Major changes on the way for gambling businesses

Since the publication of the government’s White Paper on reforming gambling regulation, further consultations have been published which seek to enhance the regulation of the gaming and gambling sector. 

In this article, Andrew Cotton, a Senior Associate Solicitor in Irwin Mitchell’s regulatory and compliance team with over 30 years’ experience as a gaming, regulatory and alcohol licensing lawyer, looks ahead to some significant reforms that will impact businesses in the industry and its service providers.

Implementation of key elements of the Review of Gambling Regulation

The majority of changes implemented as part of the review will simply require changes to the Gambling Commission’s Licence Conditions and Codes of Practice (“LCCP”) and Remote Technical Standards (“RTS”). The Commission issued its first set of consultations in July, which closed in mid-October. The second tranche of consultations were issued in November/December. These are some of the key changes in the pipeline:

1. Affordability and Financial Vulnerability /Risk: There will be an introduction of enhanced rules on when online operators must carry out financial risk checks on customers. It is proposed that Financial Vulnerability Checks will be conducted at £125 net loss within a rolling 30-day period or £500 within a rolling 365-day period including demographic postcode /deprivation index and public record checks including bankruptcy and county court judgments. The proposals will also require Financial Risk Assessments to be undertaken. Assessments are to be informed primarily by credit reference agency data and are to be applied where a customer’s net losses, in the case of those over 25, reach a threshold of £1,000 within a rolling 24 hours or £2,000 within 90 days. In the case of those under 25 the thresholds of net losses are halved to £500 in a rolling 24 hours and £1000 in a rolling 90 days. The Gambling Commission consultation concluded 18^th October 2023 and we await the response. 
2. Online game design: The consultation included proposals to reduce the speed and intensity of online products while making them fairer and increasing consumer understanding about game play. This builds on earlier work for online slots implemented in October 2021. As above, the consultation concluded 18^th October 2023.
3. Introduction of opt-in for customers to select product type marketing:  Customers are to be empowered by giving them more control over the direct gambling marketing they wish to receive. A new LCCP provision will provide customers with options to opt-in to the product type they are interested in and the channels through which they wish to receive marketing. The Commission’s response is awaited.
4. Extension of requirements for Personal Management Licences: Although not part of the gambling review the proposals widen the roles requiring the post holder to hold a Personal Management Licence. The Commission’s aim is to increase personal accountability. Nominated Officers and those overseeing AML controls, the CEO of a licence holder and the chair of a Board of Directors will all require PML’s. Gambling Commission consultation closed on 18^th October 2023 - response awaited. As PML applications usually take approximately 12 weeks to be processed those additional officers who will require a PML should be preparing the applications now.                                                                                                                                                                                                                                                         Once the Commission’s responses are published licence holders will have 3 months to implement these changes.
5. Financial Key Event Reporting: This will extend the requirements to report changes to ownership and expanding the requirements to provide details of “relevant persons” to include both direct and indirect interests in a licensee of 5% or more (increased from 3%). It will require reporting of any loan or entering into an arrangement with any person or entity not authorised by the Financial Conduct Authority or receiving financial assistance from a group company that has entered into such an arrangement. New reporting requirements will come into force for individuals acquiring £50,000 or more in new shares or in the case of entities £1m or more in new shares in a rolling 12-month period. This current Gambling Commission consultation closes 15^th March 2024.

Consultations by DCMS that require legislation.

• Capping stakes for online slots – consultation on imposing a cap of between £2 and £15 per spin for online slots and enhanced measures to protect 18- to 24-year-olds closed on 4^th October 2023. Response awaited.
• Proposals for the land-based sector, including increases in gaming machine entitlements for qualifying 1968 Act casinos and introduction of sports betting along with enhancements to the entitlements to Category B gaming machines in bingo clubs and AGC’s. Additionally, consultation on Licensing Authority fees and cashless payments for gaming machines closed on 4^th October. Response awaited. These measures will only require secondary legislation and the government intends that they are in place before the summer.
• Implementation of a Statutory Levy on all Gambling Commission licence holders to replace the current “voluntary” arrangements. Consultation closed on 14^th December 2023. Response awaited. Again, this will not require primary legislation as the Gambling Act already provides for the Secretary of State to implement the payment of an annual Statutory Levy by Regulations.

Creation of a Gambling Ombudsman

The Betting and Gaming Council is formulating proposals for the appointment of a Gambling Ombudsman that will adjudicate on customer complaints arising from social responsibility failings. It is likely that the process will be up and running later this year. At this stage legislation is not proposed to mandate the new regime.

Impact of the Deferred Prosecution Agreement (DPA) between CPS and Entain plc

On 5th December 2023 the President of the King’s Bench Division approved the DPA between the Crown Prosecution Service and Entain plc relating to the company’s failure to prevent bribery contrary to Section 7 of the Bribery Act 2010. The Bribery Act applies to all companies doing business in the UK wherever they are located. The Agreement required Entain to pay a financial penalty, including disgorgement of profits, of £585m. The full impact of the case will only become known once the Court is able to publish the Statement of Facts. However, all Gambling Commission licensees should be reviewing the adequacy of their Bribery Act policies. This is underlined by the comments of the Chief Crown Prosecutor "The wider gaming industry may wish to reflect on the implications of this agreement for their own corporate compliance procedures and, where appropriate, take action to address and report any failings they identify.”  

UK Cryptoasset Framework

There have been a number of changes to the regulatory framework relating to Cryptoassets in the past few years, including the requirement for some companies to register with the Financial Conduct Authority (FCA) and comply with the FCA’s AML regime and the implementation of the FCA’s requirements in relation to the promotion of crypto services.  In its policy paper published at the end of October 2023 HM Treasury confirmed that there will be further legislation laid before parliament this year.

What to do next? 

We offer comprehensive legal services to businesses in the gambling sector. Our dedicated regulatory and compliance team is able to advise on all matters related to UK gaming, gambling, alcohol and events licensing as well as financial crime and financial services regulations.

To learn more about the consultations listed here and the latest regulatory requirements for your business, please contact Andrew Cotton