Does the Gambling White Paper bring major changes to protect vulnerable gamblers?

someone holding a smartphone in one hand and a credit card in the other

Professor David Forrest  from our Management School takes a critical look at some of the key changes brought by the recently published ‘High stakes: gambling reform for the digital age’ White Paper:

After two years of delay after delay, the Government’s White Paper on Gambling Reform has appeared at last.

Its stated purpose was to make gambling legislation and regulation “fit for the digital age” and, whilst there are some important proposals made about land gambling venues, the most eye-catching parts of the very substantial document are about making online gambling safer for customers.

Like customers in many other businesses, for example newspaper readers and those purchasing insurance, gamblers have been steadily shifting their activity towards the online space for more than a decade.

Consumer expenditure in gambling is measured by how much people lose to the gambling providers over a period and, from the most recent data, about two-thirds of all gambling spend in Great Britain (outside the National lottery) is made online, most often using a smart phone.

The measures proposed in the White Paper are intended to offer greater protection to those whose online gambling may get out of control and get themselves into trouble.

But it would be a mistake to see the new measures as representing a step change in the way player safety is treated. Rather they should be seen as part of an evolution of regulatory policy, which has long been based on sound principles but with inadequate compliance by the industry.

Increased pressure on operators to protect vulnerable gamblers

Online gambling has the potential to be safer for vulnerable users than the comparable products consumed in-person, and indeed problem gambling prevalence has fallen steadily as online gambling has become the norm.

It is easier to keep track of spending with an online account; licensed websites have to offer self-help tools such as the ability to set time or money limits on one’s gambling; and, crucially, online transactions leave a data trail which can give strong clues where a player may have a problem.

Licence conditions in Great Britain have always required online operators to monitor every customer’s transactions to detect where there is the possibility of harm, and to make interventions where appropriate.

The problem is, whilst operators have developed decently effective algorithms which flag customers whose patterns of gambling are suggestive of risk of harm, they have been all too reluctant to make the appropriate interventions.

Their inadequacy was laid bare in analysis of Patterns of Play in Online Gambling in Great Britain carried out at the University of Liverpool Management School.

Professor Ian McHale and myself were commissioned to analyse the largest multi-operator gambling data set ever made available to researchers, with access to complete one-year gamble-by-gamble account records for 140,000 customers at the top-7 British operators.

The final Report, published in 2022 and cited multiple times in the White Paper, showed the operators were highly dependent on heavy spending customers, with two-thirds of spending generated by just 5% of account-holders.

Most of these big spenders will not be problem gamblers – they just like gambling and have the money to fund their hobby.

Nevertheless, high spending is one of the most reliable predictors of risk of harm and one might expect operators to follow the Licence Conditions and make some inquiries to check whether the big spender could afford it and whether they might need help to control their gambling.

In fact, we reported from account records that, even among those who lost more than £2,000 over the year, fewer than 1% had received a ‘social responsibility’ telephone call from the gambling firm and concluded that thresholds for intervention were set far too high by the operators.

In the face of such inadequate industry performance, the Gambling Commission has been shifting towards more prescriptive regulation.

Rather than relying on a general statement of the responsibility of licence holders to identify cases of harm and take appropriate action, its code now specifies which metrics must be considered when monitoring accounts and sets out more specifically what actions should follow.

This additional guidance has added to pressure on the industry, as has a series of financial penalties for non-compliance in various cases, where operators have egregiously failed to investigate when particular players have lost huge sums in a very short period.

These financial penalties have cost the British online industry £122m in three years and have evidently bitten.

In the last year, there has been a noticeable shift in industry behaviour, with an increase in affordability checks being made, as evidenced by the Gambling Commission monthly data collected from the dominant online firms.

The number of customers in the highest spending categories has fallen considerably, and as a result, betting revenue at the big operators has decreased by 19% in a year.

The loss to the industry is high, because some of the interventions end up with restrictions being placed on the account and some end up with customers refusing to provide evidence of affordability, which leads to the account being shut down.

Against this background, the White Paper proposes mandatory affordability checks where an account-holder has lost £1,000 in 24 hours or £2,000 over ninety days.

These are very reasonable thresholds since the majority of British households might struggle to fund such levels of spending, but, in a sense, the new regulation would just make compulsory what the biggest firms are now doing (under pressure).

Thus, it is not a major change, but it is still one to be welcomed because formalising what has become new practice would discourage backsliding, and bring into line fringe operators who may have been willing to welcome big spenders fleeing affordability checks at the market-leading firms.

The longer-run success of the policy will depend on two important issues:

First, any individual operator sees only a customer’s gambling on its own website and a customer whose spending is capped by one operator may just transfer some gambles to another account at another firm. This is a weakness of reliance on tracking accounts to identify harm, and progress on operators sharing information is needed.

Second, there is a risk that high spenders will avoid affordability checks by migrating their activity to the unregulated sector- international websites illegally selling gambling services to British customers and, of course, not following any player protection rules.

Ways need to be found of making affordability checks as non-intrusive as possible such that those big spenders who are not in the harmed group carry on gambling with the British industry rather than the black market.