MPs Sharpen Their Attention on Gambling Regulation

Over the years here in Financial Regulation Matters, we have looked at a number of elements of ‘consumer protection’, broadly defined. From predatory lenders to governmental policies that disproportionately affect the poor (and everything in between like the larger culture of credit dependency), we have seen a number of examples of when capitalism and vulnerable people collide, and vulnerable people are exploited. One area where this concept is visible is within the gambling arena whereby, since 2005 with the Gambling Act, the marketplace for in-person and online gambling has ballooned. However, an influential group of MPs are now seeking to address this issue, and even just that sentiment is already having a demonstrable effect.

The headlines in the media run with the fact that, since the influential All Party Parliamentary Group (APPG) for Gambling Related Harm recently published a report calling for the Gambling Act 2005 to be fundamentally reconsidered, shares in British gambling firms have tumbled and lost nearly £1.2 billion in value. One of the elements that the APPG are attempting to enforce, in line with the approach demonstrated by the Labour Party, is that the limit of £2 that applies to stakes placed on fixed-odds betting terminals should be applied similarly to web-based slot machine games. The reason why this has caused such an immediate impact in the gambling arena is because, as stated in The Guardian who cite the Gambling Commission, the income from those web-based games ‘accounts for more than a third of their income’. It is easy to see why the value would plummet. The marketplace is already reeling from a number of regulatory interventions, one of which included the restriction on stakes on high street roulette games. With the market’s fear being that a similar restriction would be placed onto online games like roulette, then it is no surprise to see online-based gambling organisations like 888 being hardest hit – they lost nearly 14% of their value in one day, equating to £91m. Ladbrokes’ owner GVG fared even worse, with their 10.5% fall equating to £547m coming off their market value.

Today, the largest gambling organisations in the country responding by declaring their adherence to ‘five pledges’ that would promote safer gambling. They are: to prevent underage gambling and protect young people; increase support for treatment of gambling harm; to strengthen and expand codes of practice for advertising and marketing; to protect and empower customers, and to promote a culture of safer gambling. However, this is unlikely to stop the advancing regulatory hoard. Research has suggested that previous initiatives like the ‘when the fun stops, stop’ campaign have been entirely ineffective, which suggests that the adherence to these pledges will not have any great affect. Research conducted before the Financial Crisis suggests that ‘disadvantaged social groups who experience poverty, unemployment, dependence on welfare, and low levels of education and household income are most likely to suffer the adverse consequences of increased gambling’. This has been further emphasised by researchers who argue that problem gambling is often supplemented by a number of other issues, like mental health issues, which contribute to a negative social impact.

One thing that can be suggested is that the gambling companies have ridden a regulatory wave that is soon to run out by all accounts. Whilst health-based regulatory endeavours like the campaigns to reduce smoking are up against traditionally large and well-resourced corporate entities, the gambling-based regulatory endeavours have much less of an obstacle in their way. With the cross-party support provided by the APPG proving influential, it may not even take a Labour Government to fundamentally restrict the growth of the gambling arena, but their election in December would almost confirm the demise of the sector. The gambling companies have left it too late to respond, with their five pledges being dismissed out of hand almost immediately. It will be fascinating to see whether the writing is really on the wall for the British Gambling scene.

Keywords – Gambling, business, regulation, government, @finregmatters