Industry 2020 predictions: part six – regulation

7 February 2020

Last year saw the rapid expansion of sports betting across the US, but also a number of regulatory and advertising clampdowns in Europe.

As the new decade gets underway, industry experts share their thoughts on the opportunities and challenges that lie ahead. In part six, our final installment, we hear from regulatory experts.

Interviewees
Jason Chess, partner and co-head of the Betting and Gaming group, Wiggin
David Clifton, Director, Clifton Davies Consultancy
Yahaya Maikori, partner, Law Allianz
Mark Balestra, US special counsel, Segev Law

What were the defining developments or events of 2019?
Jason Chess: The major event of 2019 was the Gambling Commission’s statement (in its Enforcement Report 2018/19) that most of the British public have a maximum of £499 monthly disposable (or “discretionary”) income and that this amount should be logged by operators as a “benchmark” for the possibility of “gambling-related harm”. The principle that operators should be held liable for how much of a person’s freely disposable income they choose to spend in any given manner finally consigns to the grave the libertarian Blairite approach to gambling.

David Clifton: From a regulatory viewpoint, the good news from 2019 was watching major operators within the UK industry finally and convincingly demonstrate that they are absorbing safer gambling principles into the heart of their business models. There is still a long way to go though, plus a legislative review, and life is not going to get easier for a long while yet. Stateside is where the major excitement has been taking place from a sports betting perspective. Long may that continue and I remain hopeful they will avoid similar regulatory problems to those encountered on this side of the Atlantic in recent times.

Yahaya Maikori: Across Africa there have been some disruptive developments – the tax imbroglio in Kenya and the propriety rights claim by Western Lotto against the remaining lottery operators in Nigeria are most noteworthy. In the Nigerian case, Western Lotto Nigeria Limited, a recently licensed operator, sought a court order stopping other operators from running Ghana Games in Nigeria based on its alleged exclusive licence agreement with LMC VAS Ghana, owner of Ghana Games. If Western Lotto has such rights, then it is a great strategic move given that Ghana Games dominates the Nigerian market and has been played since time immemorial. In Kenya the 20% betting tax has upturned the market, leading to the withdrawal of its biggest operators, SportPesa and Betin.

Mark Balestra: In the US, the year’s defining event – the Supreme Court ruling striking down PASPA – actually took place in 2018. While it was big news when it happened, its impact was felt throughout 2019, during which the number of states with legalised sports betting climbed. Opinions vary on the potential impact of the DoJ’s opinion letter issued in late 2018 extending the Wire Act’s reach beyond sports betting, but it is notable that the expansion of legalised online casino and/or poker appears to be stalling.

How do you see these continuing to shape the igaming space in 2020?
JC: The regulator, under assault from the press and – let me be fair – encouraged by far too many historic industry own goals, is in clear peril of reverting to the traditional British approach to gambling, which is that it is a moral vice needing to be controlled, particularly in relation to the poor.

DC: Let’s place our trust in the GC to carry the flag for the UK industry to ward off the doom-mongers and naysayers who forecast staking limits, advertising bans and yet more red tape strangling the life and innovation out of the sector. Let’s be optimistic too – surely 2020 might be the year for Germany and the Netherlands to finally launch their igaming space race.

YM: The Nigerian case has opened up a new vista in the gaming industry; I doubt that the shallow legal framework can adequately resolve this matter beyond the country’s intellectual property rights laws. It’s a clear argument between rights ownership and anti-competitive strategies, which won’t be resolved easily. With the Kenyan tax matter, I think that the industry will remain in limbo unless the regulator evolves other strategies to address their concerns, which centre on the dominance of foreign ownership and the prevalence of gambling addiction.

MB: It is possible that by the end of 2020, more than half of the states will have legalised sports betting. Conflicting Wire Act opinions may continue to hamper the growth of igaming. The federal ruling setting aside the DoJ opinion as it applies to the New Hampshire Lottery has exposed the volatility of the DOJ’s position, but it is a lower court decision that the DoJ interprets as narrowly applicable. The department’s forthcoming actions (or lack thereof) after its self-imposed grace period on enforcing the opinion comes to an end could indicate how things will unfold.

What do you see as the biggest challenges ahead for the sector in 2020?
JC: 2020 will see further demands for stake limits as well as restrictions on VIP and loyalty programmes. Dangerously, a viscerally moralistic and hostile press is beginning to develop an understanding of the industry, something that will allow the journalists to skate around in silence the massive improvements in customer care that have been made and isolate points that offer scope for further attack.

DC: I hate to say it, but the biggest challenge may just be how on earth we avoid more of the same for yet another year.

YM: In 2020, as the industry further deepens, poor regulation will continue to throw up disruptive challenges.

MB: The Adelson-backed opposition to interactive gambling will continue to influence policy. While a new federal prohibition is doubtful, the Adelson initiative could have a negative effect on expansion to new jurisdictions. In areas of growth – namely sports betting – states have a tendency to overshoot on revenue expectations, and the backlash of the inevitable underperformance could negatively impact expansion to new states.

Related articles: Industry 2020 predictions: part one – operators and suppliers
Industry 2020 predictions: part two – finance
Industry 2020 predictions: part three – marketing
Industry 2020 predictions: part four – people
Industry 2020 predictions: part five – technology and innovation