Gambling White Paper: Online Protections – stake limits, design standards, single customer view, and much more
Accompanying its proposals in respect of affordability checks in the White Paper (on which we will shortly be publishing a dedicated article), the Government has set out a raft of additional “online protection” initiatives designed to better protect customers when gambling online. The proposed protections are all built on the assumptions that there are not only aspects of online gambling - such as 24/7 accessibility and lack of human supervision - that pose particular risks for customers, but also that the online environment provides opportunities to ensure safer gambling. As the Government outlines in the White Paper “our vision for remote gambling is that the risks are mitigated, and that we maximise the use of technology and data to protect people in a targeted way at all stages of the customer journey”.
In this article, the latest in our series on the White Paper, we explore each of the Government’s proposals designed to achieve this vision.
Mandatory stake limits for online slots
Perhaps second only to affordability checks, the potential imposition of limits on the amount a customer can stake online, has grabbed headlines and generated debate since the formal announcement of the Gambling Act 2005 review back in 2020.
Unlike gaming machines in the land-based sector, there are currently no statutory (or regulatory) limits on the amount an individual can stake on any online gambling product. As expected by much of the industry, the Government has now proposed that stake limits be introduced, with fixed limits for online slots games proposed. The amount at which stakes will be limited has not yet been decided, with the Government (not the Commission in this case) set to consult in the summer of 2023 on a limit of between £2 and £15 per stake. Aligned with its approach throughout much of the White Paper, the Government is also proposing that a more conservative approach is taken in respect of customers aged 18 to 24, consulting on a stake limit of £2 for this demographic. Following this consultation process, the Government will proceed to implement secondary legislation to bring the stake limits into law.
The Government has opted for fixed stake limits, which would apply to all customers equally, rather than ‘tiered’ or ‘smart’ limits on stakes that were at one stage anticipated, which would vary between customers based on risk profile. However, in view of the Government’s desire for quick action in this area and therefore to avoid the need for primary legislation, the White Paper confirmed that a stake limit for online slot games will be fixed for all customers. In addition, another of the Government’s concerns with using such bespoke limits is that they would rely too much on the operator identifying who is and is not at risk of harm, and that “such customer segmentation is [not] yet a sufficiently established safeguard to control access to higher stakes”. Opting for the blunter application of fixed stake limits does seem somewhat contrary to the Government’s stated vision of maximising the use of technology and data in the online space to target protections. That being said, the development involved in implementing smart limits would not be straightforward and this would probably therefore favour the larger operators.
What will, however, be a relief to some is that the Government proposes to limit the stake restrictions to slots games only, stopping short of the recommendation made by the House of Lords Committee on the Social and Economic Impact of the Gambling Industry (in its “Gambling Harm – Time for Action” report House of Lords - Gambling Harm—Time for Action - Select Committee on the Social and Economic Impact of the Gambling Industry (parliament.uk)) to establish a category system for online gambling products, with stake limits varying between products. The Government’s focus on slots is based on the view that they are “associated with extreme gambling activity” and “have a number of the structural characteristics associated with harm”. Whilst the Government does acknowledge that the evidence of a “clear causative relationship is limited”, it claims that there “is sufficient evidence of an association between higher staking on slots and identified risks of harm to justify action on a precautionary basis as part of the wider package of protections”. This is coupled with the view that stake limits would lend themselves less easily to other forms of online gambling product, with the Government pointing out that stake size can have a more direct functional role in non-slots gameplay (the example given being roulette where a higher stakes bet can be divided between different areas, modifying the rate of return to the player and the risk of losses).
The Government also points out that it is estimated that stake limits would have a “very significant impact” on the viability of non-slot products. Some may be scratching their heads as to why the same cannot be said for slots, bearing in mind the Government’s impact assessment of the stake limits. Whilst data provided by the Gambling Commission suggests that the vast majority of slots stakes are low value (with more than 87% of slots stakes up to £1, 96% up to £2 and 99% up to £5), they also point out that Morgan Stanley and NERA Economic Consulting have respectively estimated a £2 fixed limit on online slots would reduce online slot GGY by 22% and 23%. By the Government’s own estimates, a universal limit set at £8.50 (the midpoint of the range consulted on) would reduce online slots GGY by between £135 million and £185 million (representing 4% to 6% of online slots GGY). To add to this, it is worth noting that there is no mention by the Government as to how (if at all) any imposed stake limits would keep pace with inflation, which could further compound the commercial impact of the reforms.
New standards for game design
Whilst non-slots online products may have escaped the imposition of stake limits, they will be subject to new ‘safer by design’ standards, with the Government proposing to introduce “a coherent system of safer product design standards”, which are agnostic to game-type where possible.
In the coming weeks, the Commission will publish an assessment of the impact on customer behaviour of the measures it introduced in October 2021 to limit certain features of online slots associated with increased risk of harmful play (including the bans on auto-play functionality and spin speeds of faster than 2.5 seconds). Based on an informal evaluation by the Betting & Gaming Council (BGC) of the measures voluntarily adopted by BGC members in September 2020, largely mirroring those imposed by the Commission a year later, the Government claims that early evidence suggests these controls are having a positive impact. In light of this, and the lack of comparable controls for other products, the Government proposes to introduce the new product-wide requirements.
It is worth noting, however, that the Government has ruled out an expanded pre-release product testing regime. The House of Lords Committee had proposed that the Commission establish a system for testing games against a series of harm indicators, including addictiveness and appeal to children. Calls were reiterated for this in responses to its call for evidence for the Gambling Act 2005 review, but the Government has now pushed back on these recommendations on the basis that they are “not convinced that existing theoretical models for measuring a product’s riskiness are sufficiently granular to provide meaningful insights and comparisons across the variety of products available online, and this approach risks giving false confidence to the public that only ‘safe’ gambling games are permitted”. The House of Lords Committee also proposed the equalisation of speed of play and spin between offline and online products, so that no game can be played quicker online than offline. Again, the Government has not taken this proposal forwards.
As a result of the Government’s proposals, the Commission will consult on a wider design code for online products. Like much in the White Paper, the specifics of the standards to be included are not yet clear, but the Government does give the examples of limits on speed of play to reduce “immersiveness and rapid losses”, intensifying features such as simultaneous play of multiple games being removed, and real time information on session losses and time played being mandated. Following the consultation, the requirements will be implemented via further updates to the Remote Gambling and Software Technical Standards (RTS).
The single customer view continues to progress
The notion of a ‘single customer view’ or ‘SCV’ – the sharing of customer data between operators in order to tackle the issue of customers switching between accounts to circumvent an individual operator’s intervention - is not a new one. The introduction of a SCV solution has progressed over recent years, and the Government does not propose anything in the White Paper to deviate from this, but rather provides an update on recent progress.
In February 2020, the Commission challenged the BGC to develop a SCV solution. In November of that year, the project was accepted into the Information Commissioner’s Office (ICO) “regulatory sandbox” to establish whether there was a lawful basis under the UK General Data Protection Regulation to allow the sharing of behavioural data. With the ICO publishing its findings in October 2021 that there may be such a lawful basis, trials continued, with the BGC working with GAMSTOP to operate the trial.
The Government explains in the White Paper that these trials have been focused on operators sharing information on individuals who have had their accounts closed because of disclosures about suffering serious harm. As part of the trial, codes of practice are being developed to ensure operators respond appropriately when they are notified of customers in such a situation. Later this year, the intention is to expand the system to consider customers who are showing other indicators which might necessitate coordinated action.
At this time, the Government is not proposing any further intervention. However, it will be reviewing the outcomes of the trials and has warned that, if necessary, it will “mandate a different or more comprehensive approach to ensure the system meets our objectives in a proportionate and safe way”. Once the Government is satisfied, the Commission will move to consulting on requiring all remote operators to integrate with the system, in the same way that they do with GAMSTOP for self-exclusions. Operators will be required to comply through the introduction of a new condition in the Licence Conditions and Codes of Practice (LCCP), but the Government does warn that “if necessary we would consider legislation”.
Requirement to verify payment information
The Commission are also set to consult on the possibility of requiring operators to verify that payment information of customers matches their identity, to counter the risks of both individuals opening an account in another person’s name and gambling with their own funds, and using another person’s payment information to gamble via their own account.
If such a proposal seems familiar, that is because the Commission consulted on it back in 2019 along with other updates to the LCCP requirements in respect of age and identity verification. Whilst more robust verification requirements were implemented as a result, at the time, the proposals in respect of payment information were not deemed technically feasible due to issues with operators accessing verified cardholder details when processing a payment. The Commission committed to reviewing the proposal again once the second Payment Services Directive (PSD2)/Payment Services Regulations had taken effect and merchants were compliant with Strong Customer Authentication (SCA). As SCA has now come fully into force, the Government has now confirmed that the Commission will consult on this issue once more.
Improving player-centric tools and transaction blocks
It is a current requirement of the RTS that all operators provide customers with facilities (such as deposit, spend and loss limits) that assist them in playing within their personal budgets. As part of this, customers must be offered the opportunity to set such a limit on registration, but – provided it is not set as the default – operators are still permitted to offer a ‘no limit’ option.
In the White Paper, the Government outline concerns that uptake of such controls has been minimal, with the Commission reporting that limits are used by only 11% of customers playing online. The Commission will, therefore, consult on introducing further requirements to improve uptake of these tools. Again, the specifics of what will be consulted on are not apparent from the White Paper, but the Government suggests the options of making deposit limit setting mandatory for all customers on account creation and pre-populating the limit with a reasonable default.
The Government has also challenged the BGC to work with stakeholders in the financial sector to develop a solution to prevent players from circumventing opt-in gambling blocking tools offered by consumer banks (which prevent card payments to gambling firms based on their merchant category code), by transferring money directly to an operator’s customer funds account.
Prize draws
The Government will also consult on the potential for regulating large scale prize draws and competitions.
A lottery, as defined under the Gambling Act 2005, consists of three elements: payment to participate; the award of a prize; and such award being awarded based on chance. Certain competitions and draws are structured so as to avoid falling within this definition (for example by offering a free route of entry or allocating prizes based on skill). The Government explain that they received some submissions to their call for evidence expressing concern about the recent growth of such competitions, which often offer significant prizes such as a luxury home or car.
The Government now intends to consult on the potential for regulating competitions such as those “whose scale resembles that of a large society lottery and may be confused with them” (which we assume to mean any draw with returns of £20,000 or more per draw and across a calendar year of £250,000 or more). The Government states that it intends to consult “with a view to identifying options and developing an evidence base against which their impact and the extent to which different regulatory measures would be proportionate can be properly assessed”. As the Government acknowledges, by definition, such competitions do not meet the current statutory definition of a lottery, and therefore escape gambling regulatory oversight. What is not clear is the basis on, and extent to which, the Government proposes to regulate them.
What isn’t changing?
Amongst the myriad of new proposals that are being taken forward by the Government, it is also worth noting that certain previously mooted changes appear to have been shelved.
Despite what is described as “a reasonably widespread concern” in responses to its call for evidence regarding a lack of consistency between processes which are commercially beneficial for the operator (such as account creation and depositing), and those that are not (such as account closure and withdrawals), the Government appears to be content with the current LCCP requirements in this regard. Operators are currently obliged to ensure that a request made by a customer to withdraw funds from their account must not result in a requirement for additional information to be supplied as a condition of withdrawal (if the licensee could have reasonably requested that information earlier) and to provide transparency as to where such information may be required in advance of deposit. Further action does not appear imminent this area, with the Government’s position in the White Paper being that the Commission should continue to monitor compliance with its current requirements, rather than introducing new ones.
Likewise, some customers had argued that an ombudsman should deal with the situation where (usually successful) punters have their accounts closed or made subject to restrictions on the amounts they can bet. The government gave this contention very short shrift stating that: “being a successful bettor is not a protected characteristic in discrimination law. There are also valid compliance or contractual reasons for applying restrictions to some accounts, for example to prevent fraud or cheating.” The White Paper does, however, stress that operators should (as required under the LCCP) continue to be transparent with customers about how, when and why an account might be restricted. Again, the Government is satisfied for the Commission to monitor compliance with existing requirements, rather than taking further action.
Further, the Government has concluded the answer is ‘no’ to its question of whether white label arrangements pose a particular risk to customers that cannot be addressed by the current regulatory regime. It notes in the White Paper that where issues do arise, these stem from non-compliance with existing requirements. To ensure all operators fully understand their responsibilities when entering into white label arrangements, the Commission will “consolidate existing information and good practice for operators on contracting with third parties, including white labels”, which we assume means a specific piece of guidance will be issued by the Commission. [1]
Similarly, the Government has concluded that the use of cryptocurrencies to gamble does not pose a risk that necessitates further restrictions or protections, with the current requirements for operators to notify the Commission of any changes to the payment methods, and undertake checks on source of funds, deemed sufficient at this time. Currently, however, the use of crypto for gambling has not been widespread, so it will be interesting to see if this stance changes as uptake increases.
Finally, in line with its 2020 consultation on loot boxes in video games, the Government has reiterated that it does not intend to adjust the legal definitions of “gambling” at this time in order to capture such products. The Government wants to monitor the impact of the proposals it made to protect children and young people better in its loot box in video games consultation (you can find our article on this consultation here). However, the Government does note that it “will not hesitate to consider [legislative] options if we consider it necessary in future”.
[1] The Commission’s recent enforcement decision - TGP fined for AML and social responsibility failures (cms-lawnow.com) – addresses white labels
