Category: Gambling

The trade body for bookmakers, the Association of British Bookmakers (ABB) has described a report by MPs on fixed-odds betting terminals (FOBTs) as “deeply flawed” after it called for the maximum stake on the terminals to be cut from £100 to just £2. The All-Party Parliamentary Group (APPG) on FOBTs said the maximum amount a punter can stake on a single spin should be reduced to £2 in its final report of a six-month inquiry following growing disquiet among politicians about the harm being caused on Britain’s high streets by the machines.

The report said: “We were disappointed that the bookmakers declined to participate and fear this is a reflection of their denial of the problems associated with FOBTs and a reluctance on their part to speak to policy makers about appropriate regulation.”

The group Chairwoman Carolyn Harris said:

“There is now a clear case for the Government to substantially reduce the maximum stake which can be played on FOBTs. The time for prevaricating is over. These machines are easily accessed in the most deprived areas, sucking money out of the pockets of families. I support a responsible gambling industry, but there is nothing responsible about how FOBTs are currently being operated. I urge the Government to take action now.”

The ABB warned such a move would be a “hammer blow” to high street bookies and threaten thousands of jobs. It demanded an immediate inquiry by the Parliamentary Commissioner for Standards into the APPG, which it condemned as a “front for vested commercial interests”. ABB Chief Executive Malcolm George said: “This is a deeply flawed report funded by vested interests who would directly benefit if its recommendations are ever implemented.”

They said the parliamentary group had no proper standing; that its report merely reflected the views of certain MPs with an axe to grind; and that the report had been funded by rivals in the gambling industry, such as those in the casino, arcade and pub industries.

“We strongly believe that the Parliamentary Commissioner for Standards should urgently investigate this all-party parliamentary group,” said Malcolm George, Chief Executive of the Association of British Bookmakers.

“This group of MPs has operated in secrecy, provided no transcripts of the evidence given to their meetings and operated throughout behind closed doors away from public scrutiny.”

He added that betting shops were already closing at the rate of more than 100 a year and if the findings of this report were implemented, it “could spell the beginning of the end for the High Street Bookmaker”.

The Chairman of the Local Government Association’s Safer and Stronger Communities Board, Simon Blackburn, said: ” As well as leading to spiralling debt, problem gambling can impact on individuals and their families’ physical, mental and emotional health and well-being as well as having a wider impact on society through crime and disorder. With rates of problem gambling higher among those who live near clusters of bookmakers, it is essential that, as the report also recommends, councils are given powers to stop further clusters of betting shops on our high streets.”

The MPs in their report said they had given the bookmaking firms plenty of opportunity to submit evidence. Despite the bookies’ opposition to the report, Carolyn Harris MP said the time for prevaricating was over and the government should now take action.

The 35,000 machines, primarily offering roulette, have become the biggest source of money for the bookmaking industry and now provide more than half its profits.

The report cited figures showing that in 2015 £1.7bn was lost by gamblers on the terminals, each of which took on average £48,724 from punters that year.

The industry’s enthusiasm for the machines has seen it accused of spreading gambling addiction in some of the poorest parts of the country, especially where there are unusually high concentrations of bookies shops in local high streets.

The MPs repeated their previous call for the spin speeds of the electronic gambling machines to be reduced to slow down the speed of repetitive betting. And they also said that the number of betting terminals in each shop should be cut from the current limit of four.

The MPs also took a swipe at the Gambling Commission, which regulates most betting in Great Britain, saying it had been slow off the mark and had failed to do its job properly, “We urge the Gambling Commission to take an active role in advising the government to fully regulate FOBTs and to look into accusations of any malpractice by bookmakers or gambling premises more widely.”

There has been no more divisive product in the gambling sector since they were introduced many years ago. They make significant profits for the betting industry but their existence has always generated a significant debate. If observers thought that the latest chapter was to bring a conclusion to the debate they are significantly mistaken. There is no doubt that the betting operators will fight to protect their rights to offer the facilities, it now appears that other vested gambling interests maybe promoting those who oppose their very existence.

The “Fixed Odds Betting Terminals All Party Parliamentary Group Report” can be found at the following link:

http://fobt-appg.com/wp-content/uploads/2017/01/Fixed-Odds-Betting-Terminals-Inquiry-Report-January-2017.pdf

We will continue to monitor developments and report as and when there is more information available, but it appears the FOBT debate will continue to be a significant issue for the betting industry.

 

On 21 December 2016, the Gambling Commission (“GC”) published proposals for significant changes to its fees that will come in to force on 6 April 2017. Those proposals result from a consultation conducted jointly by the GC and the Department for Culture Media and Sport (“DCMS”) between 7 July and 9 September last year and are contained in the responses document, a copy of which may be viewed here: http://www.gamblingcommission.gov.uk/pdf/Consultations/Proposals-for-Gambling-Commission-fees-from-April-2017-consultation-response-2016.pdf

The GC has been looking into the fees it charges operators to cover the work that it does for some time now, having previously launched what it described as a “discussion exercise” from 1 September 2015 to 27 October 2015, to take into account the implications, in terms of its income and costs, of the implementation of the Gambling (Licensing and Advertising) Act 2014. As part of that exercise, the GC held a workshop for Trade Associations on 24 September 2015 and it held a similar workshop on 20 July 2016, as part of the more recent consultation exercise.

The previous consultation was wide-ranging, posing a large number of questions relating to the GC’s current fee structure. It attracted a total of 27 responses from, predominantly, trade associations and operators. It covered matters ranging from those of general application, such as the GC’s current approach to revising fees every two to three years and its differentiation between sectors and licence types, using a banded structure to set fees, to more detailed questions, dealing with, for example, reducing fees payable for applications to continue a licence when a change of corporate control has occurred in relation to small-scale-family-owned operators and for applications to vary a licence where an operator moves only within a fee band. The GC published its response to that consultation exercise in December 2015 that document may be viewed here: http://www.gamblingcommission.gov.uk/pdf/Discussion-papers/Fees-discussion-responses-document-December-2015.pdf

The responses received to the 2015 consultation were taken into account in the advice provided to DCMS by the GC, which, in turn, informed the 2016 consultation process.

The 2016 consultation document received 36 responses, again, predominantly from operators and Trade Associations, but also from members of the public. It outlined three main options for changes to GC fees, for stakeholders to consider. The main features of option 1, DCMS’s and the GC’s preferred option, were:

• A reduction of 10% in total annual fee income across the industry as a whole, to reflect efficiencies achieved in the GC’s operating costs;
• The retention of a banded structure of fee categories, but with those categories being determined dependant on gross gambling yield (“GGY”) rather than premises numbers for certain non-remote operators; and
• The sub-division of certain fee categories into smaller bands.

The second option considered was for no change to be made to current fee levels. The third option consulted upon was that there be a flat 10% reduction in annual fees for all operators.

The changes now proposed will result, the GC estimates, in fee reductions for around 1900 operators, with fees being held at current levels for around 1000 operators and fees increasing for fewer than 100 operators. Application fees for all operators across all types of licences will be reduced by 10%.

One of the most significant changes is that, from 6 April 2017, the fees payable by non-remote betting, bingo and arcade operators will no longer depend upon the number of premises they operate but, instead, will be determined according to their GGY. This is defined as A+B-C, where:

A = The total of any amount paid to the licensee by way of stakes in the relevant period directly in connection with activities authorised by the licence;

B = The total of any other amounts (exclusive of VAT) that will otherwise accrue to the licensee in the relevant period directly in connection with the activities authorised by the licence; and

C = The total of any amounts that will be deducted by the licensee for the provision of prizes or winnings in the relevant period in connection with activities authorised by the licence.

Whilst non-remote betting and arcade operators who responded to the consultation favoured this change, the bingo sector largely opposed it, on the basis that it will result in non-remote bingo operators representing almost half of the total number of operators for whom these new fee proposals will result in an increase in the amount they will be required to pay. Bingo operators felt that this was disproportionate, compared to other sectors which would mainly benefit from the proposed change. However, the GC and DCMS are persisting with this option and the consultation response document points out that, whilst more than 35 bingo licence holders will receive significant fee increases, approximately 150 will, in contrast, receive a reduction. The document also points out that the move from premises-based fee categories to GGY will shift the fee burden away from the very smallest bingo operators that generate very low GGY (including working men’s cubs) towards high street and retail bingo operators. The justification for a move to GGY in calculating fee levels is that GGY represents the volume of gambling activity being carried on and thus represents a fairer way, in the GC’s view, of recovering its regulatory costs.

This notwithstanding, as a result of the responses received to the consultation, the GC has amended the proposals slightly. A new fee band will be created for bingo operators with a GGY between £750,000 and £1.25 million. The GC estimates that around 16 bingo operators will fall into this band. These currently pay an annual fee of £1,531 and, under the proposals as originally drafted, would have been due to pay, instead, an annual fee of £3,055. Those falling within the new band will now be due to pay an annual fee of £2,050 instead. The GC has also done a calculation of the new annual fee as a percentage of GGY for those bingo operators who will be subject to an increase, and anticipates that this figure will still be low, ranging from 0.08% to 0.27%.

The proposals will result in an increase in fees for medium-sized and large remote betting operators. The GC estimates that 11 operators will be affected by this increase. At the same time, 100 smaller remote betting operators will see their fees decrease. The GC takes the view that the fees for large remote betting operators are currently set at too low a level to enable it to recover a fair proportion of its costs from such operators, given the relative volumes of gambling they generate. It says that the proposals are aimed at ensuring that costs are spread more fairly and proportionately and, again, estimates that the new annual fees will still represent a small percentage of GGY, falling between 0.06% and 0.027% of that figure.

Under the proposals, certain fee categories will be further sub-divided into smaller bands. In addition to the creation of an additional fee band for medium-sized general betting (standard), bingo, AGC and FEC operators whose GGY is between £750,000 and £1.25 million, the size of the fee bands for the largest bingo and AGC operators will also be amended, to ensure that differently-sized operators at the top end of these sectors will pay different fees. The GC maintains that this will ensure that a more proportionate amount of costs is recovered in relation to GGY. The GC’s view is that the main driver of risk to the licensing objectives, and therefore of its regulatory effort, is the volume of gambling activity generated by licensed operators, which is best measured by GGY. In the GC’s view, an increase in gambling volume may, for example, generate more consumer complaints and regulatory issues such that, when an individual operator’s GGY increases, more compliance work will be required. The GC will use operators’ most recent annual regulatory return (or the previous four regulatory return submissions for operators who submit returns quarterly) in order to allocate operators to a fee category based on GGY. It intends to write to all operators shortly, and before the changes to fees are implemented, to confirm their GGY.

The GC has also reviewed its costs in relation to 2005 Act casinos by comparison to those relating to 1968 Act casinos. It has decided that the current costs applying to Small 2005 Act casinos were set at too high a level, being three times higher than the annual fee for a 1968 Act casino with the same GGY. Therefore, the fees for Small 2005 Act casinos are to be significantly reduced, by approximately 50%.

Another major change brought about by these proposals is the creation of a new category of “host licence” for gambling software licensees that also provide facilities for gambling by making their games available to customers of remote casino, bingo or betting operators. Such operators are currently required to hold a full operator’s licence in addition to their software licence. From 6 April 2017 they will, instead, only be required to hold a “host licence” licence, and pay correspondingly reduced fees, as long as they do not contract directly with any of the participants using the facilities and do not provide facilities for peer-peer gambling. Those fees will depend, again, upon GGY which, in the case of the B2C operators, will be calculated upon receipts after they have made payment to the B2B entity and, in the case of the B2B operators, will be calculated by reference to the payment they receive from the B2C entity, whether that be a fixed sum or a percentage of revenue.

The GC has decided that it is not appropriate to make a similar “host licence” category available to gambling software providers serving the lotteries sector. This is on the basis that a lottery operating licence may only be held by a non-commercial society and that, if a commercial entity participates in any of the activities which constitute promoting a lottery, they must hold an external lottery manager’s (“ELM”) licence. The GC considers that any form of “reduced” ELM licence for operators hosting lottery products would not be sufficient for it to recover its regulatory costs for its work in the lotteries sector.

The new fee proposals also cover various matters of detail. These include dropping the fee for operators when they apply to vary their licence to increase or decrease fee category to a flat rate of £25.00. In addition, the fees discounting system whereby the first annual fee is discounted by 25% will, from 6 April 2017 apply to new remote operating licences, whether or not the business already holds a non-remote licence. The discount which already applies to non-remote licences will remain. Further, the annual fee discount arrangements will be amended to apply a 5% annual fee discount to every licence activity on both non-remote and remote operating licences, for operators who hold both. Applications to continue operating licences following a change of corporate control where the applicant is a small family-owned limited company and the shares have been transferred to an immediate family member will attract a reduced fee of £100.00. Finally, any application to vary a personal licence to reflect a change in the name of the licence holder, or to amend the name of an individual named on an operating licence, will be dealt with free of charge.

If the GC’s calculations are correct, these new proposals will result in either no change to, or a reduction in, fees for the vase majority of operators. However, it is undeniable that significant increases will be felt by some. If you are concerned about how the new fees structure might affect you, please contact one of the team.

In December 2015 Paddy, Anna and myself sat down as we usually do to review the year and to look forward to and plan the next year. It was clear to us that the Gambling Industry was going through significant changes in terms of compliance and regulation following some high profile review cases brought by the Gambling Commission, and the public statements and penalties which followed those review cases. We decided at that stage to hold a seminar and Simon Thomas at the Hippodrome kindly agreed to give us use of the theatre for the event.

On the 6 June 2016 over 100 people attended the Hippodrome and heard presentations from all of us at Woods Whur, as well as from Kerry Simpkin (Westminster Council), Sheila Roberts (Newham Council) and Rob Burkitt (Gambling Commission) and we received some excellent feedback on what was a very enjoyable day. My opening presentation was entitled “Changing Times” and I reflected on how there had been very little regulation between 2007 to 2011 but that, since 2011 and in particular during 2015, we had seen a new approach to enforcement from the Gambling Commission, with a huge focus on anti-money laundering and social responsibility controls. There had been major public statements on the 7 September 2015, 15 December 2015 and thereafter in February and April 2016, and all public statements related to major operators in what is a heavily regulated industry. It was clear that the Gambling Commission felt that the gambling sector as a whole was not reaching the standards required in 2016, and that more detailed inspections at provincial casinos and betting offices would be taking place.

We are still waiting for the latest decision in the Greene King Bingo Operating Licence application case and we are currently left with the comments of Judge Levenson who noted as follows: “The Commission has an integral role as the national body with oversight over gambling policy and regulation… it acts as a gatekeeper by issuing operating and personal licences, it provides guidance to local authorities and advice to Government and its first duty is to have regard to the licensing objectives…. the Commission has the function of setting policy at a national level and where innovative applications are made it cannot be unlawful for the national regulator to express a view as to the wider issues of principle”.

When I first read Judge Levenson’s comments I wondered if the Judge had gone too far in expressing his opinion as to the role of the Gambling Commission, but having considered the matter further, I welcome the Judge’s comments that the Gambling Commission can (and should) be expressing a view. I would go further than that, and ask the Gambling Commission to be very clear in their views and approaches, to ensure that the industry as a whole is aware of the Gambling Commission’s approach and opinion and to regularly update the industry on the Gambling Commission position.

What has frustrated me in recent years with regard to the Gambling Commission is what I perceive as a lack of transparency and openness with the industry. The industry and the Gambling Commission should work together to achieve “best practice” and that can only be achieved by the sharing of information and a proportionate approach to regulation throughout the industry.

• If decisions are being made with regard to particular cases or particular innovations, then let us know who is ultimately responsible at the Gambling Commission for this and let us meet with them to discuss their approach. Don’t hide behind a Gambling Commission officer who ultimately cannot make any decisions or discuss cases openly.
• Don’t hide behind the usual mantra of “we don’t give advice”, “we don’t approve policies and procedures”. Be more proactive in working with the industry. I still receive correspondence from the Gambling Commission which says they do not approve policies and procedures and yet in the same post can receive correspondence from the Gambling Commission indicating that an application is going to be refused because the policies and procedures are either missing or inadequate.
• Cut down on significant delays in responding to correspondence in major cases. I have had examples in the last year of waiting sixty days for a response on a particular case which is wholly unacceptable.The ambling industry should be under no illusion that the regulatory approach to compliance of 2015 and 2016 will continue, into 2017 and beyond. Most of the major London casinos have already been inspected, some provincial casinos have now been inspected, and the next phase of regulatory control will surely relate to provincial betting offices, bingo premises and adult gaming centres. The Money Laundering Regulations 2007 must be complied with and individual companies and individual premises will have to ensure that the following main regulations are covered, not only by policies and procedures, but by staff fully understanding the implications of these regulations:
• The above frustrations do relate to individual cases and it is only fair to comment that I have also had experience of receiving a first class and tremendous service from the Gambling Commission on other cases. Individual officers have turned around applications extremely quickly when circumstances dictate that a swift response is required and others have been incredibly helpful and forthcoming in assisting applications and cases in general, during the last six months. Just as I am not going to name and go into detail about the individual public statements I am not going to name individual officers who have been extremely helpful, but should like to thank those officers at the Gambling Commission for their help during 2016.
• Regulations 5 & 7: Customer Due-Diligence
• Regulation 8: Ongoing Monitoring of a Business Relationship
• Regulation 14: Enhanced Due-Diligence
• Regulation 19: Keeping Records
• Regulation 20: Adopting Risk Sensitive Policies I welcome the approach of the Gambling Commission in organising the Raising Standards Conference on the 8 November 2016, which by its very nature starts to deal with my earlier frustrations with regard to transparency and proportionality, and I think it is worth concluding my final article of 2016 by reminding everyone of the three main topics covered by Sarah Harrison, Chief Executive Officer for the Gambling Commission:
• The challenge to the industry is to ensure that regional area managers and regional shop managers fully understand these policies and ensure that all staff are working towards a common goal of putting into effect all policies and procedures.
• The Gambling Commission vision for raising standards and accelerating the pace of change.
• The specific areas of focus for the Gambling Commission.
• The Gambling Commission review of their enforcement policy and proposals for the future. The specific areas of focus for raising standards will be social responsibility, treating customers fairly and money laundering, and everybody in the industry should be aware of the five bullet points that Sarah put forward in the social responsibility part of her speech:
• The Gambling Commission’s point of view is that more can be done to put customers at the heart of what the operators do and that was a major point of Sarah’s speech. “Don’t wait for a crisis to happen”.

1. Is the work operators are doing on social responsibility aimed at preventing harm – or just dealing with it where it was already occurring?
2. How will the industry assess the impact of measures and share findings?
3. Are operators doing the minimum or taking their responsibilities further?
4. Are businesses considering every aspect of the customer journey?
5. Will operators take stake holders with them and be open about the inputs to their work as well as the conclusions and actions?

The most important part of the speech in terms of regulation and the one most significant message that operators need to take forward into 2017 is that the Gambling Commission will remove any bias in favour of settlement and put all aspects of regulatory enforcement including a licence review on an equal footing. As Sarah said, “Yes we should use them (“the powers”) proportionately but adopting a blanket approach of seeking a regulatory settlement as a matter of course is not the right way to achieve that proportionality”.

In 2015 and 2016, many clients and many operators ensured that their policies and procedures evolved to meet new standards. The Gambling Commission call is to “take this to the next level” and the industry should seek to be at the forefront of working with the Gambling Commission to ensure that this happens.

I am sure that 2017 will continue to be an interesting time for the gambling sector, and we would like to wish everybody a happy Christmas and a merry New Year.

2016 has certainly been busy for the lotteries sector, with good causes and External Lottery Managers (“ELMs”) alike constantly seeking to innovate in order to raise funds, in what has been a somewhat tricky climate for the charitable sector, during a year which has, notably, seen the introduction of the new Fundraising Regulator.

I am lucky enough to be standing advisor to the Lotteries Council and its members and I have been kept busy with a whole range of queries in the past year, coming from organisations large and small.

One of the areas in which I have most frequently been asked to advise is the question of whether it might be possible for a society to obtain multiple lottery operating licences in order to increase the amount of good causes money raised in this way. The Gambling Act 2005 places a limit of £10 million on aggregate proceeds – the total amount paid in respect of lottery tickets – that may be raised in reliance upon a single operating licence in the course of a year. A number of charities have already successfully obtained multiple operating licences in order to maximise revenue, and I know that more are currently considering doing the same.

A number of issues arise from the need to establish multiple, separate societies, how to structure these and the implications of any new arrangement in corporate governance terms. Perhaps most importantly, the Gambling Commission (“GC”) requires the aims and objects of each individual society to be absolutely distinct, if they are to hold multiple licences. This involves careful consideration of the totality of the work undertaken by the “umbrella society” and its division into clearly distinct and distinguishable areas. Early input and guidance from the GC as to what they might and might not find acceptable is essential. I have found the GC to be invariably helpful and proactive in this regard. Some care will also need to be taken to co-ordinate the applications for new licences with the surrender of the previous, “umbrella” licence.

All of this is taking place against the backdrop of the Government itself considering whether to increase the £10 million proceeds limited, something which the Lotteries Council is lobbying for. We know that this is very much still on the Government’s agenda, and the hope remains alive that this reform can be brought about by Statutory Instrument – something which is provided for within the primary legislation itself – rather than being swept up with the Government’s review of the gambling industry more generally, which includes its examination of the much more controversial area of fixed odds betting terminals, or Category B2 gaming machines, found in high street betting offices. The alternative, then, would be that any increase to lottery proceeds limits might be included in a new Gambling Bill which, of course, would take some time to work its way through Parliament. We anticipate that some progress may be made with this issue next year, and will keep you informed as soon as any further detail is known.

2016 has also seen various societies and ELM’s joining forces in innovative new collaborative lottery schemes, again, with a view to maximising revenue and I have also frequently been asked to advise on many of these new structures, and to carry out the regulatory due-diligence required before any agreements are signed.

Another area which those in the lotteries sector have been working on in the last year surrounds implementing changes brought about recently by the GC to its Licence Conditions and Codes of Practice, intended to bolster the provisions on social responsibility and keeping crime out of gambling. The requirements expected of the lotteries sector in terms of age verification have very helpfully been clarified by the GC and it is now clear that, save for instant win lotteries and lotteries that might conceivably particularly be attractive to children, it is not necessary independently to verify the age of each and every player, provided that the terms and conditions state that no one under the age of sixteen may participate. Independent age verification of a reasonable sample of players is, instead, acceptable.

At the same time, some changes have given certain societies and ELMs cause for concern – notably, the requirement to notify all players of any material changes to the terms and conditions of a lottery before they take effect. Some have worried that this will prove unwieldy and expensive and I have frequently been asked to advise on what are and are not material changes.

One very interesting recent development concerns the new requirement in Social Responsibility Code 3.5.3(8), which, as matters stand, applies to all remote gambling operators including society lotteries and ELMs, requiring them to make self-exclusion available via a wholly automated process. I was asked by one major ELM whether this provision should apply to them, as the arrangements that they currently had in place with their charity partners do not provide for such a facility to be made available on those partners’ website. Rectifying the matter would involve considerable work. Happily, through discussing the matter with the GC, we were able to secure a concession that this provision perhaps should not apply to the vast majority of remote lotteries, who operate simply by receiving low-level regular subscription payment details by telephone or email. The GC is now consulting internally on amending this provision to exempt remote lotteries which do not offer gambling via a website or instant win lotteries or other types of remote lotteries involving repetitive play. This may well result in a consultation paper on the issue next year and represents a significant positive result for my client in that we were assured that, in the meantime, the GC would be “very unlikely” to take compliance action because they were not making available a fully automated self-exclusion process.

Another sphere in which I have begun to see evolution – and this, in my view, is likely to gather pace next year – is the take-up by Local Authorities of the ability to use lotteries to raise monies to fund the work that they carry out pursuant to their statutory duties. The Gambling Act states that non commercial societies, sporting organisations and local authorities are all entitled to run lotteries but, whilst the first two categories currently commonly avail themselves of this opportunity, local authorities have not, historically, tended to do so. There are of course a few exceptions to this, and I know that many more authorities are looking at the possibility of running lotteries in the future. This is one area where I expect to see significant expansion moving forward.

Any review of the lotteries sector this year wouldn’t be complete without paying tribute to Clive Mollett, Chair of the Lotteries Council, who very sadly passed away in early October. Clive was a much respected stalwart of the Lotteries Council and the sector generally, a wealth of knowledge on lottery fundraising and a champion of the sector and of Lotteries Council members. I shall remember him fondly and should like to wish his successor, Jo Bucci, Managing Director of the People’s Postcode Lottery, all the very best in her new role. I look forward to continuing to work with Jo and the rest of the Lotteries Council Board and its members in 2017 and moving forward in, what will undoubtedly continue to be a period of change, development and innovation for lotteries.