Whitepaper UK: long-awaited changes to gambling legislation

The UK online gambling market is one of the largest in the world and one of the most regulated. The last primary law in this industry was passed back in 2005 (Gambling Act 2005).

The government has announced an update in the regulation of gambling, however, it has been postponing the announcement of specific changes for a long time, in connection with which the players and operators could only guess what kind of novations will occur. The main developer of the new legislation was the Ministry of Culture, Media and Sports (hereinafter referred to as the Ministry).

On April 27, 2023, the long-awaited announcement of changes to the gambling legislation took place, called “High stakes: gambling reform for the digital age” or as its short name among the public -Whitepaper. In this article, we will tell you in detail what has changed and what to prepare for now.

Measures to protect players and operators

1.1. New Player Checks

It is no secret for operators around the world that player checks must be mandatory. Often, basic verification includes proof of identity, proof of address, and proof of funds. Of course, there are enhanced checks in case the actions of the players look suspicious to the operator, but in the UK there was a question of more effective checks in order to protect both players and operators, as well as to determine the main patterns of player behaviour.

The Ministry of Culture Media and Sports is currently working with the financial services sector to explore which agencies would be most effective in vetting players. These methods will be directed to players who, for certain reasons, do not want to provide documents requested by the operator. To date, it is planned to collect information, such as payslips or bank statements through banking and financial institutions. It is expected that such interaction will be able to simplify and speed up the review of the necessary information for a particular client, for example, an estimate of the total income.

Where this is not possible, information will have to be collected directly from the client, although there may be scope to simplify this process using open access to banking information. As it is now, this data will be used to assess whether the level of a customer’s gambling spending is likely to harm them.

Based on the test results and more comprehensive understanding of risk management in relation to clients – there may be a relevant range of operator responses, including the application of limits to the account or the complete termination of the relationship with the client if any serious concerns regarding his addiction to gambling are discovered.

1.2. New risk assessment system

Operators are already required to identify customers whose behaviour on the platform clearly shows that they are losing more than they can afford and take appropriate action. Consideration of the client’s losses in the context of his financial situation will become an obligatory part of the client’s due diligence. While many operators have long implemented risk assessment systems, intervention often occurs too late or does not occur at all, and measures are applied inconsistently.

To further raise standards, a more fundamental and risk-based model will be introduced whereby online operators are required to examine a customer’s financial circumstances in response to certain loss triggers to see if their gambling could harm them.

The classification will basically be done as follows:

• financial vulnerability: when customers are unable to bear the additional financial burden associated with gambling, even with a modest level of deposits;

• stormy gambling: when customers spend significant amounts in a short period of time, perhaps shortly after opening an account;

• unacceptable financial losses that persist over time: when customers suffer significant losses over a long period of time.

Based on these classifications, new limits will be introduced, which we will discuss below.

1.3. New limits

• financial vulnerability

With a moderate loss threshold, the limit set will be either £125 net loss per month or a £500 net loss per year. Operators should conduct a financial vulnerability test, taking into account the types of open source indicators that many already evaluate regularly,such as the presence of a criminal record, the average level of income in the area of ​​​​residence and checking in the registers of debtors.

• Stormy gambling

In line with the Ministry’s recommendations, any account with a net loss in excess of £1,000 in a 24-hour period will be subject to enhanced spend verification, which gives a much greater picture of a client’s financial situation through access to more personalized data that takes into account factors such as level of income after taxes.

• Unacceptable financial losses that persist over time

Unusually high losses over several weeks or months are also sufficient indications of risk to merit careful investigation. As advised, in this case, the limit will be set at £2,000 net loss over a 90-day period to trigger enhanced reviews.

1.4. Safe gambling

All operators must monitor the behaviour of players and use the data they have to identify those who may be at risk and take measures to protect them in accordance with the detailed guidance of the Ministry. Where appropriate, action taken should include encouraging or requiring the player to set limits, recommending visits to addiction specialists, suspending marketing where there are serious indications of harm, and unilaterally suspending or closing accounts.

While operators’ approaches to achieving this goal vary, the tightened regulations of the Ministry of Gambling, which came into force in September 2022 and February 2023, clarify the responsibilities of operators for interacting with customers and require consistency across the sector. These rules define seven relevant categories of “harm indicators” that all operators must monitor from the moment they open an account, and define how operators must tailor the actions they take based on these behavioural indicators.

“Indicators of damage” that online operators are required to track and examples of constituent metrics:​​

The nature of spending

• influxes (not constant participation in gambling, with a certain frequency)

• large amounts at certain times (such as payday)

• escalation gambling (constant increase in finances and time spent on gambling)

Client costs

• amounts spent taking into account the client’s income

• amount spent compared to other consumers

Time indicators

• amount of time spent gambling

• time of day (e.g. late evening)

Behaviour

• usage of numerous products (betting, gambling and poker at the same time)

• “chasing losses” (endless desire to recoup)

• high-risk food choices

• In-play bets (multiple bets right during the sporting event)

• unstable models (unstable behaviour of the player in relation to rates – the inability to attribute it to a specific category)

Customer-led contact

• complaints

• indicators of vulnerability, such as bereavement

• hints that a person is not coping

• chat comments

Use of gambling management tools

• refusal to use tools

• changing limits

• previous self-exclusion

• timeout reuse

Account indicators

• unsuccessful deposits

• several payment methods

• payment types

In addition, the regulator also sets remote access technical standards, which define the security and technical standards for remote gambling operations. In addition to defining how certain account-level safeguards should function, they include specific rules for the design of online gambling products to ensure that games operate in a socially responsible manner and do not encourage potentially harmful gambling activities. According to the Ministry’s product testing strategy, which was updated in February 2020, games are subject to pre-testing for randomness and fairness, and after release is subject to an annual audit by testing organizations.

Marketing and advertising

2.1. Restrictions on bonuses and direct marketing

The Gambling Commission has already restricted marketing and promotional offers for customers with clear signs of increased risk gambling addiction, and review incentives such as free bets, bonuses and spins to ensure they are designed and directed towards socially responsible behaviour that does not encourage excessive or harmful gambling. The consultation will also consider measures such as limiting the replay requirements and establishing an appropriate minimum period for customers to receive bonuses.

The Commission will closely monitor the practice of using VIP-scheme (sales of sports predictions) online to ensure they are not used to reward high-risk gamblers. The number of clients of such schemes has already declined significantly since the Commission’s increased protections in October 2020.

The Commission will also continue to work to increase the level of opt-in for direct marketing in the online gambling industry, with both new and existing customers having more choice in offerings (including requiring consent to “cross-sell” new products) and how marketing materials are sent.

Such innovations will complicate the work of not only the operators themselves but also the areas of activity associated with them, such as affiliate marketing.

2.2. Advertising Safety and Integrity Plan

Advertising was not a detailed element of the consideration of the legislative initiative, but in this article, we consider it necessary to mention those proposals that were touched upon.

The full potential of available advertising technologies should be aimed at keeping advertising away from children and vulnerable people, as well as those who show signs of harm.

The Gambling Commission and the Advertising Standards Authority are taking a collaborative approach to address the issue of “content marketing” that may inappropriately attract children, applying where possible the standards expected of other forms of marketing.

Program DCMS (Department for Digital, Culture, Media and Sport) on online advertising examines the role of platforms in ensuring the safety and social responsibility of the advertisements they place. At the same time, some online platforms are introducing the ability for individuals to “opt-out” of gambling ads, which may well be developed in the future.

The Commission will continue to hold licensees accountable for the activities of their marketing affiliates.

2.3. A New Approach to Spreading Safe Gambling Messages

Drawing on the experience of public health and social advertising, a new evidence-based model has been developed to independently develop safer gambling advertising messages.

The lawmaker welcomes the industry’s expansion of its commitment to the safer exchange of advertising messages about gambling, which account for 20% of all advertising both online channels and broadcast channels.

2.4. Socially responsible sport sponsorship

A responsible approach by the sports industry to gambling sponsorship and implementation of minimum standards of social responsibility through an industry code of conduct is promoted. Separate restrictions may be introduced by sports federations by industry.

The Football Premier League has announced that it will remove gambling ads from players’ jerseys to reduce children’s exposure to gaming brands under new advertising rules.

Conclusions

After analyzing all the innovations, two statements can be made with confidence:

1. It is difficult to predict the potential impact of such changes on the entire field of online gambling in the UK, however, we, in turn, see certain risks associated with the potential desire of players to switch to unlicensed platforms in order to avoid such a high level of checks.

2. Based on the fact that many questions regarding the changes remain open in the report of the Ministry, it can be assumed that the Ministry will not stop at the changes described in this article. The only question that remains open is how far the changes will go and how they will change the situation in the gambling market.

However, we can definitely say that these are some of the most significant changes in the structure of the online gambling market over the past decade, and we will only be able to find out their positive or negative impacts over time.