White Paper Series: Low(er) stakes gambling in the high stakes White Paper
An objective of the review of the Gambling Act 2005 was to protect players from the risk of harm, and to address this, the Department for Digital, Culture, Media & Sport (“DCMS”) proposes in its white paper, High Stakes: Gambling Reform for the Digital Age, the implementation of a package of protective measures, including applying a stake limit to online slots.
Consideration was given to applying a stake limit to all online products, including all casino games and betting. However, evidence suggests that slots, which are defined in the Gambling Commission’s Remote Technical Standards as “casino games of a reel-based type (includes games that have non-traditional reels)” carry the greatest risk of harm. 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, as the nature of slots allows for frequent staking (the average spin speed for online slots is 7 seconds, although a game cycle can be as little as 2.5 seconds) with no statutory limit on the amount people can stake – at least not yet.
The Gambling Commission’s Advice to Government encouraged a stake limit for online slots and suggested several options, including:
- a universal stake limit applied to all players on a precautionary basis;
- tailored stake limits applied only to at-risk demographic groups or customers identified as being at risk of harm; or
- a risk-based “smart stake” which allows a stake limit to be tailored to the player.
DCMS agrees that stake limits are needed, but while we know that stake limits will be coming, we do not know definitively where they will land, as DCMS will be consulting this summer on applying a stake limit to online slots which will be fixed somewhere between £2 and £15 for the general population, with a lower stake limit for 18-24 year olds which could be either £2, £4 or using a risk-based smart stake approach.
In the land-based sector, a reduced stake limit was applied to fixed odds betting terminals (“FOBTs”) in April 2019, lowering the maximum stake from £100 to £2 in an effort to reduce the risk of gambling related harm. This had a very significant effect on betting shops, which suffered a £763 million or 42% drop in machine sector gross gambling yield (“GGY”) between 2018/19 and 2021/22.
We think it is unlikely that the online slots stake limit will have parity with the £2 FOBT limit, and for good reason. Online operators benefit from the fact that their customers must hold accounts with them, giving them access to data which allows them to monitor their customers, track their play, and intervene where necessary. This is less easily achieved by land-based operators, whose customers can be unknown and where it can be difficult to track play as they move across machines. Additionally, the stake limit is just one of a number of protective measures that is proposed in relation to online gambling, meaning that there will be layers of protection for the customer.
That said, it is also unlikely that the stake limit will be set at £15. The nature of slots products is that they can be played very quickly and repetitively, with a new game round potentially every 2.5 seconds – even at a £15 maximum stake, this could quickly add up to significant losses.
Most likely, the limit will be set around the £5 mark. Indeed, this is the number that was leaked from an earlier version of the white paper in July 2022, and a cynic might say that reverse engineering is in play, and that by giving a range of £2 to £15, DCMS can say that they are being tough on industry by imposing a £5 limit at the lower end of the spectrum under consideration.
For the year 2021-22, online slots GGY was £3 billion. DCMS has calculated the financial impact of the proposed stake limit based on a fixed maximum of £8.50, which is the midway point between the proposed range of £2 to £15. This estimates a drop in online slots GGY of £135 million to £185 million, or 4-6%. If the stake limit is set at £5, the impact on the industry will be even greater.
DCMS’ consultation will take place this summer, and we urge you to get involved. Do get in touch if you would like any advice, or need assistance preparing a response.