Posted on

Gambling Commission responds to Government decision on Fixed Odds Betting Terminals

Tracey Crouch’s announcement on 17 May regarding Fixed Odds Betting Terminals (“FOBTs”) will not have escaped your notice.

The Minister for Sport and Civil Society set out the Government’s proposed move to cut the maximum permitted stake on FOBTs (Category B2 machines) from £100 to £2. No definite date for the implementation of the change has been set, but it is expected to take effect within a year. The new limit can be introduced via secondary legislation, thus avoiding the need for the proposal to go through the protracted Parliamentary process which would be associated with amending the Gambling Act 2005 (“the Act”).

This is, without doubt, one of the greatest shake-ups for the gambling industry since the Act came into force in 2007, and it has left bookmakers examining which of their shops might cease to be profitable when stakes on FOBTs are slashed. Some operators estimate that as many as 40% of their shops will become loss-making as a result of the change, with “a proportion” being at risk of closure. There is talk of some 21,000 job losses, and of a reduction in the payments to support British horseracing of £290m, by 2020.

The move has also left the Treasury scratching its head as to how to cover the loss of revenue that will be felt between now and 2020. Machine Games Duty stands at 25% and estimates place the deficit at £1.1bn. The Government has said that it will increase Remote Gaming Duty (which is currently set at 15% of profits) to stop the gap, although the free-market think-tank, the Institute of Economic Affairs, has warned of “unintended consequences” of the reforms and predicted that taxpayers may have to make up the shortfall in Treasury income.

In reaching its decision, the Government pledged that it would “take a stand”. Culture Secretary, Matt Hancock, said: “When faced with the choice of halfway measures or doing everything we can to protect vulnerable people we have chosen to take a stand. These machines are a social blight.”

FOBTs currently enable players to gamble up to £100 every 20 seconds and, with 33,000 machines in betting shops and over 230,000 individual sessions in 2015-16 during which the player lost more than £1,000, they have commonly come to be referred to as the “crack cocaine of gambling”.

The Gambling Commission’s (“GC”) response to this FOBT announcement has been coloured by its formal advice to Government (provided under s26 of the Act), which was published on 19 March. The GC broadly recommended a reduction in maximum stakes (including those for Electronic Roulette) to £30 for games that have the potential for players to lose large amounts of money in a short space of time, with a reduction in slots stakes to £2.

The Government’s proposal therefore appears to go further than the GC’s suggestion. However, the GC also proposed other measures, such as limit-setting and tracked play across all machines. Much of the GC’s input has been accepted by Government, and this led the new GC Chief Executive, Neil McArthur, to say: “We’re pleased Government has supported a comprehensive package of measures to protect consumers, and that this includes a substantial stake cut. Whilst we welcome the reduced stake, that alone will not be enough to address the risks of harm that can come from all forms of gambling.”

So, in addition to the stake cut, Government is heavily engaging with the GC in improving player protection on Category B machines generally and, more importantly, online. This initiative specifically surrounds age verification, terms and conditions, identifying risks to players and customer interaction. In the absence of voluntary action, the Government has declared its intention, in collaboration with the GC, to force through legislation to ensure that operators comply.

Government also intends to crack down on gambling advertising and expects regulators, broadcasters and the industry to be compliant. A package will be rolled out this year, designed at protecting the most vulnerable, and will include a major responsible gambling advertising campaign.

Government has also commissioned a study to be carried out by Public Health England, to improve the available evidence on treatment for problem gambling – and it seems that the GC is likely to “strengthen” the current voluntary contributions system towards research into, education on, and treatment of problem gambling. I would not be surprised to see contributions soon becoming mandatory, and set as a percentage of turnover.

Finally, and this will be of interest to readers operating in the lotteries sector, the Government intends, as part of the next National Lottery competition, to assess whether the age limit for participation should be changed from 16 years old. One can only assume that the intention is to increase this to 18 years old. Whether this change will translate into the society lottery market remains to be seen.

We will, of course, keep a close eye on all developments and keep you informed in future editions of our Newsletter.