October 23, 2019

The system is broken

The trouble with writing for a magazine, however eminent an organ, is that you write three months in advance of when people (hopefully) will read it. So, I’m writing this just as Teresa May’s EU Withdrawal Bill has suffered the worst defeat by any government in modern history. By the time that you’re reading this, the UK could have crashed out of the EU and you could be using this magazine as kindling for a fire to roast the pet hamsters that you’ve bartered away your remaining supplies of medicine for, just so you can eat. Well good luck with that, back to the woes of the gambling industry.

If we look back on 2018, it was undoubtedly one of the worst years for gambling in my 25 years in the industry. The nadir was the passing of The Gaming Machine (Miscellaneous Amendments and Revocation) Regulations 2018 on 20th December. This was the secondary legislation that dropped the maximum stake of fixed odds betting terminals (FOBTs) from £100 to £2. This was a massive victory for the anti-gambling brigade as not only was this not based on any scientific evidence but the government’s own advisers, the Gambling Commission, had recommended any other stake limit apart from £2. The fact was, the government had to do it because of the strength of antigambling feeling amongst MPs, so any other option would have been voted down.

The strength of anti-gambling feeling within Parliament was also found when the Chancellor announced in his October budget that Remote Gaming Duty, the tax online casinos pay, would be raised by 6% to pay for the shortfall in duty being received from FOBTs due to the stake cut. In an unprecedented move Philip Hammond MP was making one gambling sector pay for the ‘crimes’ of another and not one MP questioned it. We then saw the Gambling Minister, Tracy Crouch MP, dramatically resign over the date when the £2 stake drop would happen, spouting lies about the number of suicides that gambling caused, her falsehoods going unquestioned and her even receiving an award for her supposedly principled stance. 

All evidence suggests that 2018 was when the government was captured by the anti-gambling brigade. Ominous dark clouds began forming when the government responded to the Triennial Review in May. Here we see the portents for future despair. The beginning of the investigation into mandatory player tracking for all category B machines and the potential for the banning of credit cards in online play (an issue today). Advertising on TV was seen as such a ticking time bomb that the online industry felt it had to impose its own whistle to whistle ban, we have yet to see if this will be enough to prevent a complete ban. Hidden away were two potential catastrophes waiting to happen, the Gambling Commission’s suggestion of ‘affordability limits’ and the Advertising Standards Authority’s work on normalcy. Both, if allowed to see daylight could destroy online gambling.

The Gambling Commission’s current consultation on a National Strategy to Reduce Gambling Harms exemplifies the problem. Everything to do with gambling from a political and policy perspective is now seen through the spectrum of problem gambling. And just to make things worse, the people who are leading the agenda about problem gambling are mostly ideologically opposed to gambling, whether they be petulant problem gamblers or militant academics or just charities on the make, knowledgeable that an increased perception of problem gambling can only mean more grants. The trouble for our industry is that they have captured the ecosystem that dictates our lives through regulation and public perception. The default setting is that gambling is creating misery. The more misery there is the better, so much in the same way the ‘at risk’ problem gamblers category was invented to show that millions could descend into addiction at the drop of a hat without any scientific evidence to prove this, the move to focusing on gambling harms, i.e. every person that associates with a problem gambler, will increase the perception of gambling caused misery twentyfold. That’s all great for the ecosystem because they will benefit with the industry being forced to pay for every possible externality. So you can be certain that the social responsibility levy will become mandatory and increase hundredfold.

I will be the first to accept that the industry hasn’t exactly covered itself in glory recently. £26 million in fines and some licences forfeited. The last few years have seen almost every single big brand penalised for problem gambling and money laundering issues. The worst thing about it is that practically every case involves some very basic mistakes being made. One constantly questions how some senior members of the industry remain in their posts if such basic errors keep being made.

Having said this, I believe the current system is inherently flawed. Currently, gambling operators are expected to monitor players gambling behaviour to identify signs of problem gambling and/or anti-money laundering. Their trade associations (or associated organisations) are tasked with operating the self-exclusion systems that are the lynchpins of preventing problem gambling.

Why this system is flawed is that each operator only sees the player behaviour that the player exhibits to their company. It is a snapshot and not the whole picture, as a gambler can gamble £100 with one operator and not be considered problematic for either problem gambling or money laundering but if that gambler is doing the same with 100 operators the story may well be completely different.

Currently we have hundreds of operators duplicating effort in undertaking KYC (Know Your Customer) and then monitoring player behaviour, all just to get a severely limited picture of what the customer is actually doing.

If there was just one payment solution for the whole industry (e.g. a customer had to use a specified payment provider to deposit money to gamble), operated by the regulator, then a truly holistic picture of player behaviour could be obtained. Since there is only one wallet, with all gambling payments going in and out of it, monitoring the entirety of player behaviour would be entirely possible. It would also solve underaged gambling as they would have to prove age to play.

I would also argue that making operators responsible for preventing problem gambling and money laundering will always be problematic due to their primary objective of making money from gamblers. To get them stop doing this goes against the reason they get out of bed in the morning. It makes far more sense to have the regulator undertake the task as the public good is, or should be, their primary purpose, as opposed to making headlines as it was under a previous CEO.

In much the same way, having trade associations run self-exclusion systems is inherently flawed because a) there should be only one national self-exclusion system to cover all forms of gambling – possible under the above system, and b) when a self-exclusion system goes wrong which recent news about GamStop shows can happen, it will always be seen as the industry profiting from problem gamblers gambling.

A number of countries in Scandinavia now operate systems whereby gambling can only be accessed through what is effectively one wallet and the majority of European jurisdictions have nationally organised self-exclusion systems operated by the regulator. So why can’t we? Maybe if the Gambling Commission took on this task rather than just hectoring the industry we could all move forward.

In conclusion, our problems can best be summed up in the words of Saul Alinsky, author of the 1971 classic, Rules for Radicals: A Pragmatic Primer for Realistic Radicals which inspired a young Barack Obama. He wrote ‘The less a person is directly involved in an issue, the more moralistic they are about it’. 

While the chattering classes that make up our industry’s ecosystem; government, the regulator, academia, charities and the press only listen to those ideologically opposed to our industry, we will suffer a growing amount of restriction and cost, just to provide fun and excitement for 99% of the population. By championing a new way of fulfilling our social responsibility obligations that will actually work, we can shift the debate and put our industry back on firmer ground politically.

Steve Donoughue, MBA
As featured in Gambling Insider

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