The Chief Executive Officer of the Gambling Commission, Andrew Rhodes, delivered a speech on 8 November 2023 at the CEO Briefing 2023, an event organised by the Gambling Commission for C-level executives in the gambling industry to discuss progress with the implementation of the White Paper, share insights and explore current challenges.
This blog outlines the key themes from Rhodes’ speech, upon which we have been reflecting. It also highlights why, in our view, Rhodes is, by virtue of his plain-speaking leadership style at the Gambling Commission, making strides in improving the regulator’s relationship with its licensees, during an unprecedented period of change for the industry.
A more grown-up relationship
Rhodes opened the speech by reflecting on progress made since the Gambling Commission’s last CEO briefing (which we wrote about here). He acknowledged that the Gambling Commission “are seeing far less…extreme cases emerge from casework” in terms of player protection and commended operators and trade bodies for progress made. However, Rhodes made clear that more work has yet to be done:
“Last year I was clear that eliminating… …cases of extreme harm would lead to a new and – if anything – more challenging phase – how to tackle the more difficult issues where the balance between the licencing objectives and legitimate innovation, consumer choice and fair business practice is harder to define…
And all of that comes together in how we want the relationship between us, as the regulator, and you, as operators, to be if we want to continue to keep pace on the progress we have made over the last 12 months. A much more grown-up relationship where we can be transparent about the issues that matter and collaborative in how to address them.“
This message will be music to the ears of many because, for seemingly as long as anyone can remember, licensees have been complaining of being unable to engage constructively with the Gambling Commission. If Rhodes can deliver on his promise of creating a more communicative and collaborative relationship between regulator and regulated, this can only be good for the industry and regulator alike.
It is very positive that this message is being delivered from the top-down. However, as we all know, even a well-led organisation is only as good as those on the ground and to truly deliver on his promise of cultivating a more “grown up relationship“, Rhodes will need to ensure that his message filters through the Gambling Commission’s licensing, compliance and enforcement divisions, with which the industry interact, with varying degrees of cordiality, on a daily basis.
Praise where praise is due
Rhodes went on to reflect on the core messages he delivered at his speech at the 2022 CEO Briefing, noting that “last year I said we are still seeing too many of the extreme cases – the top of the chart – and that this was holding us back from grappling with those more complicated and harder to solve challenges”.
This year, the message to licensees was much more positive and represented a somewhat rare ‘pat on the back’ from the Gambling Commission:
“Now I’m not going to say everything is perfect now, but twelve months on we are seeing far less of those extreme cases emerge from our casework. The industry has made progress and I want to thank the many operators in the room today and your trade bodies for having worked with the Commission to achieve this step forward.“
Rhodes went on to note that the reduction in extreme casework will allow the Gambling Commission to start considering more complex issues. He hinted that this could involve the regulator gaining a better understanding of the issues faced by different types and sizes of operators, so it can better regulate a diverse industry with a dynamic customer base; and understand how technology can be used to “reduce reliance on manual processes” – even though human judgement will always be needed in some instances.
A more collaborative approach to tackling the illegal market
Rhodes also touched on the work the Gambling Commission has been doing to tackle the illegal, unlicensed gambling market in Great Britain. This is a topic on which we have extensively written (please see our recent blog here for example, which provides a checklist for licensees who find themselves contacted by the Gambling Commission regarding the use of their software or placement of ads by black market operators), so we will not repeat ourselves; but two statements made by Rhodes in the CEO Briefing are worth emphasising.
First, Rhodes noted in his introduction to this topic that he has often been misquoted regarding the risk of illegal gambling in Great Britain (which, as regular readers of other gambling publications will know, is quite true), and helpfully clarified that in his view (emphasis added):
“The risk of illegal gambling and the black market as an argument against reform of regulation is, I think, overstated, based on what we see in reality… …That does not mean there is no risk, as I have said many times. It does not mean there are no problems…“
Secondly, Rhodes explained that the Gambling Commission is hopeful it will soon begin seconding people from the industry to boost its insight and expertise in relation to tackling illegal, unlicensed gambling. Again, this will be a welcome message for the industry, who have long felt that they have much to offer to help the Gambling Commission to carry out its functions in this important area – another indication that Rhodes will continue, during his tenure at the Gambling Commission, to do more to improve collaboration with industry stakeholders.
High growth operators to be under the spotlight
Rhodes also hinted in his speech that in the forthcoming year, the Gambling Commission will be focusing its attention on a slightly different category of licensee. Specifically, he explained that the Gambling Commission will be turning its sights to Tier 2 and Tier 3 operators, “particularly where they have grown rapidly”.
This is not because they see growth as a “bad thing” – but because it may be an indication that the business may be growing faster than the underpinning compliance infrastructure.
This is a valid observation and operators that fall into this category will be well-advised (if they have not done so already) to commence a review of their internal policies and procedures to ensure they continue to be both:
- fit for the business given its changing size, nature and/or customers; and
- regularly updated to reflect recent changes to the Licence Conditions and Codes of Practice and associated guidance; for example, in relation to remote customer interaction, a subject upon which we have extensively written – most recently, here.
To be or not to be bound by the Regulators’ Code?
Perhaps the most controversial section of Rhodes’ speech concerned his nod to the Regulators’ Code – and more specifically, his indication that the Gambling Commission does not consider itself to need to strictly adhere to these standards, which are intended to provide a “principles-based framework for regulatory delivery that supports and enables regulators to design their service and enforcement policies in a manner that best suits the needs of businesses and other regulated entities”.
In broaching the subject, Rhodes referred to “questions about the Gambling Commission’s adherence to the Regulators’ Code” (explored in some of our previous blogs, including this article), and went on, somewhat dismissively, to refer to the Regulator’s Code as “a seven page document written some years ago” that contains:
“a number of very sensible guiding principles for regulators, but it is meant to be just that – a sensible set of guiding principles – it does not try to cover the exact application of regulation in all circumstances.”
Rhodes went on to give some context to this statement by highlighting that the Gambling Commission’s role in regulating the gambling industry is to find an appropriate balance. For example, to find a balance between complying with its duty to aim to permit gambling, and consistency with the licensing objectives. Or, in terms of balancing the interests of the 22.5 million people that gamble in this country every year (44% of the adult population) with the risk that some of that cohort will experience harms from gambling.
Although we agree that the Regulator’s Code is a set of guiding principles which requires the Gambling Commission to “choose proportionate approaches” to those it regulates based on “business size and capacity”, “minimis negative economic impacts of their regulatory activities”, it is much more than that and we suspect that this part of Rhodes’ speech is likely to stimulate future debate.
No one can reasonably argue that the man at the helm of the Gambling Commission does not have a difficult job, and Rhodes appears to be balancing the issues with which he is faced with gumption. However, it is clear that regulators such as the Gambling Commission must have regard to the Regulator’s Code when developing policies and operational procedures that guide their activities. This is not so dissimilar from the obligation the Gambling Commission imposes upon its licensees to have regard to the Gambling Commission’s formal guidance and advice under the Licence Conditions and Codes of Practice. If the Gambling Commission expects the industry to properly take into account its own guidance, surely it must practise what it preaches.
Swallowing a bitter pill
Next, Rhodes addressed the elephant in the room – the recent high-profile discussions regarding the introduction of financial risk and vulnerability checks and how these would impact the British horseracing industry.
Labelling it as “an exceptionally difficult and sometimes very bitter debate”, Rhodes disclosed that he has spent a lot of time meeting with and speaking to senior leaders in horseracing and groups representing punters. Despite this, Rhodes’ message was that it is not the job of the Gambling Commission to “consider or advise on the wider implications for any given sport – that is the role of the ”.
Rhodes went on to draw comparisons between the relationship between gambling and football vis a vis horseracing, commenting that many would “probably agree football would still happen even if people could not gamble on it”, but horseracing:
“is unique in its relationship with gambling and has a critical dependency on gambling as a funding stream. If less people lose money betting on horseracing, the income into horseracing goes down.”
Despite this, Rhodes brought attention to the Patterns of Play research, which showed that out of the accounts used for horseracing bets, “the most profitable 1 percent from the operators’ perspective accounted for 70.4 percent of Gross Gambling Yield” – that 1% being a proportion five times smaller than the equivalent percentage for other types of sports betting; and that operators needed to take this into account when determining the financial thresholds to apply when assessing the risk of different customers’ spend.
Rhodes effectively therefore poured cold water on a campaign by the horseracing industry that there should be no checks at all on how affordable someone’s gambling is in horseracing. For example, in the recent petition presented to UK Government that has (as at the time of writing) accumulated 102,806 signatures (more than the 100,000 signatures needed to be considered for debate in Parliament), and which has recently attracted the following response from the UK Government:
“We are committed to a proportionate, frictionless system of financial risk checks, to protect those at risk of harm without over regulating….
….this petition raises the important link between betting and horseracing. The government recognises the enormous value of horseracing as both a spectator sport and through its economic contribution. The white paper’s estimate was that financial risk checks will reduce online horserace betting yield by 6% to 11%, which would in turn reduce racing’s income by £8.4 to £14.9 million per year (0.5% to 1% of its total income) through a reduction in levy, media rights and sponsorship returns.”
Rhodes’ comments and the Governmental response therefore confirm – perhaps to the dismay of signatories of this petition – that both the Gambling Commission and the Secretary of State are committed to rolling out financial risk checks – but that these will only be tested, trialled and rolled out when the Government and Gambling Commission are confident the checks “will be frictionless for the vast majority of customers”.
How precisely this will be achieved is a thorny issue. It is not yet clear what is meant by the phrases ‘frictionless’ or ‘vast majority’ and the interpretation of these words will be critical to ensuring that financial risk checks do not have unintended consequences for the gambling industry in Great Britain. We truly hope that the Government and Gambling Commission identify some innovative solutions by the time the Gambling Commission’s response to its Summer 2023 consultation (which considered how financial vulnerability and financial risk checks would be implemented) is published in 2024.
In concluding his speech, Rhodes highlighted two forthcoming developments:
- the Gambling Commission’s new three-year Corporate Strategy (due to be published next Spring), where they are “baking into it a focus on communicating clearly and building effective partnerships” which “will include engaging constructively with industry”, with a view to “reduc the reliance on formal enforcement”; and
- a one-day conference hosted by the Gambling Commission during which, similar to an event hosted in 2023, the Gambling Commission will invite collaboration with operators, academics and the third sector to discuss how to improve the evidence base in gambling and tackle the illegal market. The next conference in this series is scheduled for March 2024.
Finally, Rhodes reiterated the key message in his speech by calling on the industry to “commit to working together” as it will “lead to a better regulation, better outcomes and safer, fairer and crime free gambling across Great Britain”.
Rhodes’ comments in the CEO Briefing, as well as his general approach since he has been appointed as Chief Executive Officer of the Gambling Commission, are encouraging and potentially signal the beginnings of a relationship between the Gambling Commission and its licensees. However, as they say: “the proof of the pudding is in the eating” and we will be closely watching to see whether Rhodes’ approach is reflected in the Gambling Commission’s work during 2024 – particularly in relation to its responses to the recently closed Summer 2023 consultation and recently opened Autumn 2023 consultation; and in its future enforcement action.
If you would like to discuss Rhodes’ speech or any of the themes therein, please get in touch with your usual contact at Harris Hagan.
With credit and sincere thanks to John Hagan for his invaluable co-authorship