GAMING: An Introduction to UK-wide

Introduction

The gambling industry in Great Britain has, as always, been busy over the last 12 months, this time in the wake of the Conservative government’s White Paper in April 2023 – High Stakes: gambling reform for the digital age (the “White Paper”). This White Paper outlined how the government would work with the Gambling Commission (the “Commission”) and others to reform the regulation and legislation governing the gambling sector. It received a positive reception, not least as it finely balanced consumer freedoms and the prevention of harm, with different reforms being welcomed by different stakeholders. There was something for everyone and extensive efforts have been made to ensure the proposals in the White Paper are implemented in a timely way and as proposed, through lobbying and by responding to numerous Commission and government consultations.

After enduring a turbulent 30 months whilst the Gambling Act Review was underway, with some radical proposals under consideration during that period, the balanced outcome brought the UK gaming industry a sense of stability and a basis upon which to plan for the future. The published consultation responses confirmed changes that would be made and their implementation dates. The land-based industry could look forward to some modest and overdue modernisation, most importantly relating to machine entitlements. However, progress was brought to a standstill in July 2024 when the UK general election was called, resulting in a new Labour government. The industry now waits to see whether and when the government will implement the proposals as drafted in the White Paper. Likewise, other stakeholders less enamoured with gambling await critical reforms, including the creation of a Gambling Ombudsman, the introduction of a statutory gambling levy and online stakes limits.

White Paper

The White Paper set out more than 60 proposals which would shape the future of the gambling industry, to be made through consultations, primary and secondary legislation, voluntary commitments and changes to the Commission’s licence conditions and codes of practice.

Timing

Government and the commission aimed to implement most key White Paper measures by Summer 2024. Whilst progress has been made, the timeframe has not been met, not least due to the General Election in July 2024. We are yet to see the new Labour administration progress implementation of White Paper proposals. Those that require secondary legislation, including the introduction of a statutory gambling levy, some of the land-based modernisation measures and online stake limits for slots, are therefore yet to take effect. We do not know when the government will return to implementing the proposed reforms, but we expect to see progress in the coming months and early 2025.

There is a risk that the government will make changes to the proposed reforms, which would jeopardise the delicate balance of stakeholder interests the White Paper achieved, or not progress the reforms at all. However, we think it is much more likely that the government will progress the proposed reforms more or less as envisaged in the White Paper. The White Paper had cross-party support, and it would be politically expedient to implement its proposed reforms rather than revisit gambling policy, an issue which has historically had an ability to overshadow more important matters of state, as evidenced most recently by the political betting scandal.

Status

Since the White Paper was published, progress has been made towards achieving several of its key proposals:

1. Statutory levy: A new levy to fund research, education and treatment of gambling-related harms was expected to be introduced from 1 April 2025, but this will likely be delayed due to the change in government and need for secondary legislation.
2. Financial vulnerability checks: Following the Commission’s consultation response of 1 May 2024, financial vulnerability checks must be conducted on customers pursuant to a new social responsibility code provision. These checks came into force on 30 August 2024 at the initial net deposit threshold of GPB500 a month, which will be reduced to GBP150 a month from 28 February 2025.
3. Financial risk assessments: A pilot, which will run for four to six months, was launched by the Commission on 30 August 2024 to test how proposed “frictionless” risk assessments can work in practice and to assess appropriate thresholds. The intention is that an assessment would allow operators to consider gambling history and whether there are other indicators of harm.
4. Online game design rules: Following the Commission’s consultation response published on 1 May 2024, new remote game design rules that extend existing game design requirements for slots to other online products including speed of play limitations, autoplay prohibition, and display requirements come into force on 17 January 2025.
5. Direct marketing: A new social responsibility code provision introducing requirements to provide customers with options to opt-in to marketing will come into force on 1 May 2025 (extended from 27 January 2025).
6. Land-based reforms: Following the government’s consultation response published on 16 May 2024, several changes to the land-based sector were announced, including increased gaming machine entitlements, acceptance of cashless payments on gaming machines, introduction of a legal age limit of 18 for Category D slot style machines, and the increase of Local Authority fees. Most of these land-based reforms require legislation and are therefore yet to be implemented.
7. Online stake limits: Following government’s consultation response on 23 February 2024, online stake limits are to be introduced at GBP5 per spin for those aged 25 years and above, and GBP2 per spin for under 25s. The changes were due to come into force in September 2024, but have not yet been implemented given the change in government and need for legislation.

The voluntary creation of a Gambling Ombudsman is a cornerstone proposal of the White Paper. It is intended to be an independent, free to use, statutory body to handle social responsibility complaints from consumers. We are yet to see progress in establishing the Ombudsman, which was due to start taking claims from Summer 2024. Given the steady increase in consumer complaints over recent years, the introduction of an Ombudsman should be welcomed by the industry.

M&A Activity

Despite the challenging macroeconomic climate, M&A activity has significantly increased this year. The sector has seen a number of key M&A trends, including the previously untapped B2B sector and increased private equity take-privates. We expect these trends to continue in the year ahead, particularly as companies continue their expansion in the United States and look to consolidate and restructure to optimise operational efficiency, and while interest rates continue to decrease.

Conclusion

It has been a busy year for the British gambling industry as consolidated efforts have been made to progress implementation of the White Paper proposals. The change in government has paused key reforms requiring secondary legislation and cast a shadow over regulatory reforms being implemented by the Commission. However, we are cautiously optimistic that the government will soon adopt the White Paper, which had cross-party support, and press ahead with critical reforms including relating to the introduction of a statutory levy, the creation of a Gambling Ombudsman, and certain gambling restrictions, whilst providing the industry with the balance and certainty it needs plan for a sustainable future.