
“stop influencers promoting unlicensed gambling.

Further, between May and July, Rhodes explained that geo-blocking had restricted access to four of the top 10 illegal domains, and there was a 46 percent reduction in traffic to the largest illegal sites.

The Gambling Commission also “block 17 sites from Google search results through collaboration with Google, and “remov payment facilities from illegal sites” through their work with Mastercard.

Next steps

Rhodes pledged to “continue to study the impact of interventions and respond accordingly”, and to “deepen collaboration with partners in industry, tech and finance” to further strengthen their disruptive capabilities.

Moreover, Rhodes revealed that the Gambling Commission would be holding a Conference in March 2024 to explore “how can work with partners to further decay, frustrate and drive out illegal gambling”.

Rhodes reflected that “strong collaboration with others”, including with other regulators, has been crucial to the results the Gambling Commission’s disruptive enforcement work has yielded so far. However, he wants to see further collaboration take place and urged other regulators to join him in forging and strengthening relationships.

Reflection

This is Rhodes’ second time speaking at the IAGR conference. His last speech, delivered in Melbourne in October 2022 at a time when the White Paper was still pending, appealed for gambling regulators to work better together; share data and evidence; adopt common approaches; and coordinate actions where possible.

This year, Rhodes recognised the role that collaboration has had in successful outcomes during the last year, including in relation to tackling illegal online operators, and reiterated his call for overseas regulators to “share notes” with the Gambling Commission on gambling operators that trade globally.

Rhodes also emphasised that the Gambling Commission is “more than ready to work with ” – referring to a recent roundtable with nine US and Canadian jurisdictions as an example of the Gambling Commission “establish clear working relationships that will support all of us to be more effective”.

At the conclusion of the conference, IAGR members elected Ben Haden of the Gambling Commission as their new president. Mr Haden takes over the presidency from Jason Lane, the Chief Executive of the Jersey Gambling Commission.

Next steps

Please get in touch if you would like to discuss any aspect of this speech or if we can otherwise assist you. You can find out more about the services Harris Hagan provides here.

This blog has been written on the basis of the published version of Rhodes’ keynote speech available here, which may differ slightly from the delivered version.

19Oct

Gambling Commission reminder to licensees about timely payment of annual fees

19th October 2023 Chris Biggs 170

In its fortnightly E-bulletin of 25 September 2023, the Gambling Commission included two reminders to operating licence holders (“Licensees”). Firstly, about the requirement that they pay their annual fee before the anniversary date of their operating licence and secondly, that it is a condition of the licence that the gross gambling yield (“GGY”) does not exceed the fee category threshold of that licence.

Payment of annual fees

Requirement

Following the Gambling Commission’s grant of an operating licence, Licensees must pay their first annual fee within 30 days of the Gambling Commission issuing their licence. Licensees are then required to pay their subsequent annual fees each year before the anniversary date of their operating licence being issued (section 100(1) of the Gambling Act 2005 (“2005 Act”)).

Failure to make payment on time

The Gambling Commission is required by the 2005 Act to revoke an operating licence in the event of a Licensee’s failure to pay its annual fee before the licence anniversary (section 119(3) of the 2005 Act). However, the 2005 Act permits the Gambling Commission to disapply this requirement, if is satisfied that the Licensee’s failure to pay its annual fee is due to an administrative error. It is of note that there is no requirement that the Gambling Commission commence a licence review before revoking an operating licence for non-payment of the annual fee.

How to make payment

The Gambling Commission will issue an invoice to Licensees six weeks before the annual fee is payable. The invoice can also be found on each Licensee’s Gambling Commission eServices account, through which payment of the invoice can be made.

Annual fees are not refundable by the Gambling Commission, unless an overpayment has been made. For example, no refund would be given if a licence is surrendered the day after the licence anniversary date.

We recommend that Licensees diarise their own reminders, well in advance of the licence anniversary, to ensure the timely payment of annual fees.

Fee categories

It is condition of an operating licence that the gross gambling yield (“GGY”) (or annual gross sales for gambling software licences) does not exceed the upper threshold of the fee category for each licensable activity.

Licensees must therefore monitor their projected GGY or annual gross sales in line with their fee categories, which are displayed on their operating licence. It is of note that fee category thresholds follow the licence anniversary year and not the reporting year (which is stipulated by regulatory returns).

Licensees must apply to vary their operating licence to increase the fee category of a licensed activity before exceeding the upper threshold to avoid breaching the licence condition. Failure to do so may lead to regulatory action. The application to vary can be submitted through eServices, carries an application fee of £40, and must be granted by the Gambling Commission before the licence anniversary date. Licensees who have already exceeded the GGY threshold must regularise the position by submitting an application to vary immediately.

Next Steps

We encourage Licensees to set reminders to pay annual fees, and to ensure the accuracy of their licence fee categories. Further information can be found in the Gambling Commission’s annual fees guidance.

Please get in contact with us if you have any questions about your annual fees and/or fee categories.

13Oct

Gambling Commission speech at G2E 2023: Growing importance of international collaboration

13th October 2023 Chris Biggs 185

Tim Miller, the Gambling Commission’s Executive Director for Policy and Research and Senior Responsible Owner for the White Paper, delivered a speech at the Global Gaming Expo (“G2E”) in Las Vegas on 10 October 2023. In his speech, Mr Miller discussed (1) the “growing importance” of international collaboration with other gambling regulators, (2) how this is assisting in tackling illegal online gambling and (3) the progress of the White Paper and changes to the law and regulations in Great Britain, which remains the largest licensed online gambling market in the world.

This blog, whilst not intended to be a comprehensive overview, will summarise those three key themes from Mr Miller’s speech.

Growing importance of international collaboration

Mr Miller stated that gambling is a global industry and that leading operators and suppliers are now (mostly) multi-national businesses. The Gambling Commission’s motivation to collaborate with international regulators has been piqued, as it witnesses more large British or European operators seek to establish themselves in North American jurisdictions. Indeed, Mr Miller declared:

“Increasingly we regulate the same companies; we address the same risks; we face the same challenges.”

In an effort to provide clarity about what the Gambling Commission means by strengthening its relationships with other regulators abroad, Mr Miller explained that the Gambling Commission continues to look to support new regulators in burgeoning jurisdictions and learn from their experiences, suggesting:

“The more gambling regulators know of each other’s rules, standards and markets, the more we are sharing information and best practice, the more we support each other then the more effective we will be.”

Consistent with the Gambling Commission’s tough stance on compliance and enforcement (indeed, Mr Miller mentioned the Gambling Commission broke its own record for “the largest ever settlement” twice in the last financial year), Mr Miller also gave a clear warning for licensees who are non-compliant in one jurisdiction not to be surprised if they are “the subject of regulatory conversation in other jurisdictions.”

Further collaborative efforts mentioned by Mr Miller include:

He, alongside the Gambling Commission’s Chair, Marcus Boyle, hosted a roundtable discussion at G2E with North American regulators on the practical steps the Gambling Commission will take to enhance regulatory collaboration;
the Gambling Commission is close to concluding a number of Memoranda of Understanding with US regulators, which look to establish clear working relationships with those regulators; and
the Gambling Commission continues to build stronger links between the North American Gaming Regulators Association and the Gambling Regulators European Forum.

Collaboration improving the combat against illegal online gambling

Mr Miller used illegal online gambling as an example of why international collaboration is important: what is illegal in one jurisdiction may not be in another, and some jurisdictions do not regulate online gambling at all. The key point made here is, as Mr Miller states, “legitimate, licensed operators from one jurisdiction can actually be the illegal or black market in another.” Tackling illegal online gambling is therefore a particular focus of the Gambling Commission and one which it relies on international collaboration to deliver greater results in making gambling safer, fairer and crime-free.

In terms of results, Mr Miller announced that by engaging and collaborating with payment providers, internet search providers and product and game developers, the Gambling Commission has delivered a 46% reduction in traffic to the “largest illegal sites coming into market.” Notably, Mr Miller indicated that the Gambling Commission’s Chief Executive, Andrew Rhodes, will be providing further information on this topic in a speech at next week’s International Association of Gambling Regulators conference.

Lastly, Mr Miller explained that the Gambling Commission continues to hold discussions with regulators in Europe and as far away as Australia to improve its response to illegal online gambling and influence on those outside of the gambling industry, declaring:

“The collective voice of gambling regulators across the globe pressuring big tech companies, banks and even some other jurisdictions to address the role they play in facilitating illegal gambling, will be much harder to ignore.”

Update on Great Britain’s changing regulations

Referring to the Gambling Commission’s first consultation following the White Paper released on 26 July 2023, Mr Miller indicated that the Gambling Commission has already received “thousands” of responses to these consultations. We strongly encourage stakeholders within the industry to respond to this consultation before it closes shortly on 18 October 2023.

Additionally, Mr Miller indicated there has been progress with the GamProtect project, which grew out of the Gambling Commission’s challenge to the gambling industry to produce a holistic view of risk of harm, known as the Single Customer View. Mr Miller indicated that the Gambling Commission has been working with the Betting and Gaming Council and the Information Commissioner to set up a pilot for this project and ensure the data gathered will only be used to protect people from harm.

Lastly, Mr Miller indicated that the Gambling Commission is finalising its new methodology for the collection of Participation and Prevalence data as part of the Gambling Survey of Great Britain. The Gambling Commission expects this survey (1) to have 20,000 respondents per year, (2) will be the “largest of its kind in the world when up and running”, and (3) will become the “new gold standard” of gambling data in Great Britain. Mr Miller stated the Gambling Commission is clear that “better data will lead to better regulation and better outcomes for both consumers and operators as a result.” As we have discussed previously, this is something we strongly support; better evidence and data should lead to better regulation, but time will tell.

Summary

Gambling is a global industry with global gambling businesses. The Gambling Commission’s desire to increase collaboration, especially against the backdrop of the Gambling Act Review and its previous speeches, is unsurprising. As Mr Miller acknowledged, “o regulator – regardless of their experience or scale can be the world police” for the gambling industry. Watch this space to see what increased collaboration amongst international regulators means!

11Oct

Regulatory returns are under the microscope – but will the key issue be missed?

11th October 2023 Chris Biggs 179

The Gambling Commission’s Director of Research and Statistics, Ben Haden, posted a blog on 6 October 2023, entitled Making better use of operator data.

In the blog, Haden explains that, following industry discussions at the Setting the Evidence Agenda Conference on 9 March 2023, and as hinted at in the Gambling Commission’s Evidence gaps and priorities 2023 to 2026 publication in May this year, the Gambling Commission is introducing two new measures over the next six months that are intended to enable it to gather more detailed operator data.

Measure 1: “Sharpening” the data currently received from licensees in regulatory returns by “removing a significant number of items which are out of date or not useful”; increasing the frequency of reporting requirements for many licensees, from annual to quarterly; and aligning reporting dates.

Measure 2: Commencing a pilot to receive a more detailed “daily aggregated consumer data” from operators (meaning aggregated transaction data over the course of a day – not on a per transaction basis).

According to Haden, Measure 1 will be subject to public consultation in November.

In this article, we discuss Measure 1 and consider its effectiveness in the absence of improvements being made to the current regulatory returns system.

Background

In our recent blog on regulatory returns, we highlighted that the Gambling Commission is taking a tougher approach to regulatory returns and, in particular, will escalate to its Enforcement team any operator which fails to submit its regulatory returns on time. As a reminder, it is a licence condition for all licensees to submit regulatory returns on time (15.3.1 of the Licence Conditions and Codes of Practice). Separately, we understand that the Gambling Commission has established a working group which is seeking feedback on the questions raised in the regulatory return form.

Regulatory returns are clearly therefore under the microscope internally at the Gambling Commission – but what is going to change?

Proposed changes to regulatory returns

As mentioned above, Measure 1 will be subject to public consultation in November 2023. For now, therefore, we have only a generic outline of the proposed changes.

Proposal 1: Certain (out of date and/or not useful) questions to be removed.

We agree that less is more, but will the Gambling Commission also take the opportunity to review the remaining questions and related guidance, to ensure it elicits the correct responses from licensees?

Proposal 2: Frequency of reporting to increase for many licensees.

This change would only apply to licensees that are currently required to submit annual returns, which include (but are not limited to) the following licences:

Adult gaming centre
Betting (limited) (non-remote)
Betting (standard) (non-remote and if less than 50 premises)
Betting intermediary (non-remote)
Bingo (non-remote)
Gambling software (ancillary, non-remote, remote and linked)
Pool betting (non-remote and remote)

The full list of licences and the current frequency of reporting can be found here.

Proposal 3: Regulatory returns reporting dates to be aligned.

We expect the Gambling Commission will require all licensees to submit regulatory returns at the same time, rather than in line with (for example) their own financial reporting periods.

These proposals follow the Gambling Commission’s previous efforts, in 2014, to align regulatory returns (for all licensees) to a periodic reporting frequency from 1 October, the original date the point of consumption licensing regime was due to be implemented. The rationale of these proposals was explained in the Gambling Commission’s Review of remote casino, betting and bingo (‘RCBB’) regulatory return and gambling software regulatory return consultation response, in August 2014. The proposals were abandoned following the judicial review that delayed the implementation of the new regime.

Technology is only as good as the data put into it. Doesn’t the same apply to the Gambling Commission?

Haden opens the blog by stating:

“Operator data is a rich resource in terms of ensuring how we understand how the market is developing, appreciate how interventions we make are (or aren’t) having an impact and at a fundamental level ensure we charge the right fees and can forecast and manage income and finances.”

and concludes it by asserting that:

“better evidence driven by better data, will lead to better regulation.”

Whatever the Gambling Commission’s aims, its intention to collect better industry data is laudable; we cannot argue that better evidence and data should lead to better regulation. However, as we have discussed previously, the current regulatory returns system is imperfect and lacks detail. This lack of clarity has, in our experience, sometimes resulted in incorrect data being provided with the regulatory returns, or being provided under the wrong licensable activity.

This is of course a serious concern from the licensee’s perspective, as it is an offence under section 342 of the Gambling Act 2005 for a licensee to misrepresent or provide false information to the Gambling Commission without reasonable excuse. However, it also raises concerns regarding the quality of data being collected by the Gambling Commission – and thus the reliability of the conclusions drawn therefrom.

The Gambling Commission is right to acknowledge that operator data is a potentially rich resource, but the quality (or otherwise) of the data collected will be key to ensuring that it can be relied upon by the Gambling Commission. Whether data is to be used to calculate correct fees, to manage income and finances, or to identify and evaluate market change does not matter. If the data provided to the Gambling Commission by licensees is incomplete or inaccurate, it will cast doubt on decisions taken by the regulator and may lead to the wrong regulatory outcomes.

When it consults on Measure 1, we hope the Gambling Commission will at the same time propose (and consult on) changes to:

the remaining questions that are posed in regulatory returns; and
the associated guidance,

to ensure there is little to no ambiguity between licensees as to what data should, and should not, be provided.

By taking the time to get the regulatory returns process right now, the Gambling Commission could make significant gains in the future, by ensuring that the datasets it collects going forward are as accurate, and therefore useful, as possible.

Next steps

Licensees should look out for the Gambling Commission’s consultation on Measure 1, which is due to be published in November 2023. Once the consultation is open, we recommend licensees to respond and use the consultation as a platform to raise other concerns about the regulatory returns system, even if they are not specifically raised by the Gambling Commission. In the meantime, licensees can also contact the Gambling Commission about the regulatory returns process by completing its online contact form.

Please get in touch if you have any questions regarding the regulatory returns process or if you would like our assistance preparing a regulatory return.

With credit and sincere thanks to Gemma Boore for her invaluable co-authorship.

22Sep

DCMS Committee inquiry on gambling regulation

22nd September 2023 Harris Hagan 202

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

Watch the recording of the DCMS committee oral evidence sessions:

22Sep

Gambling Commission establishes Industry Forum

22nd September 2023 Bahar Alaeddini 182

On 14 September 2023, the Gambling Commission announced the establishment of an Industry Forum, to be made up of representatives from the British gambling industry, with the role “to provide further insight into the views of operators… share industry views on areas such as account management, consultations and the Commission’s data programme.”

There will be approximately 10 cross-industry members.

The recruitment of a Chair will begin in September 2023, when the Gambling Commission will be inviting expressions of interest from industry to become a member. Details will be published on the Gambling Commission website.

We welcome this announcement. We also very much welcome that the Gambling Commission has listened with increased industry engagement, recognising that better relationships with industry leads to better outcomes. However, we make two important observations:

Why is the Industry Forum only being created now? It is: (a) nearly three years since the Gambling Act Review kicked off and the Lived Experience Advisory Panel was formed; (b) nearly six months since the publication of the White Paper; and (c) critically, the most important Gambling Commission consultations have already been published.

Cynically, it is titled a “forum”, which suggests the possibility (however remote) it may not be viewed with much value within the Gambling Commission itself. Why is the Industry Forum not placed on an equal footing to the Lived Experience Advisory Panel, Digital Advisory Panel and Advisory Board for Safer Gambling? The Lived Experience Advisory Panel is described by the Gambling Commission as “provid expert independent advice based on its members personal lived experience of gambling harms”. Putting aside the issue with this description and lack of members with positive experience (which I have written about previously and was raised by the DCMS Committee on 5 September 2023) why is the new forum not an “Industry Panel” providing “advice” to the Gambling Commission? Plainly, advice is just that and it can be ignored.

Further, as industry lawyers, we have not had any structured engagement with the Gambling Commission for two years since the last Industry Lawyers’ Group meeting in September 2021 (which used to meet once or twice a year) and even that had fairly limited value when the questions raised were not answered for six months.

Whilst we acknowledge, as Andrew Rhodes explained before the DCMS Committee on 5 September 2023, that the Gambling Commission has held more stakeholder engagements in the last year (220 to be precise), it appears to have been selective. In particular, it has excluded certain parts of the British gambling industry, including longstanding, experienced and balanced stakeholders and advisers, including us!

Industry lawyers are an important buffer between the Gambling Commission and applicants/licensees. This is perhaps most obvious in our immersion in compliance and enforcement. The Gambling Commission (in its current form) seems to confuse lawyers being unhelpful with lawyers acting on their clients’ instructions. Nowadays, the latter tends to require us to hold the Gambling Commission to account to comply with its own policies and procedures and the law. We very much hope the establishment of the Industry Forum will prompt the Gambling Commission to take a more strategic and holistic approach, and perhaps create, like other regulators, a framework for stakeholder engagement.

Whilst we are encouraged by the establishment of an Industry Forum, we are disappointed by its delay and remain keen to hear what other plans the Gambling Commission and its leaders have to engage with the industry and its stakeholders.

22Sep

White Paper Series: Regulatory Panel changes – Fair or unfair?

22nd September 2023 Bahar Alaeddini 182

In this blog, we consider the Gambling Commission’s most recent proposals to the Regulatory Panel.

It will not come as a surprise to readers that, as gambling lawyers, we have serious concerns about the proposals to:

use Adjudicators with only a minimum of five years’ post qualification experience (“PQE”); and
change the default from oral hearings to paper-based decisions subject to a fairness test.

Regulatory Panel and its importance

The Regulatory Panel provides an important opportunity for applicants and licensees to attend an oral hearing to challenge decisions made by Gambling Commission staff. It is the only avenue of recourse, outside the expensive options of the First-tier Tribunal and judicial review, when the Gambling Commission is going against you. Whilst we accept it is still, in fact, the Gambling Commission, it is an important accountability mechanism for Gambling Commission employees making decisions under delegated powers. This narrow and non-independent avenue of recourse should not be further eroded.

2020 consultation

On 18 May 2020, the Gambling Commission announced planned changes to its Regulatory Panel, which included: (1) the recruitment and appointment of legally-qualified Adjudicators, solely for the purpose of sitting on the Regulatory Panel with the “presumption” they will also provide legal advice; and (2) reconstituting the quorum as follows: (a) for operating licences: one Commissioner and one Adjudicator; and (b) for personal licences: one Adjudicator.

At the time, we were so concerned by the proposals and that the duty to act fairly was being compromised that we submitted a response to the 2020 consultation and shared it on our blog to assist others in preparing responses.

More than 14 months later, on 21 July 2021, the Gambling Commission published its consultation response which summarised the 22 written responses received from gambling operators, trade associations and others, including Harris Hagan. As explained in our August 2021 blog, The overwhelming majority of respondents disagreed with each of the Gambling Commission’s proposals, with a key concern being that “the independence and impartiality of the Panel would be adversely affected by the proposal to use adjudicators” as outlined in my May 2020 blog.

2023 consultation

The two main proposed changes are:

Quorum and composition

The Regulatory Panel will no longer comprise up to two to three Commissioners, advised by an independent legal adviser. Instead, it will be chaired by a legally qualified Adjudicator sitting alongside one Commissioner and one senior Gambling Commission employee. The Adjudicator would sit alone on case management matters and personal licensing cases.

The main reasons for the proposed change are to improve availability, improve governance and accountability and provide an enhanced skillset for decision making.

Our main concerns are:

Adjudicators will, as proposed in 2020, be employed by the Gambling Commission. In a small feat of victory, we note from the draft Governance Framework (published this time as part of the consultation) the Gambling Commission has acknowledged some of our previous concerns by indicating that Adjudicators’ will be home-based and appraisals will be run by a Commissioner.

Adjudicators will only need a minimum of five years’ PQE. The idea that someone with potentially as little as five years’ PQE would be adjudicating on a £20m fine, suspension or revocation of a licence is frightening. Where is the Gambling Commission’s evidence to support that five years’ PQE is appropriate? How is this a sufficient level of experience, bearing in mind they are likely to have absolutely no experience of gambling and, given their lack of seniority, very minimal experience making unsupervised decisions?

Unlike the 2020 consultation which failed to specifically mention other adjudication frameworks, this time, the Gambling Commission has made fleeting mention to the General Medical Council (regulates medical doctors), Ofqual (regulates qualifications, examinations and assessments) and Solicitors’ Regulation Authority (regulates law firms and solicitors) to support the move to a mixed model of decision-making. We remain wholly unconvinced by the Gambling Commission’s rationale. There are about 90 statutory regulators in the UK and yet the consultation includes no details, or evaluation, of the different models of adjudication and relative advantages and disadvantages (including appeal rates) of each model. Nor is there any reference to the determining factors for the chosen mixed model or the appropriateness of application to the regulation of commercial gambling. As with the 2020 consultation, we are left to assume this is deliberate given many of the other models appear impartial, independent and robust. By way of example, approximately half of the Financial Conduct Authority’s Regulatory Decisions Committee’s 18 members come from finance or financial services backgrounds. The other half have esteemed legal, governance, policy or academic backgrounds. Independence is further emphasised by the FCA handbook stipulation that: (i) none of the members are employees; and (ii) the committee has its own legal advisers and support staff.

The Principles of inspection and enforcement, as set out in Philip Hampton’s Reducing administrative burdens: effective inspection and enforcement report state: “egulators should be accountable for the efficiency and effectiveness of their activities, while remaining independent in the decisions they take setting out a number of core principles of effective regulation – the standard against which all regulators’ performance should be judged.” At a minimum, the Gambling Commission must publish its research into each adjudication model and its evaluation criteria for monitoring the “efficiency and effectiveness” of each model, together with the impact on applicants/licensees.

There is no mention of a trial period of using Adjudicators.

Default of paper decisions

Another proposal is to change the default from oral hearings to paper-based decisions. An oral hearing can be requested by the applicant/licensee; alternatively, the Panel itself may decide it is “required” – using a test of “fairness”, for example, where there are “material and significant disputes of fact”.

The main reasons for this proposed change are to reduce the burden on applicants/licensees particularly where they have unrepresented and find it difficult to navigate, and to increase the promptness of decision making.

Our main concern is that applicants and licensees will be denied the opportunity to bring their arguments to life. What is the test of fairness and why do we need one?

The requirements of fairness are flexible and fact specific. Legal history places huge importance on oral argument and, in our view, with good reason. Over 20 years ago, Lord Justice Laws recognised “oral argument is perhaps the most powerful force there is, in our legal process, to promote a change of mind.” Further, in R (H) v Secretary of State for Justice EWHC 2590 (Admin), Cranston J summarised the legal position in respect of oral hearings as follows:

Procedural fairness sometimes demands an oral hearing. There can be greater confidence with an oral hearing that the relevant standards have been properly applied and that the facts on which the decision is based are accurate. The oral hearing also gives the person affected by the decision the opportunity to tailor the arguments to the concerns of the decision maker.

Another concern is the matter of mutual respect for the Gambling Commission and the applicant/licensee with the latter’s perception of the process being central, as acknowledged in Osborn v Parole Board UKSC 61, in which Lord Reid referred to the principle that:

…justice is intuitively understood to require a procedure which pays due respect to persons whose rights are significantly affected by decisions taken in the exercise of administrative or judicial functions. Respect entails that such persons ought to be able to participate in the procedure by which the decision is made, provided they have something to say which is relevant to the decision to be taken.

We feel strongly that the Gambling Commission’s proposals do not conform to the necessary standards of fairness. The proposed barrier should therefore be removed, and the policy should simply say that an oral hearing can be chosen on request. This will address the Gambling Commission’s main reason for the proposed change whilst still enabling those who want one, a fair hearing.

The consultation cites the stress that the unrepresented applicants/licensees experience in attending hearings as a reason for changing the default to paper decisions. However, there is no mention of how many of the 12 requests, to the Regulatory Panel, last year were unrepresented. The Consultation is silent (no doubt, intentionally) on the introduction of a policy dealing with unrepresented parties.

Concluding thoughts

It is undeniable that the Gambling Commission is a very powerful regulator. How many other UK regulatory authorities can impose limitless fines, commence criminal proceedings and decide to close multi-million pound businesses?

It appears that the Gambling Commission’s primary focus is to cut costs. Inevitably, good decisions will not be made in the public interest, nor will those decisions be made following a fair process. The new proposals will have a far bigger negative impact than announced changes in 2021, which will be implemented at the same time (as amended). The only possible – dim – glimmer of hope is that decisions will or should be quicker. However, if those decisions are of poor quality and unfair, it means that they will be more routinely appealed to the First-tier Tribunal, which will be lengthy, uncertain and expensive. Therefore, any possible benefit gained from quicker decisions will be more than outweighed by the drawbacks.

If we look at the regulatory landscape, the Gambling Commission is proposing to make these significant changes at the same time as it is escalating fines and sanctions.

Effective regulation requires effective accountability, and it seems to us that the Gambling Commission is removing a weakening mechanism which holds the regulator to account for its own policies and procedures and the law.

In conclusion, and repeating the final words from my May 2020 blog, the proposed changes do not offer a practical vision for adjudication that is consistent with good regulatory and legal practice. There is nothing to suggest that fairness has been a consideration. The only consideration appears to be about saving cost, time for the Gambling Commission and Commissioners, and speeding up the process. In doing so, the duty to act fairly has been compromised.

Respond to the consultation

We strongly encourage industry and its stakeholders to respond to the consultation, which closes on 18 October 2023.

22Sep

White Paper Series: Defining the Future VIXIO Webinar

22nd September 2023 Harris Hagan 189

On 15 September 2023, Bahar Alaeddini appeared as a panellist on a VIXIO Regulatory Intelligence (formerly GamblingCompliance) webinar titled “UK White Paper: Defining the Future” together with Tim Miller from the Gambling Commission, Sarah Fox from the Department for Culture, Media and Sport and Dan Waugh from Regulus Partners. The panellists had an insightful and lively discussion about some of the proposals in the recent wave of consultations and next steps:

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.

24Aug

Gambling Commission publishes new remote customer interaction guidance

24th August 2023 Adam Russell 189

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

Context

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

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

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

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

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

other references in SRCP 3.4.3 to the guidance,

until at least 12 February 2023.

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

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

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

New customer interaction guidance now published

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

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

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

In addition, SRCP 3.4.3 requirements:

to take into account the guidance; and

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

will come into force on the same date.

Next steps

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

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