Is the Gambling Commission fit for purpose?

17 March 2020

Great Britain’s gambling regulator is facing mounting criticism from both sides of the debate, with some now questioning whether it is capable of fulfilling its duties. Jake Pollard examines whether the Gambling Commission is likely to be swept up in the wholesale changes facing the British market

The short answer to the question ‘is the Gambling Commission fit for purpose?’ is: no, it’s not. 

To start, it’s underfunded. Its annual budget for the year ended 31 March 2019 amounted to £19m, to govern an industry with a gross gaming yield of £14.37bn for that same period.

It’s responsible for enforcing an act dismissed as “analogue legislation for the digital age” – one which contains more mentions of betting over the telephone than betting online, no less. And despite talk of protecting consumers, this is achieved by imposing conditions on operators, rather than dealing directly with the end user.

Yet to date, those campaigning for major changes to British gambling regulations in their fight for a safer environment haven’t been highlighting these specific issues.

Instead, the regulator has been hit by constant criticism, ranging from allegations of being too clubby with the industry, to direct attacks on its leadership. To these critics, the fact the Gambling Commission is not fit for purpose is the fault of its leadership, rather than a fault of outdated regulations and chronic underfunding. 

The stakes were raised further in late February. Carolyn Harris of the Gambling Related Harm All Party Parliamentary Group (APPG) called for Gambling Commission chief Neil McArthur’s resignation in the wake of the National Audit Office’s (NAO) report on how it regulates the sector. 

In Harris’ eyes, the report was confirmation that the commission is not fit for purpose.

This assessment may be too simplistic. Yes, the report was hardly complimentary. It highlighted deficiencies across numerous elements of the regulator’s player protection strategy.

Equally, however, it blamed much of this on a lack of resources, arguing the Commission was “constrained by factors outside its control, including inflexible funding and a lack of evidence on how developments in the industry affect consumers”.

It’s hard to say the truth lies in the middle, or that – like the BBC – criticism from all sides suggests the Commission is in fact doing its job properly. The traffic is all one-way: everyone is accepting that changes are not just inevitable, but necessary.

Instead, the current debate concerns the scale of these changes, and how (and by whom) they are implemented. 

Therefore, the issue facing the Gambling Commission is convincing both the industry and its critics that it is capable of managing this period of change.

Poles apart
Leading the charge against the Commission is the APPG and campaign groups such as the Campaign for Fairer Gambling, not to mention growing sections of the mainstream media. 

These groups have made it clear that they will not stop until they are satisfied the industry is regulated and controlled enough to their liking. How far this control goes is the question that will start to be determined in the coming months as the Gambling Act review takes shape. 

For this group, industry social responsibility efforts are window-dressing. No matter what they do, this will not be enough. This extends to the Commission’s efforts to drive cross-sector collaboration in pursuit of a safer industry. 

Just take Campaign for Fairer Gambling founder Derek Webb’s reaction to the industry working group established with the likes Scientific Games and Playtech to develop new responsible game design standards.

“[That] project is farcical,” he said. “It can only be possible to identify safer games if the most dangerous games can be identified. So how about declaring what those games are and cease offering them!”

The prevailing view of the industry’s opponents is that the Commission is too close to the industry. They see it as too lenient on operators that don’t respect licensing obligations, and they question the wisdom of letting operators and suppliers “mark their own homework” by setting up working groups around product design, advertising technology and VIP schemes. 

In Harris’ eyes, that amounts to the Commission only representing its licensees’ interests. 

“I was under the impression, a false impression it seems, that it was [the Commission’s] job to protect players, but they are only there to protect the industry,” Harris (right) told iGB.

However, it may be less a case of the Commission only being there to protect the industry, and more a case of its power being isolated to working with operators. It may talk about protecting consumers, but it does not actually have the power to run a complaints service or consumer advocacy groups. 

While it works with other organisations to make gambling safer, and ensures consumers are not mistreated by operators, such efforts are hamstrung by its limitations, the NAO report pointed out. Under current arrangements, consumers cannot typically seek redress where operators fail to meet social responsibility codes of practice.

“The Commission has therefore found it difficult to consistently direct consumers seeking support or redress to relevant organisations,” the NAO explained in its report. “For example, this includes directing consumers with complaints towards the appropriate industry‐funded dispute resolution service, of which there are eight. 

“There is also no statutory consumer representative organisation, as exists in some sectors.”

Essentially, with no dedicated industry ombudsman, there is no effective mechanism for protecting consumer rights – things are divided across multiple alternate dispute resolution (ADR) bodies. It could perhaps be argued that the Commission should have pushed for a more targeted system.

That should ultimately come down to the government to see that gap, and move to fill it. Equally, the Commission could have recommended an ombudsman be set up. Instead Harris, and the APPG, has effectively found itself thrust into that position.

This, in turn, highlights another issue identified by the NAO, that has arguably not been picked up on by industry critics to date. The Commission is too slow to act. 

This was exemplified in the fixed odds betting terminal (FOBT) debacle – in fact many would argue that much of what ails the Commission stems from the launch of the machines in 2001.

As far back as 2013 it highlighted the urgent need for new harm-minimisation measures for FOBTs to the government. It lacks the authority to change gaming machine stake limits (though can advise the government on such changes), but in 2013 felt that it did not have enough evidence to make a concrete recommendation. 

The process of building this evidence, hampered by a lack of resources, took until 2018, when it proposed a £30 stake limit. At a time when industry intransigence, not to mention huge public and political pressure, had turned the debate toxic, this seemed overly lenient. It certainly gave anti-FOBT campaigners such as Harris and Webb more ammunition to attack both the regulator and the industry. 

Indeed, the fact that its £30 suggestion was ignored in favour of the £2 limit gave further credence to the idea that it was out of step with public opinion, and that it was protecting the industry rather than consumers. 

Trivial penalties
If that £30 suggestion is taken as evidence of too close a relationship with the industry, the Commission’s approach to enforcement does more to tarnish it in the eyes of the campaigners for change. 

Take the recent case of William Hill and Mr Green, which saw the operator agree a £3m regulatory settlement over historic compliance failings. It makes for uncomfortable reading. 

One player that won £50,000 lost the entire amount on new bets, then deposited thousands in new funds. Mr Green accepted decade-old evidence of a £176,000 claims payout as source of funds evidence from a customer who had deposited more than £1m.

A photograph of a laptop screen showing currency in dollars on an alleged crypto trading account was deemed adequate proof of source of funds. A review of 120 of its top customers led to 113 accounts being closed, as they were unable to satisfy improved anti-money laundering requirements.

It was discovered that between 2014 and 2018 the operator “did not have effective and adequately resourced AML controls in place to consistently address risks presented by higher risk customers”.

Yet the case and financial settlement was first announced by William Hill in its 2019 annual results presentation. The Gambling Commission announcement came a day later. And in Webb’s eyes, the penalty imposed was “trivial”.

“Why should any penalty be less than the highest annual remuneration? If the infraction is over multiple years, then the penalty should be similarly multiplied.”

Harris argues that licence revocations or suspensions are the only way: “[Operators are] allowed to get away with violations, and until they see there are serious consequences they will continue to chance their arm.”

To Webb, the results of the Commission’s current approach are clear: “[It] has failed to interpret the licensing objectives broadly enough, leading to a culture that bad practice has not inevitably resulted in negative consequences. 

“Neil MacArthur with his legal background has personal responsibility for this,” he explains. “As a result, the three key tenets of the 2005 Act are frequently debased.”

Tough enough
The Commission, however, argues that it has to make “tough decisions about priorities and how to make the maximum impact in reducing risk”. 

“In 2017, we introduced a much tougher compliance and enforcement regime,” a Commission spokesperson told iGB. “We did that because we needed to significantly change the behaviour of operators and those who run them. 

“There were far too many failures and too many repeated instances of lessons not being learned. Standards were not good enough. 

“We have seen some change as a result but not enough. The industry must move faster to protect consumers. While we want to support the industry to raise standards, we cannot continue to proceed at the speed of the slowest.”

Yet the NAO report queried whether this muscle-flexing approach was actually effective. It noted a jump in financial penalties between 2014-15 to 2018-19, from £1.4m in fines for three cases in the former, to £19.6m levied across nine cases in the latter.

“The Commission does not know the extent to which these increases have strengthened the deterrent effect of enforcement action,” the NAO said.

“The Commission is not doing as much as it could to incentivise operators to raise standards and make gambling safer,” the report continued. “Effective regulation not only penalises rule‐breaking but also raises standards across the industry both by strengthening the rules where appropriate and by incentivising and supporting companies to go beyond minimum standards.”

It’s doubtful that industry critics would welcome efforts to incentivise operators that go above and beyond the licensing conditions and codes of practice, however. Just think of Webb’s reaction to the industry working groups. 

Again, the commission argues to the contrary: “We recently carried out a comprehensive compliance review, involving 123 online casino operators, which resulted in 45 online operators being forced to submit an action plan to raise standards,” the spokesperson said. 

“A further 14 online operators were the subject of enforcement investigations which resulted in tough sanctions. This work continues.”

Circular firing squad
It’s hard to deny that things are getting to a point where industry critics, aided by the industry’s awful public image and the FOBT victory, will simply continue pushing for change, yet never be happy with the concessions they secure.

As the body with regulatory oversight for the industry – and indeed by virtue of having the term ‘gambling’ in its name – the Gambling Commission will be seen as part of the problem, and an obstacle to be clambered over.

Former Labour deputy leader Tom Watson, one of the first to call for significant changes in the sector, argues that it shouldn’t be a case of ruling whether the Commission is doing its job right or wrong (see page 62). Instead, he says, it should be asking whether the Commission has the tools it needs to be an effective regulator, given the evolution of the market. 

Even the most starry-eyed optimist is unlikely to say that this is the case. A £19m budget to govern a £14.37bn yield sector is hardly sufficient. Online GGY alone totalled £5.3bn – when the regulations the Commission enforces barely mention online gambling. 

It has identified specific skills gaps in areas such as cryptocurrency and addictive technology, the NAO noted, but cannot change licence fees to raise additional resource. Furthermore, taking budget from one department to free up funds for new projects would leave that other department lacking. 

However, the report added: “[It] has not yet produced a robust assessment of future needs or fully explored what more it could do within its existing resources”.

The Gambling Commission is not entirely blameless for the situation it finds itself in today. There are areas where it has been too slow to act, and often appears to be bypassed by politicians, who tend to work around rather than with it. 

For his part, Gambling Commission chief executive Neil McArthur’s two years in charge have been marked by public criticisms and warnings to the industry, something many feel has added to a fraught atmosphere.

McArthur (pictured right) has also bemoaned a lack of curiosity displayed by the Gambling Related Harm All Party Parliamentary Group after it failed to consult the regulator before calling for a £2 cap on online slot stakes.

This ultimately benefits no one, least of all consumers that the industry critics, the Commission, and yes, the industry itself are committed to protecting. 

The regulator is working to raise standards, but undermining confidence in the body tasked with managing an industry that critics say is in dire need of managing only creates a circular firing squad. Changes are inevitable, and 2020 is likely to end with progress towards a vastly different set of regulations in place in Great Britain.

Whether it’s called the Gambling Commission, or renamed to reflect new realities, the regulator will still be the regulator. Whether it is fit for purpose or not is hardly the point – as Watson says, ensuring it has the tools and resources to be effective is what these critics should be campaigning for.