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Harris Hagan

UK Gambling Law

Home / UK Gambling Law
17Jan

Is in-play betting really an ‘indicator of harm’?

17th January 2023 David Whyte Uncategorised 177

The Gambling Commission (the “Commission”) is currently consulting (the “Consultation”) on the proposed Customer Interaction – Guidance for remote operators (the “Guidance”). While this exercise has not yet attracted the same attention as its 2020 predecessor consultation and call for evidence on remote customer interaction requirements and affordability checks (on remote customer interaction and affordability checks) it is potentially every bit as significant for licensees and consumers. In this, the fourth in a series of articles, Regulus Partners and Harris Hagan examine one specific detail of the Guidance – its classification of in-play betting as an “indicator of harm” – and consider what insights it holds for the Commission’s approach to evidence-based policy-making.

The decision to single out in-play betting participation, from all the other forms of online gambling, as a behaviour that might be an “indicator of harm” should strike even the most casual reader of the Guidance as odd. The seemingly arbitrary nature of the classification is reinforced by an absence of supporting evidence. Instead, we are offered a rather banal explanation that: “people who bet in-play may place a higher number of bets in a shorter time period than people who bet in other ways, as in-play betting offers more opportunities to bet”. It adds that: “some studies have shown that placing a high number of in-play bets can be an indication that a customer is at an increased risk of harm from gambling”; but the studies themselves are not cited. 

In search of enlightenment, Regulus Partners submitted a request under the Freedom of Information Act in order to obtain the missing evidence. This turned out to constitute one blog article, one journal paper and a selection of results from the Commission’s 2016 Telephone Survey. An examination of these sources raises various questions about the Commission’s capacity for critical analysis. Most importantly, however, the evidence cited does not support the classification of in-play betting as an “indicator of harm”.

In-play betting

Before we delve into the detail, it is worth explaining what an in-play bet is, because the image of turning sports into a slot machine is somewhat misleading. To bet in-play is to place a wager on an event which has already started, but before the result is known; that sounds simple but here are some practical examples. Placing a bet on the final score of a football match during half-time counts as in-play, but during the 100 minutes or so that a typical football match lasts, there are typically ten domestic horse races, even more international and dogs races, and as many virtual betting opportunities that a customer can hope to find. Equally, a tennis match typically lasts 90 minutes and can go on for hours; in Australia in-play betting is not permitted on the internet, so in tennis it is the game rather than the match which is considered to be the unit of play; therefore most ‘in play’ bets on a standard definition become ‘pre-match’ in Australia by applying a common sense workaround. Basketball can be similarly divided up: a two and a half hour match comprises four twelve-minute periods and a lot of stoppage time. Perhaps the most obvious ‘in play’ definition trap is a three-day test match in cricket, substantially all of the betting is necessarily ’in play’ but hardly ever fast-paced. The frequency at which a gambler bets is clearly an important potential marker for harm, but whether or not a bet is in-play is typically a definitional red-herring based upon the length and game-structure of the sport rather than the customers’ betting frequency on a given sport.

The blog

In April 2013, Professor Mark Griffiths of Nottingham Trent University published a blog The ‘In’ Crowd: Is there a relationship between ‘in-play’ betting and problem gambling?’. The article contained no analysis of betting data or harm. It was instead a conjectural piece that considered whether an ability to place football bets more frequently (through in-play) heightened risk of disordered gambling. It argued that the ability to place successive wagers on successive matches, combined with an expansion in television coverage of live football, might increase risk of harm for some people compared with the days when most games kicked off at 3pm on a Saturday afternoon and were not televised live. If anything, the blog appears to suggest that the dispersal of matches across the week (and at different times of the day), which reduced the intervals between football betting days, was the bigger issue.

The blog concluded that: “in-play betting is something that many of us in the problem gambling field are keeping an eye on because it’s taken something that has traditionally been a non-problem form of gambling to something that is more akin to betting on horse racing.” This is significant for two reasons. First, the speculative nature of the commentary is emphasised by Professor Griffiths’ intention to “keep an eye on” in-play betting. His concerns stemmed not from any actual data or observations of in-play betting, but from what some people might theoretically do given the chance to place bets throughout the duration of a football match. Moreover, Professor Griffiths noted the relationship between bet frequency and event frequency needs further empirical investigation and conceded that “ntil more research is forthcoming a definitive answer is currently not available.” Second, he compared in-play betting on football with horserace betting – an activity with consistently low rates of “problem gambling” reported via official prevalence surveys. In short, Professor Griffiths did not suggest that in-play betting was especially risky.

The journal

The second piece of Commission evidence is a study published in the Journal of Gambling Studies in 2015, Demographic, Behavioural and Normative Risk Factors for Gambling Problems Amongst Sports Bettors (Hing et al.). The study features results from an online survey of sports bettors in Australia in 2012. It concluded that: “risk of problem gambling was also found to increase with greater frequency and expenditure on sports betting, greater diversity of gambling involvement, and with more impulsive responses to betting opportunities, including in-play live action betting.”

It would be wrong, however, to read this conclusion as vindication of the Commission’s targeting of in-play betting. First, the study was based on data from Australia, where in-play betting is only permitted by telephone or in person and where on-line in-play bets may therefore only be placed with unlicensed operators. Second, it is based on a relatively small sample of sports bettors (n=639) and the use of an online survey vehicle that “deliberately oversampled to optimise recruitment of adequate numbers of problem and at-risk gamblers”. Third, the data was gathered via a self-report survey rather than actual observation of betting behaviour. It relied on respondent recollections, from the previous 12 months, of the proportion of bets that they placed by different channels, at different times (i.e. the day before the event, the day of the event, during the event) and on different outcome classifications (i.e. final outcome of event, key events such as ‘first goal’ and micro-bets such as ‘next point’ in tennis). The classification by respondents of betting activity in this way for an entire 12-month period would have involved fairly heroic feats of recall.

Most importantly however, the journal paper’s findings do not support the Commission’s categorisation of in-play betting as an “indicator of harm“. The researchers did find an association between the percentage of an individual’s bets placed “during the match” and their Problem Gambling Severity Index (“PGSI”) score – but they also identified a similar association for traditional bets placed within the hour prior to kick-off. Perhaps more significantly, they found that betting in-play on the final outcome of the match was associated with lower PGSI scores than final outcome bets placed before kick-off. Associations between the percentage of bets on “key events” and PGSI score was similar whether the bets were placed before or during the match. It did indicate that regular betting on “micro events” (which can only be made in-play) are associated with higher PGSI scores: but to suggest that this proves the inherent riskiness (or harmfulness) of all forms of in-play betting is at best a profound misreading of the research.

The survey

The final item of evidence is a set of results from the Commission’s Quarterly Telephone Survey in 2016 (the “2016 Survey”). The Commission reported that “27.4% of online gamblers who bet in-play were classified as problem gamblers, compared to 10.9% of all online gamblers and 5.4% of online gamblers who do not bet in-play. 44.1% of online gamblers who bet in-play were classified as at risk of problem gambling compared to 40.4% of all online gamblers and 26.4% of online gamblers who do not bet in-play.”

On the face of it, these findings appear to support the classification of in-play betting as an “indicator of harm”. This however overlooks important considerations of survey methodology and interpretation.

The 2016 Survey typically samples around 4,000 people a year. While this is a reasonable sample size for estimating overall participation in gambling, findings are likely to be less robust when considering specific activities. For example, we calculate that the number of online football bettors in the sample in 2016 was around 160; the number of tennis bettors just 14. The ‘problem gambling’ rates for online gambling cited by the Commission (using the short-form PGSI rather than the full nine-item instrument) were three times higher than those found in the ‘gold-standard’ NHS Health Survey for the same year, something that raises obvious questions about sample bias. Upon original publication of the results in 2016, the Commission noted with suitable circumspection that “due to small base sizes the data presented here should be considered as indicative, and be treated with caution.“

Issues of survey reliability aside, there are a number of issues of interpretation. The Commission appears not to have considered that people who typically bet in-play may, for other reasons, be considered higher risk. For example, young men (a higher risk demographic group) are likely to be over-represented amongst in-play bettors. It seems plausible that a majority of in-play bettors will also bet traditionally; in which case they may be assumed to have broader wagering repertoires than people who only place bets before the start of the event (because they do both). Finally, the analysis is limited to a comparison of “problem gambling” rates between two different types of online sports betting. It provides no comparison between in-play betting and other forms of gambling, which would be necessary to classify it as a uniquely risky product.

Conclusion

The Commission’s decision to classify in-play betting as an “indicator of harm” is, according to its Freedom of Information Act disclosure, based entirely on an assessment carried out in 2016, which stated: “on the balance of the evidence we have reviewed and considered, we have concluded that the current regulatory regime in place for in-play betting is sufficient and further controls are not needed at this time.” It is unclear therefore why a review of precisely the same evidence base in 2022 should arrive at such a different view.

The Commission is correct to point out that short gaps between bets or high-staking after a big win may be risk indicators for some people, but if so, this is true of many other activities and not just in-play betting. Indeed, in-play betting does not appear to be particularly high-risk viewed solely through a lens of bet frequency or rapidity.  

Official prevalence surveys have consistently shown that participation in online sports betting is associated with low rates of PGSI and DSM-IV “problem gambling”. As we pointed out in our third article, this is particularly the case where bettors have not participated in other forms of online gambling. We know from Commission data that around one-quarter of online gamblers, and therefore a much higher proportion of online sports bettors, participate in in-play betting. It is not a difficult jump to realise that it is implausible that problem gambling rates could be so low for remote sports betting in total if in-play betting on its own was a significant “indicator of harm”.

There is no inherent logic to consider in-play betting as especially risky. After all, ‘in-play’ simply denotes the fact that the wager is placed after the event has commenced. A final outcome result bet placed five minutes into a match is really no different to the same bet placed five minutes before kick-off. If anything, the bettor has more information on which to make his or her decision. Some bet types, in particular ‘micro-bets’, may indicate elevated risk; but specific bet-choices may be indicative of risk in all forms of gambling: this is not unique to in-play.

Our analysis indicates that the Gambling Commission’s decision to categorise in-play betting as an “indicator of harm” is based on a mis-reading of a very thin and selectively assessed evidence base. Indeed, we would go further, the Commission’s claims are in fact contradicted by the only peer-reviewed study presented as evidence. The Griffiths blog is a cogent article, however it proves nothing and in any case does not support the Commission’s classification, whilst results from the 2016 Survey appear to be at odds with the ‘gold-standard’ Health Survey for that year (and all other years) and are presented without context and in a way that does not allow further checking or analysis. In this article, we have examined, and found wanting, the evidence presented by the Commission in support of just one of the vast number of “indicators of harm” or “vulnerability” that feature in the Guidance. This may in itself be an indicator of a particular vulnerability within the Commission: a susceptibility to believe the worst about the market it is required by law to oversee. It is certainly an indicator that evaluation is difficult and may be subjective, something that would benefit from introspection in any final version of the Guidance.

With thanks to Dan Waugh from Regulus Partners for his invaluable co-authorship.

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09Jan

Proposed Customer Interaction Guidance: The problems with common sense by decree

9th January 2023 David Whyte Harris Hagan, Responsible Gambling, Uncategorised 187

The Gambling Commission (the “Commission”) is currently consulting (the “Consultation”) on the proposed Customer Interaction – Guidance for remote operators (the “Guidance”). While this exercise has not yet attracted the same attention as its 2020 predecessor (on remote customer interaction and affordability checks) it is potentially every bit as significant for licensees and consumers. Once implemented, it is likely that its strictures will in time bind non-remote gambling licensees and consumers too. Regulus Partners and Harris Hagan have written a series of co-authored articles to assist stakeholders responding to the Consultation. In the second of these articles, we described how the Guidance threatens to alter the meaning in law of “vulnerability” through its definition of “vulnerable persons”, by rendering universal what had formerly been considered exceptional. In this, our third article, we examine why this matters, in terms of both near-term regulatory compliance and longer term attempts to stigmatise participation in gambling.

The most striking feature of the Guidance is the extent to which it attempts to mandate common sense through a series of ill-defined rules – proposing a vast bureaucracy to facilitate and evaluate customer interactions. Having established a wide range of criteria for classifying customers as either “vulnerable” to, or “at risk” of, gambling harm; two concepts that appear to be definitionally similar but which the Commission, at different times, treats as both distinct and the same, the Guidance then requires licensees to configure a range of actions in response. The Guidance is, however, silent on what specific actions should be aligned to particular criteria (or clusters of criteria).

A little less conversation, a lot more interaction

Such is the breadth of the Commission’s conceptualisation of “vulnerability to harm” (there are literally millions of possible combinations of the “factors of vulnerability” and “indicators of harm” contained within the Guidance), it is inevitable that different licensees will take different actions in response to the same risk factors. More significantly and putting aside the inconsistent use of the differing terms “may be experiencing harm” and “may be at risk of harm” in the Guidance, licensees’ interpretation of what actions should be applied to any particular constellation of “indicators” is likely to differ from the Commission’s (and indeed, within the Commission, between one official and another).

In the absence of clearer direction, licensees will be left to learn from painful experience what “vulnerability” looks like through the eyes of Commission officials as well as what action or response should be considered appropriate (knowing that the Commission’s view on any given day is no guide to future interpretation). More cautious licensees may find themselves conducting customer interactions as a response to the vaguest suggestions of vulnerability; for example, being above or below certain, as yet unspecified, age thresholds. In this way, a degree of standardisation may eventually be achieved; albeit with thresholds set at successively lower levels.

Licensees who adhere to the Guidance, are exposed through a requirement that their staff “need to be trained on the skills and techniques they need to help them carry out customer interactions, including what to do if a customer becomes distressed or there is a risk of suicide.” There is no question of anyone in the gambling industry not wishing to prevent suicide. However, this wording implies that it is the responsibility of licensees or their employees to identify risk of suicide, and act upon it. Suicide risk is always the result of a complex array of factors, that may or may not, include an individual’s gambling. It is the responsibility of qualified professionals to identify that risk, not licensees, and it is dangerous on multiple levels, including in relation to the wellbeing of licensees’ employees, to suggest otherwise in formal Guidance.

The consequences of all this may be guessed at: enforcement action ramped up as the Commission weaves an ever more intricate web of compliance tripwires; licensees absorbing (or passing onto customers) substantial increases in the cost of doing business; and customers facing greater levels of intrusion and inconvenience based upon lifestyle preferences but also a range of factors beyond their control, such as age or disability.

Under the Guidance, licensees will be expected to conduct customer interactions according to a quota system based on DSM-IV and PGSI “problem gambling” prevalence rates from the Health Survey for England 2018 (the “Health Survey”). Online sportsbooks must therefore interact with at least 3.7% of their customers each year; while the minimum quota for online slots, casino and bingo operators is set at 8.5%. Licensees will be required to carry out monthly checks to ensure that they are on course to hit these targets.

The use of quotas raises a number of questions not addressed within the Consultation, which does not even canvass views on the wisdom of such a scheme. First, it reveals a discontinuity in the Commission’s logic – with “problem gambling” belatedly introduced as a proxy for “vulnerability to harm”. It should not, however, be assumed that someone with a DSM-IV or PGSI classification of “problem gambling” will meet the definitional criteria set out by the Commission for “vulnerability” or “harm”. This invites the question of just what problem is to be addressed and who, in particular, licensees are expected to protect: those whose gambling might be considered problematic according to recognised psychiatric criteria, or those who may meet the regulator’s often more nebulous definition of “harm”. The requirement that licensees use “specifically the problem gambling rates for the individual activities” exposes a basic misunderstanding of prevalence surveys. The Health Survey does not in fact provide “problem gambling” rates by discrete activity. Instead, it shows prevalence rates for people who participate in certain activities in combination with others, which is a rather different thing. 

The Guidance becomes even more muddled in proposing interaction quotas for licensees with online sportsbooks and casinos – suggesting the use of a combination of problem gambling rates weighted for the percentage of revenue derived from each activity. It overlooks a simpler, more targeted and more logical method – using ‘problem gambling’ prevalence rates for customers who only use sportsbooks when gambling online, those who only play online slots, casino or bingo and those who do both. We have provided the figures below from the Combined Health Surveys for 2016: it would be a relatively straight-forward matter for the Commission to update these for 2018.

ActivityDSM-IV/PGSI ‘problem gambling’ rate
(% of customers participating)
Online betting0.4%
Online slots, casino & bingo7.3%
Online betting and online slots, casino & bingo8.7%

The Guidance states that these quotas may be recalibrated in the future – with particular reference to how “problem gambling” or “gambling-related harm” are measured. Here it should be recalled that the Commission is part-way through a process to wrest control of the measurement of gambling and “problem gambling” prevalence from the NHS – through the replacement of the Health Surveys with its own vehicle. The Commission’s Update: Pilot of survey questions to understand gambling-related harm published in May 2022 (the “Pilot Survey”) produced a combined PGSI problem gambling’ rate of 1.3% – more than three times higher than the result from the Health Survey. Analysis by Regulus Partners has highlighted previously a number of serious errors with the Pilot Survey (including a failure to carry out cross-checks with regulatory returns data; and overlooking the impact of Covid-19). The Commission has neglected to address these flaws and states, as an article of faith and without supporting evidence, that Health Surveys under-report “problem gambling”.

The Pilot Survey also contained questions about gambling-related harms, although the Commission has been rather selective in releasing these results. Some of these “harms”, as we explained in our previous article, include reduced attendance at the cinema, spending less time with loved ones or “feeling like a failure”. Rather unsurprisingly, they are experienced by a much larger group of gambling consumers than those likely to be classified as “problem gamblers”. Licensees may find therefore that interaction quotas are ramped up significantly in the future as a consequence of surveys controlled entirely by a regulator apparently intent on demonstrating that  “problem gambling” or “gambling harms” are widespread in the population.

One obvious difficulty with issuing quota requirements is that they lead inevitably to a tick-box approach to compliance based on quota fulfilment. The Guidance sets out a very catholic definition of what might be considered an “interaction” – from generic safer gambling messages or pop-ups right through to treatment referrals and exclusion. Thus, in order to satisfy the quota, licensees may simply have to make sure that around one-in-five or one-in-ten customers receive a generic safer gambling message at least once a year – a figure that is likely to be well below current levels where responsible operators are concerned. In time therefore, the Commission may either drop the quota system or increase its complexity, with quotas for specific types of interaction (e.g. quotas for self-exclusion).

When combined, all of the above issues will make it incredibly difficult for licensees to act where there are “strong indicators of harm” as there is a lack of clarity in the Guidance as to what the Commission considers to be a “strong indicator of harm”. In the Consultation the Commission acknowledges previous concerns raised about this, and states that it “does not consider it appropriate at this time to set requirements which would remove the discretion or ability on the part of operators to tailor processes to their businesses and customers”. One might take the view that this is precisely what the Guidance does, particularly when it contains formal requirements.  

Evaluation and Impact

The greatest area of complexity is likely to reside within the requirement that licensees conduct assessments in order to “understand the impact of individual interactions and actions on a customer’s behaviour”. The Commission is correct to highlight the importance of evaluation, even if it might strike some as hypocritical, given its own aversion to scrutiny, as safer gambling initiatives are often implemented or mandated on the basis of face validity rather than scientific observation. Evaluation is critical therefore if we are to improve and move beyond what should work in theory and understand what works in practice.

However, the implication here is that if the customer’s gambling activity does not change for the better (i.e. stop or reduce), they are suffering, or continue to be at risk of suffering harm. This cannot be correct: a customer may continue to gamble at previous levels or even increase their spend following an interaction for various reasons. There are several problems with the demand that licensees demonstrate the effect of changes to customer behaviour of every single customer interaction. First, it will be vastly bureaucratic and costly to implement, given the number of interactions that licensees will be encouraged to undertake. This might be acceptable if the benefits of such a system outweighed the costs, but this is unlikely to be the case. Gambling behaviour, and particularly disordered behaviour, is complex. To suggest that each individual licensee’s action might be separately assessed for discrete impact goes against the balance of research opinion as well as the Public Health whole systems approach. Neither the Guidance nor the Consultation give any consideration to proportionality, in direct contravention of the Responsible Gambling Strategy Board’s evaluation protocol.

This section of the Guidance gives rise to possible negative (and so presumably unintended) consequences. It fails to consider the substantial costs that such a system would impose on licensees or what this might mean in terms of customer experience where such costs are passed on through pricing. Most importantly, however is that it may impede efforts to protect consumers. Licensees swamped by assessing the impact of potentially millions of individual interactions may suffer a loss of perspective, impairing their ability to identify and understand what is happening to those at genuine risk of harm. People who fall under the Guidance’s discriminatory gaze (by virtue of being too old, too young, not physically fit enough or too trusting) may find themselves subject to repeated harassment by multiple licensees. Finally, there is the risk that a requirement to carry out evaluation on such a microscopic basis will in fact deter licensees from undertaking interactions over and above the level demanded by the quota system.

The Guidance of course, is not satisfied by requiring evaluations of every single customer interaction: licensees must also demonstrate impact. This stipulation reveals a fundamental flaw in the Commission’s thinking. As we explored in our second article, the basis for interaction in the Guidance is a range of  “indicators” denoting  “vulnerability” or  “harm”; but indicators are not the same as actual vulnerability or harm. In demanding that all interactions must demonstrate impact, the Commission appears to conflate probability with certainty; and in doing so ignores the presence of false positives that are a feature of any diagnostic system. Under the Guidance, licensees will be required to demonstrate that interactions alter customer behaviour, regardless of whether reform is necessary, or to document, frequently, their decisions as to why such alteration was considered unnecessary despite the indicators identified. Worse, licensees will feel obliged to take progressively more heavy-handed approaches with such customers until a change is observed, the regulatory equivalent of factitious disorder imposed on another.

This impact becomes even more absurd when one considers the nature of some of the indicators in the Guidance that may trigger an interaction. To illustrate, we use the same hypothetical customer from our second article – a 24-year-old with dyslexia who bets in-play on football and cricket and typically spends slightly above the average for his age group. Now imagine this benighted individual suffers a bereavement. Displaying seven indicators of vulnerability or harm, some licensees may consider him an appropriate target for interaction – but what precisely should be the outcome? The licensee cannot alter his age, address his dyslexia or alleviate the distress of personal loss; and so must presumably either deter him from betting in-play (an activity branded an “indicator of harm” on the most spurious grounds, as we show in our next article) or encourage him to spend less. Even if a reduction in spending is achieved (via coercion of an individual displaying no actual symptoms of harm) the customer will still be considered vulnerable on four counts and at risk of harm on two – and therefore subject to further interactions in the future (until he ceases to be ‘younger’ or ‘bereaved’ perhaps). The consequences of such a regime are unlikely to be in the best interests of that customer; and while ‘black market’ risk can be overplayed, it seems legitimate to cite it where such blatantly anti-consumer logic is concerned.   

These are the near-term implications of what the Commission proposes in its Guidance. It is possible too that the Guidance hints at longer term aims or outcomes:  the addition of further regulatory restrictions which stigmatise betting and gaming as pastimes. The codification in the Guidance (which introduces “formal” requirements) of “younger adults” as intrinsically vulnerable, may in time be used to lobby for the legal age for gambling to be raised (with perhaps a new maximum age being introduced to address risk among “older adults”); while certain modes of gambling (most obviously in-play betting) may be curtailed or banned on the same basis.

The Guidance contains some useful insights but ultimately falls down in its attempt to inculcate common sense by diktat. In doing so, it fails to recognise the essence of common sense as something that cannot be circumscribed by rules. Whilst some of the factors set out in the Guidance are sensible and may have an effect on a customer’s powers of self-regulation, it is impractical to seek to enforce this in “formal” Guidance, particularly when that guidance is unclear. Further, there is no suggestion anywhere in either the Guidance or the Consultation that the Commission has taken the time to understand the basis of current licensee practices (a review of enforcement cases is, by definition, no way to assess the market as a whole); or to consider how desired behaviours might be encouraged rather than coerced. In our last two articles in this series, we will examine the evidence presented by the Commission for classifying in-play betting as an ‘indicator of harm’ in its own right; before closing with a summation of the reasons why all gambling licensees and consumers, alongside those concerned about personal freedom in other domains, should take the time to respond to this most worrying of consultations.

With thanks to Dan Waugh from Regulus Partners for his invaluable co-authorship.

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09Jan

Chambers Gaming Law 2022 Global Practice Guide

9th January 2023 Adam Russell Harris Hagan 164

Partners, Bahar Alaeddini and Julian Harris, have resumed their roles as Contributing Editors to the Chambers Global Practice Guide, with the latest edition of the Gaming Law 2022 eGuide now available online. Associate, Jessica Wilson, joined this year as a co-author.

Harris Hagan contributed to four parts of the publication

  • the Introduction;
  • the UK chapter;
  • the Alderney chapter; and
  • the UK Trends and Developments chapter.

The esteemed publication spans over 30 jurisdictions and provides the latest regulatory information including: the availability and duration of licences; B2C and B2B licences; application requirements; affiliates; white labels; responsible gambling; AML legislation; restrictions on advertising; acquisitions and changes of corporate control; trends in social gaming; eSports; fantasy sports and blockchain; tax; and anticipated reform.

Key trends are covered by jurisdiction under the Trends and Developments section, and the publication also provides users with the opportunity to perform jurisdiction comparisons using the Compare locations tool.

Please use the above links to review their contributions and the rest of the eGuide at your leisure.

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23Dec

Where is the harm? Implications of regulatory revisionism for customer interactions

23rd December 2022 David Whyte Harris Hagan, Responsible Gambling 184

In this – the second in a series of articles on the Gambling Commission’s (the “Commission”) consultation (the “Consultation”) on the proposed Customer Interaction – Guidance for remote operators (the “Guidance”) – Harris Hagan and Regulus Partners consider the concept of ‘vulnerability to harm’ that underpins the Guidance. The Commission proposes that licensees be required to identify “harm”, “potential harm” and “vulnerable states” by monitoring customer behaviour, scrutinising private information and making assessments based on a range of demographic characteristics. While licensees should always be sensitive to customer wellbeing, the Commission’s attempt to translate common sense into a bureaucratic checklist appears to be at odds with the intent of the Gambling Act 2005 (the “2005 Act”), regulatory coherence and the best interests of consumers.

Vulnerability and harm

The Guidance requires licensees to identify customers exhibiting “indicators of harm” as well as those who – for a wide variety of reasons – may be “vulnerable” to gambling harms. For these terms to be meaningful, it is important first to understand what the regulator wishes to convey by the term “harm”. While the Guidance itself is silent on this matter, the Commission has defined gambling harms in its Update: Pilot of survey questions to understand gambling-related harm as “the adverse impacts from gambling on the health and wellbeing of individuals, families, communities and society.” Emphasising the breadth of the concept, it adds that “these harms are diverse, affecting resources, relationships and health, and may reflect an interplay between individual, family and community processes. The harmful effects from gambling may be short-lived but can persist, having longer-term and enduring consequences that can exacerbate existing inequalities.”

To hammer home the scale of the problem, the Commission enumerates 27 “harms” experienced by gambling consumers and a further 13 “harms” to “affected others”. Some of these adverse impacts are incontrovertible – financial consequences such as problematic debt being the least ambiguous – but others are less clear-cut. The Commission, for example, defines having less money to go to the cinema or “other forms of entertainment” as a harm from gambling. Spending money on one pastime in preference to another – as the Australian academic, Professor Paul Delfabbro has pointed out – is “more akin to opportunity costs than true harm”. Its inclusion in the ‘Index’ suggests a moral judgement on those people who prefer to spend their own money on betting in preference to the movies or a meal out. Among the Commission’s other “harms”, we also encounter “feeling like a failure” which in its weakest form is a potential corollary of all unsuccessful wagers and “spending less time with people you care about”, a test that many activities, including going to work or attending a school or college, would fall foul of.

Are these the “harms” or “potential harms” that the Commission expects its licensees to identify? If so, how does it expect them to do so? Will licensees, for example, be required to scrutinise bank statements in order to understand whether or not customers are movie-goers? With what degree of regularity must customers be going to the flicks in order to satisfy the regulator? This may be a case of reductio ad absurdum – but it illustrates the fact that the Commission has in fact set some fairly absurd tests for what should be considered harmful. In the absence of clearer direction, operators are expected to make their own judgements about which of the “harms” listed by the Commission they should be attempting to identify.

A list of 21 prescribed “indicators of harm” are provided in the Guidance as a minimum – but not exhaustive – set of standards. The basis for the selection of these indicators is not made clear, supporting evidence is often not cited, and generally they lack all but the most conceptual definitions. For licensees, this presents a significant challenge in terms of operationalising the indicators. How, for example, should a licensee create a rule for “amount of money spent on gambling compared with other customers”? Is this intended to suggest that anyone spending above the mean (or median) is displaying an indicator of harm? As written, it could be used to describe anyone wagering more than the lowest-spending decile, which would be more than “other customers”. Another example is the “use of multiple products”, without any definition of what constitutes a “product”. Are football betting and tennis betting different “products” or a single product (i.e. sports betting)? Is a ‘Rainbow Riches’ slot game a different product to ‘Cleopatra’, as manufacturers would certainly contend? Where certain activities are concerned, any participation at all is considered potentially problematic. In-play betting is classified as an automatic indicator of harm. Although, as we will explain in a further blog, this appears to be based on the Commission’s misreading of its own evidence.

So much for harm; but what about “vulnerability”? Here, the Guidance does at least provide some kind of definition of what a “vulnerable person” is: “somebody who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care”.

Harris Hagan has raised previously its concerns about the transformation of what the Commission considers to be “vulnerability” and its inclusion of a definition of the term in guidance. It is for Parliament, not the Commission to define a statutory term that is included in the 2005 Act and which Parliament did not find it necessary to define, having clearly considered the interpretation of vulnerability a straightforward matter. Reference in the third licensing objective firstly to children, and then to other vulnerable persons adequately sets out Parliament’s intention that the licensing objectives apply to those people not able to make properly informed or ‘adult’ decisions.

The operative phrase in the definition in the Guidance – “especially susceptible to harm” – implies that vulnerability is a rare or exceptional condition rather than a state shared by the majority. This conceptualisation is however, undermined by the Commission’s use of illustrative examples. “Young adults” are categorised as vulnerable (around 12% of the population are between the ages of 18 and 24 years); but so are “older adults” (23% of the population are 65 or older). Poor physical health denotes vulnerability (43% of adults have a long-standing medical condition); as does poor mental health; (17% have a common mental health disorder; 16% have an eating disorder). One is vulnerable if one is bereaved (15% of us each year), has caring responsibilities (13%) or has dyslexia (10%). Most perplexing of all, a “higher than standard level of trust or appetite for risk” – a quality that might be said to be a defining characteristic of any gambler – is also sufficient to qualify an individual as vulnerable.

The Guidance refers to the Financial Conduct Authority’s (“FCA”) observation that 46% of adults “display one or more characteristics of vulnerability” and indeed, the Commission’s definition of vulnerability is identical to that used by the FCA in its Guidance for firms on the fair treatment of vulnerable customers – February 2021 (the “FCA Guidance”). The FCA Guidance is, however, prepared to serve an entirely different purpose. It is issued under s139A of the Financial Services and Markets Act 2000 (legislation which, unlike the 2005 Act, makes no reference to vulnerability) and provides guidance on the FCA’s Principles for Business, which state that, “a firm must pay regards to the interests of its customers and treat them fairly”. Principle-based regulation of this nature almost certainly requires guidance and the FCA is justified in defining vulnerability in that context; that the Commission seeks to take an identical approach to the FCA, in an entirely different context, is not.

There is a difference between the FCA’s intention that regulated firms identify “characteristics of vulnerability” to ensure they treat their customers fairly and in accordance with their needs, and the Commission’s duty under the 2005 Act to permit gambling in so far as it thinks it reasonably consistent with, the licensing objective of “protecting children and other vulnerable persons from being harmed or exploited by gambling”. The Commission’s reinterpretation of “vulnerability” as a universal rather than exceptional state risks distorting and undermining the legislation that it is required to enforce – replacing parliamentary sovereignty with regulatory fiat. Furthermore, the Commission prescribes a requirement in SRCP 3.4.3. It therefore had the opportunity, following consultation, to set out precisely its definition of vulnerability when introducing that requirement. That it now seeks to widen the parameters of that requirement in the Guidance, is plainly wrong.

The concept of vulnerability

The suggestion that we are all vulnerable may be true at a certain banal level – but it is inconsistent with the intent of the legislation and also the Commission’s own conception of ‘especial susceptibility to harm’. A system of customer monitoring predicated on the idea of universal vulnerability risks failing those in genuine need of protection. There are a number of other practical considerations which the Guidance fails to address. For instance, it suggests, by way of reference to past enforcement cases, that operators must routinely scrutinise customer bank statements in order to harvest medical information, or risk facing sanctions for failing to do so. This raises complex ethical issues of discrimination and data protection. Should operators, for example, treat customers differently on the basis of a perceived medical condition (which they are expected to glean from banking data)? How might customers feel about betting companies holding information (however obtained and however accurate) about their health? 

To illustrate the scale of the challenge presented by the Guidance, consider the following fictitious scenario. A 24-year-old with dyslexia who bets in-play on football and cricket and spends slightly above the average for his age group could plausibly be said to raise three ‘vulnerability’ flags and three ‘indicators of harm’. As we observe in the next in this series of articles, a licensee would be required to determine for itself whether or not the presence of six ‘indicators’ would necessitate an interaction, and if so of what variety. It is inevitable that operators will adopt widely divergent interpretations in such instances, with implications for market distortion. Perhaps more significantly, the Guidance creates ample scope for disagreement between licensees and the Commission about whether a customer is vulnerable or displaying genuine indicators of harm.

That “vulnerability” is to be determined by whether a “firm”, which we understand to mean a licensed operator (again the use of “firm” a reflection of the Commission’s use of the FCA’s definition), is “acting with appropriate levels of care”. The decision as to whether a licensee has acted with appropriate levels of care must ultimately rest with the Commission and therefore it seems that vulnerability will be determined subjectively by the Commission, almost certainly in hindsight. Further, by suggesting, incorrectly, that licensees have a duty of care at law to prevent customers from gambling if they are or might meet the Commission’s definition of vulnerability, the Commission risks improperly introducing such a duty in law, or at least exposing licensees to such a challenge. This is dangerous territory for any regulator, and for licensees.

Autonomy – a wider debate

Finally, there are some genuine ‘slippery slope’ consequences for the wider economy, privacy and personal freedom. One of the Commission’s key items of evidence for the proposed interactions regime is a survey carried out in 2020 by the Money and Mental Health Policy Institute (‘MMHPI’) included in the report A Safer Bet. The Commission states that 24% of people with mental health problems experienced financial problems in consequence of online gambling and 32% said that they had bet more than they could afford to lose. This representation of the findings is misleading (the survey was of people with mental health problems who had gambled online and not all people with mental health problems – an important distinction); as is the Commission’s repeated misuse of the Problem Gambling Severity Index item “bet more than afford to lose”, which is a risky behaviour rather than a harm.

Quite aside from matters of precision, there is an important omission of context. In the same year, the MMHPI also published the results of a survey on online shopping by people with mental health problems – with very similar, and in some cases more alarming, results. The MMHPI report, Convenience at a cost found that 29% of respondents had spent more than they could afford when shopping online while 63% “had cut back on essentials” and 56% “had fallen seriously behind on payments for bills or debt repayments as a result of not being able to control their spending.” In short, the basis for regulatory intervention on remote gambling could just as easily be applied to shopping with Amazon or Tesco. Context is important because it helps us understand whether state action in one domain is consistent with broader societal ‘rules’ – and so deters unfair discrimination against particular groups (in this case, people who enjoy gambling). The Commission’s deliberate exclusion of this information, which was brought to its attention as part of the original consultation, is unhelpful and reinforces the idea that the regulator is not in earnest in its use of public consultations.

The Commission’s obsession with vulnerability suggests a rather hopeless outlook on life. To the extent that we are all, to some extent vulnerable, we are all resilient too and possessed of broad powers of self-regulation. An exclusive focus on what makes us weak with no recognition of what makes us strong is distortive and may lead to negative consequences – most obviously through undermining individual agency, which is an essential ingredient for wellbeing.

The identification of harm and vulnerability set out in the Guidance is the basis for ramping up operator interactions with customers, which may in some cases be warranted. The practical implications of the requirements to interact, and to evaluate the effect of those interactions, is the subject of our next article.

With thanks to Dan Waugh from Regulus Partners for his invaluable co-authorship.

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22Dec

Putting the Customer First: Why all licensees should the take the Consultation on Customer Interaction Guidance seriously

22nd December 2022 David Whyte Harris Hagan, Responsible Gambling, Uncategorised 193

A little over two years on from the launch of its consultation and call for evidence on remote customer interaction requirements and affordability checks, the Gambling Commission (the “Commission”) has initiated a new public consultation (the “Consultation”) – this time on the proposed Customer Interaction – Guidance for remote operators (the “Guidance”). While the Consultation has so far not attracted the same attention as the 2020 exercise, the implications are potentially just as profound. In a series of co-authored articles, Harris Hagan and Regulus Partners will explore the key proposals in the Guidance, examining the evidence that underpins them and asking whether they are in fact proportionate, legal and in the best interests of consumers.

We appreciate that some of the more cynical readers of this article may think there is little point in responding to the Consultation as the Commission will take little or no notice of any feedback it receives from licensees. However, we consider it critically important that all licensees, including non-remote licensees, do respond to the Consultation. It is more difficult for the Commission to ignore numerous representations on common concerns, and experience suggests that similar guidance may be produced for non-remote licensees in the future. Recognising that the timeframe for the Consultation will include the holiday period, the Commission has extended the originally proposed six weeks to approximately nine weeks, and it will now close on Monday 23 January 2023.

There are a number of areas of the Guidance which licensees should be concerned about – Harris Hagan included some of these in previous articles in July and September 2022. In this article, the first of the series, we set out a summary of those issues, and analyse the “Introduction” and “General requirements” sections of the Guidance. In subsequent articles we will also consider the central theme of assessing ‘vulnerability to harm’; and how licensees will be expected to take action to address it.

Key areas of concern

Our key areas of concern about the Guidance, many of which we will explore in more detail in this series of articles, are:

  • It has been poorly drafted. Many key terms are either undefined or defined in a fashion so highly generalised as to be almost meaningless. An absence of precision in the way that regulatory requirements are described inevitably invites a high level of subjectivity in terms of how they will be interpreted by both licensees and the Commission.
  • The evidence that underpins key measures contained in the Guidance is either absent or highly selective – and, in some cases, it is misleading.
  • It appears to conflate “indicators of harm” with actual harm – requiring licensees to take action to correct customer behaviours regardless of whether they are in fact harmful.
  • The definition of key terms is so broad as to make it almost impossible for licensees to justify not conducting a safer gambling interaction based on either “indicators of harm”, “vulnerability” or both.
  • It takes no account of the practicability of the measures required, the cost implications, or the potential for negative unintended consequences.
  • The Commission appears to have undertaken no research into consumer support for the measures that are being mandated or how they might react to them.
  • One of its more alarming aspects is the suggestion that licensees should harvest medical information about their customers. There is no demonstration within the Consultation that the Commission has considered the ethical or legal dimensions of this requirement, the extent to which licensees possess the requisite expertise to interpret such information, or whether this is even possible.

Issues not addressed in the Consultation

The Commission makes it clear that the Consultation relates solely to the Guidance which is issued on Social Responsibility Code Provision (“SRCP”) 3.4.3. The requirements of SRCP 3.4.3 itself are not within scope, nor are “matters associated with unaffordable gambling and specific thresholds which should apply”, the “separate consultation on the three key financial risks” the Commission committed to in May 2021 (yet to materialise), or matters associated with “single customer view”.

General requirements

“How to use this guidance”

There are inconsistencies in the Guidance between “aims” and “formal guidance”, and it is difficult to ascertain whether the Commission expects licensees to “take into account” or “address” its aim in setting each requirement.

The impact of this inconsistency can be seen throughout the Guidance. For example, requirement 1 states that “icensees must implement effective customer interaction systems and processes in a way which minimises the risk of customers experiencing harms associated with gambling.” However, aim 1 states that “Licensees must have effective controls to minimise the risk of customers experiencing harms associated with gambling”. There is a clear difference between implementing effective systems and having effective controls, the latter being more easily determined subjectively by the Commission and with hindsight: the assumption likely being that if any customer has suffered or experienced harm (a highly malleable term as we will explain further in our next article), the controls were ineffective.

It is critically important that the Commission ensures uniformity in the Guidance. If ‘aims’ are within scope, then the language used for requirements and aims should be consistent: if ‘aim’ is not within scope, then the “How to use this guidance” section of the Guidance should be amended and reference to licensees being obliged to “address that aim” removed, to ensure that this is abundantly clear.

Formal requirements as guidance?

Harris Hagan has previously set out its view that it is inappropriate, and arguably ultra vires, for the Commission to introduce formal requirements through guidance. The Commission seeks to address such concerns in the Consultation where it states:

“On occasion, the proposed guidance document uses the language of ‘must’ or ‘the Commission expects’. This language is used in contexts where the guidance is intended to reflect the requirements or SR Code Provision 3.4.3. The proposed guidance document also uses the word ‘should’, which denotes an approach or action that is not required by SR Code Provision 3.4.3, but which operators are required to consider. We are interested in stakeholders’ views on the language used in the proposed guidance document in this respect.”

Despite this statement, there are several areas of the Guidance where the language used does not reflect the requirements set out in SRCP 3.4.3, goes beyond those requirements, or is inconsistent with those requirements. This is inappropriate, will cause confusion, and exposes licensees to the risk of broad or inconsistent interpretation by Commission officials during compliance or enforcement action.

By means of an example:

  • Requirement 4 states: “Licensees must have in place effective systems and processes to monitor customer activity to identify harm or potential harm associated with gambling…”;
  • Aim 4 is stated as being to ensure “that customers who may be at risk of harm are identified”; and
  • Formal Guidance 4 states that “icensees must identify customers that may be at risk of harm.”

There is a clear distinction between “identifying harm or potential harm” and identifying customers “that may be at risk of harm”: the latter arguably being impossible as it applies to anyone who gambles. We will discuss this in more detail in a subsequent article. The importance of the Guidance being easily distinguished from the prescriptive requirements set out in SRCP 3.4.3, and of ensuring consistency between requirements and aims and formal guidance, must not be overlooked.

“How the Commission will use this guidance”

The Commission refers under this section of the Guidance to its expectation that “licensees demonstrate how their policies, procedures and practices meet the required outcomes”. However, at no point has the Commission set out what those required outcomes are. SRCP 3.4.3 is not outcome-led; it is, at least in part, prescriptive – as is the Guidance. We would therefore suggest that “requirements” rather than “required outcomes” is the more accurate language to be used here.

“Amending this guidance over time”

Under this heading, the Commission sets out that “for the purposes of raising standards, protecting customer interests, and preventing harm to customers, will update and re-issue guidance”. Harris Hagan has previously raised concerns about this approach. We remain of the view that the Commission should consult on any changes to the Guidance, particularly if those changes introduce formal requirements, or if they explain how the Commission may interpret those formal requirements. The Commission is comfortable with short consultation periods; it originally proposed that the Consultation be open for six weeks. To conduct further short consultations before amending the Guidance is hardly an arduous task, particularly given the benefit of doing so, not only to licensees and stakeholders, but to the Commission itself.

In our second article, we will discuss the concepts of “harm” and “vulnerability” that underpin the Guidance.

With thanks to Dan Waugh from Regulus Partners for his invaluable co-authorship.

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18Jul

Customer interaction guidance for remote gambling licensees (formal guidance under SR Code 3.4.3)

18th July 2022 David Whyte Harris Hagan, Responsible Gambling 196

Following its announcement, in April 2022, of the introduction of a new Social Responsibility Code Provision (“SRCP”) 3.4.3 that comes into effect on 12 September 2022, the Gambling Commission (the “Commission”) published its customer interaction guidance – for remote gambling businesses (formal guidance under SR Code 3.4.3) (the “2022 Guidance”) on 20 June 2022, which comes into effect at the same time as SRCP 3.4.3. To date the Commission has made no reference to the revision of its guidance for premises-based businesses and therefore those licensees remain in the dark about any changes that may be introduced in the future.

However, the Commission’s reference to “ew consumer protection guidance” in the press release for the 2022 Guidance demonstrates further its self-driven evolution into a consumer protection body and, given that the requirements set out in SRCP 3.4.3 require action across licensees’ entire customer base, the Commission’s reference to “new rules on action for at risk customers” in the release for the new SRCP is a further indication that the Commission considers all gamblers to be “at risk”. It is therefore likely that revisions to the requirements for premises-based licensees will follow. As we know from the affordability issue, whether formal inclusion of these licensees occurs or not, the Commission is not averse to applying guidance to the entire industry. As we have explained before, the Commission’s approach is difficult to reconcile with the licensing objectives set out in section 1 of the Gambling Act 2005 (the “2005 Act”) and in the Commission’s statutory obligations under section 22 of the Act:

“(a) to pursue, and wherever appropriate to have regard to, the licensing objectives, and

(b) to permit gambling, in so far as thinks it reasonably consistent with pursuit of the licensing objectives”

The Commission is not charged with protecting all consumers, however admirable that may be; it could be the purpose of an ombudsman if appointed as part of the changes to gambling legislation. It was certainly not the intention of Parliament when passing the 2005 Act that the third licensing objective – “protecting children and other vulnerable persons from being harmed or exploited by gambling” apply to all customers who, at some point in time, may be “at risk”.

The 2022 Guidance, which we recommend licensees review in detail, reveals an apparent ignorance on the Commission’s part of various concerns that have been raised in the past about its approach, thereby exposing it to the risk of challenge. This article does not attempt a detailed critique of the entire 2022 Guidance; rather we have sought to identify the most salient points which we believe may have the greatest impact on licensees, or where we believe the Commission’s approach is misconceived.

Section A – General requirements

Paragraphs 1 and 2 – Formal guidance?

The Commission maintains its previous approach in paragraphs 1 and 2 of SRCP 3.4.3, requiring licensees to “embed the three elements of customer interaction – identify, act and evaluate”. Its replacement of the previous requirement to “interact” with a requirement to “act to minimise harm” illustrates its expectation that licensees do more than simply engage with customers and that tailored, proactive steps are taken to minimise the risk of harm.

The 2022 Guidance is more prescriptive than the existing guidance documents that the Commission has issued in relation to customer interaction, and it is certainly less outcome focussed. It requires licensees to undertake specific measures, for example that “licenses must understand that there are many reasons a person may be in a vulnerable situation” or that “licensees must identify customers that may be at risk of harm using all of the information available about the customer.” The use of words such as “must” and “required” have no place in guidance: they are the language of statute, conditions and codes of practice. We will leave for now the bigger issue that this prescription undermines the entire premise of the 2005 Act, which introduced a principles and risk-based system, as opposed to the prescriptive regime of the Gaming Act 1968 which it replaced.

It is of note that paragraph 2 requires that licensees “take into account the Commission’s guidance on customer interaction … as published and revised from time to time…” and that the Commission makes similar reference in the 2022 Guidance, stating that “for the purposes of raising standards, protecting customer interests, and preventing harm to customers, will update and re-issue guidance.” It is intriguing how the Commission considers that future updates to guidance “intended to support compliance with LCCP SR code 3.4.3” can raise standards or prevent harm. Unless, that is, the Commission intends to use the “formal” 2022 Guidance to implement “formal” requirements.

For a number of reasons, the Commission’s attempt to make a silk purse out of a sow’s ear is evident from the questionable foundations upon which the evolved 2022 Guidance is based. Firstly, and somewhat unsurprisingly, the Commission continues to ignore previous concerns raised, not least by us, about its use of guidance: guidance that enables the Commission to outline its expectations to licensees to assist their understanding of licence conditions or codes of practice is sensible. However, the Commission continues to introduce formal requirements through its use of guidance and without consultation, which is wrong. The Commission’s powers are controlled by statute and are therefore the preserve of Parliament. The 2005 Act requires that the Commission must consult before specifying a licence condition (section 76) and before issuing or revising a code of practice (section 24). Guidance must therefore be easily distinguished from a licence condition or code of practice (including those that carry the weight of a licence conditions such as SRCP 3.4.3) and should not prescribe additional requirements.

The distinction is not more apparent than real. Aside from the fact that it exceeds the Commission’s powers to introduce a licence condition or code of practice without consultation, by using guidance which should only be explanatory rather than mandatory, the distinction has very different consequences. Breach of a licence condition or code of practice carrying the weight of a licence condition is a criminal offence and allows the Commission to prosecute or resort to its full armoury of penalties through licence review. By contrast, licensees must “take into account” guidance and therefore not following it should not be an automatic breach. It is therefore wrong, and confusing, for the Commission to include specific requirements in the 2022 Guidance, particularly when it has very recently consulted on the introduction of SRCP 3.4.3 and has thus had the opportunity formally to introduce whatever further formal requirements it wished at that time. Reference to “formal” guidance in the title of the 2022 Guidance is indicative that it knew what it was doing.

Secondly, if the Commission is willing and able to circumvent statutory controls now, and not for the first time (it introduced its Covid-19 guidance very quickly and not alongside a change to the SRCP or consultation), it is likely to do so again. This leaves licensees and other stakeholders exposed to the risk of further change without fair notice or the ability to challenge.

Thirdly, whilst it may seem somewhat hypocritical to challenge now this prescription when licensees have been desperate for clarity for many years, a more thorough analysis of the 2022 Guidance reveals that, despite it being more prescriptive, it is unlikely to provide licensees with the clarity that they desire and will certainly lead to a continuance of the ‘flexible interpretation’ experienced by licensees during compliance assessments and subsequent regulatory investigations. One might argue that, like licensees, the Commission has also struggled to identify what specific controls and thresholds will adequately identify who might be at risk of harm and balance those controls against the freedom of choice.  

It seems that in recent times, guidance, formal guidance and licence conditions have become one and the same thing in the belief of the Commission, the only difference being that the former two contain requirements that the Commission have found inconvenient.

Section B: Identify

Paragraph 3 – Transforming vulnerability

Paragraph 3 requires that “Licensees must consider the factors that might make a customer more vulnerable to experiencing gambling harms and implement systems and processes to take appropriate and timely action where indicators of vulnerability are identified. Licensees must take account of the Commission’s approach to vulnerability as set out in the Commission’s Guidance.” Prior to the publication of the 2022 Guidance, the wording of paragraph 3 indicated that the Commission may have taken a step back from its intention, set out in its consultation, to require that licensees “take account of its definition of vulnerability”. However, it is clear in the 2022 Guidance that this is not the case: the requirement remains but it is drafted more subtly. The Commission sets out in “Aim 3” (which reads as more of an obligation than an aim – a theme that runs throughout the 2022 Guidance) that “ require operators to take action when they are aware that a customer is in a vulnerable situation”, and sets out its own definition of a vulnerable person as

“somebody who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care”.

The Commission requires (amongst other things) that “licensees must understand that there are many reasons a person may be in a vulnerable situation…” explaining that a vulnerable situation “can be permanent, temporary or intermittent, and may be related to health, capability, resilience, or the impact of a life event such as a bereavement or loss of income”.

In recent years the transformation of what the Commission considers to be “vulnerability” is bewildering. Parliament clearly considered the interpretation of vulnerability a straightforward matter: it did not find it necessary to include a statutory definition in the 2005 Act. This is understandable: as we have discussed previously, the reference in the third licensing objective firstly to children, and then to other vulnerable persons, adequately set out Parliament’s intention that the licensing objective apply to those people who are not able to make properly informed or ‘adult’ decisions.

Most worrying, however, is that vulnerability as now defined, is to be determined by whether a “firm”, which we understand to mean a licensed operator, is “acting with appropriate levels of care”. Given that the decision about whether a licensee has acted with “appropriate levels of care” rests with the Commission, it seems that vulnerability will be determined subjectively by the Commission, in hindsight, most likely during compliance assessments, and based primarily on a licensee’s actions and controls in relation to each individual customer. In referring to those “appropriate levels of care” the Commission also suggests incorrectly that licensees have a duty of care at law to prevent customers from gambling if they are or might be vulnerable and risks improperly seeking to introduce such a duty in law, or at least exposing licensees to such a challenge based on its definition.

Matters are likely to become further complicated when the Commission launches its further consultation on the ways to tackle what it considers to be three key financial risks for consumers: binge gambling, significant unaffordable losses over time, and risks for those who are financially vulnerable (the “Financial Risks Consultation”). Licensees who are hoping that this consultation will provide clarity about affordability expectations may be disappointed and faced with a further definition to consider, this time of “financial vulnerability”. Based on its current approach, the Commission is likely to permit itself a similar level of hindsight, the focus of its decisions being on action taken and controls implemented.  

The Commission apparently considers itself lawmaker on a par with Parliament: it will determine who is and who is not vulnerable, and will further amend its definition without consultation, whenever it sees fit.

Paragraphs 4 and 5 – Affordability?

Paragraphs 4 and 5 require licensees to “have in place effective systems and processes for monitoring customer activity” and set out a range of indicators which must be operated by licensees. The 2022 Guidance expands on these requirements, making it clear that the Commission expects a mix of automated and manual processes and that systems should “draw on all available sources of data”.

The 2022 Guidance does nothing to clarify the uncertainty about affordability, with the Commission’s position largely replicating the previous guidance. In setting out examples of indicators which should be used by licensees (some of which have now been made requirements) the Commission refers to “mounts spent compared with other customers, taking account of financial vulnerability”. It is of note that in its reference to the Financial Risks Consultation, the Commission indicates that further “guidance” will follow. Again, given that the Commission has considered it necessary to define “vulnerability”, this is an indication that a further definition for “financial vulnerability” seems likely.

Section C – Act

Paragraphs 8, 9, and 11 – An absence of prescription or guidance?

These paragraphs require that licensees take “appropriate action in a timely manner when they have identified a risk of harm” and that this action is tailored “based on the number and level of indicators of harm exhibited.” The 2022 Guidance obliges licensees to have a suite of actions in place ranging from “early generic action” to “very strong” action (this essentially amounting to ending the business relationship). The Commission does not, however, specify which indicators of harm it considers lower level and which it considers strong. Rather, strong indicators must be “defined within the licensees’ processes”. Prescription, when most likely to be helpful, is absent. The resulting inevitability of inconsistent standards and expectations being applied during compliance assessments will further frustrate licensees.

The requirement not only to “implement automated processes”, but also when those automated processes are applied to “manually review their operation in each individual customer’s case” is burdensome, impracticable, counterproductive and undermines the benefits of automation. The limited guidance – in its true sense – in relation to this requirement and the lack of clarity about when any manual review must take place, is indicative that the Commission has not considered fully how it is “consistent with data protection requirements”.

Section D – Evaluate

Paragraphs 12, 13 and 14 – Impact?

Evaluating the impact of each customer interaction is no easy task. As licensees have already experienced, it doubles the operational impact, with additional and equivalent resource required to follow up on the original interaction. The Commission fairly points out in the 2022 Guidance that “not every customer who receives an interaction will require a follow up” however it overlooks the fact that not every interaction will require evaluation. The Commission states that “by impact we mean a change in the customer’s gambling activity which could be attributed to the interaction”. The implication here is that if the customer’s gambling activity does not change for the better (i.e stop or reduce), they are suffering, or continue to be at risk of suffering harm. This cannot be correct. Some customers will, for various reasons, simply continue to gamble at previous levels, or may even increase their spend, particularly if they are winning (as is commonplace when most people gamble). This is certainly not always an indicator of harm. This lack of clarity will mean that licensees will continue to feel obligated to ensure that on every occasion they interact with a customer they see a change in behaviour, and where this is not the case will feel bound to take further action whether or not any such action is wanted by a customer or thought necessary to prevent harm.

The requirement that licensees evaluate the effectiveness of their overall approach maintains the current requirements, however the Commission sets out in more detail its expectations. The new obligation to “take account of problem gambling rates for the relevant activity published by the Commission in order to check whether the number of customer interactions is, at a minimum, in line with this level” is something of a step away from the tailored approach of other requirements in SRCP 3.4.3 and the 2022 Guidance. To avoid criticism, licensees will need to be acutely aware of any updated publication of problem gambling rates by the Commission, however questionable that data may be, and ensure that this is reflected in their approach.

Conclusion

Whatever the Commission’s intention, and however strongly it feels that licensees are not going far enough to protect consumers, it is vitally important that it acts within its statutory remit. Not for the first time, the 2022 Guidance reveals a willingness on the Commission’s part to act beyond its powers, this time under the guise of the new SRCP and its intention to introduce “stronger and more prescriptive” rules. The Commission’s willingness to continually use guidance as a means of introducing formal requirements through the back door is concerning and it may only be a matter of time before it faces challenge. In the meantime, licensees should ensure that they take steps to ensure that they are able to adhere to both the SRCP and the 2022 Guidance to mitigate the risk of regulatory action.

With thanks to Julian Harris for his invaluable co-authorship.

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07Jul

The Affordability Debate (4): The Commission Unmasked

7th July 2022 Julian Harris Harris Hagan, Responsible Gambling 221

Readers may recall the three articles we have previously written analysing the Gambling Commission’s (the “Commission”) covert operation to introduce a requirement on operators to conduct evidenced affordability checks. Whilst we cannot claim that it is as a result of those publications, it is encouraging that the Commission has finally and “officially” been taken to task on this controversial issue by no less a body than the Digital, Culture, Media and Sport (the “DCMS”) Committee of the House of Commons (the “Committee”). On the penultimate day of the Committee’s Inquiry on What next for the National Lottery? (30 June 2022), the Committee heard evidence from Commission CEO, Andrew Rhodes and its Executive Director, John Tanner. Whilst much of the questioning by the Committee related to the subject matter suggested by the title of the Inquiry, the Committee then turned to the subject of affordability checks and then customer interaction.

We can all sympathise with being taken off guard by unanticipated questioning, but less so with Mr Rhodes’ apparent denial of responsibility for, or even knowledge of, matters that occurred before his appointment, especially in relation to such a critical issue for consumers and the industry.

Even less worthy of sympathy was his apparent inability to explain the relationship between the newly published Customer interaction guidance – for remote gambling licensees, the November 2020 Consultation and call for evidence – Remote customer interaction  (the “Consultation”) on which the Committee interrogated Mr Rhodes, and the issue of affordability which was the basis for the questioning. This is particularly the case given that the core and most contentious of the Commission’s ever evolving proposals in relation to affordability, the introduction of mandatory financial thresholds for affordability checks, was introduced in the Consultation.

Secrecy v transparency

To quote Jeremy Bentham, “secrecy, being an instrument of conspiracy, ought never to be the system of a regular government.” summarises neatly the Committee’s displeasure – to put it mildly – at the Commission’s failure to publish the results of its Consultation. As the Chair, Julian Knight MP, put it:

“This is important work. Affordability and affordability checks are of great public interest. It seems to be very strange that this has not been made publicly available. I do not know what is so secret about it that it needs to be handed over covertly to DCMS and then inform the White Paper. We have a right to see it as well and so does the general public, because we pay for you.”

Mr Rhodes denied knowledge of the reasons, on the basis that it pre-dated his appointment. Now that he has been the CEO for a year, one would expect that he knew, or ought to have known, about the Commission’s handling of an important document relating to a key Commission policy that has been disclosed to DCMS, which has been the subject of numerous licence reviews conducted by the Commission, is of critical importance to those whom the Commission regulates and to consumers, and which has been the subject of very substantial commentary. As the Chair commented:

“It does seem to be very strange that you should announce a consultation in November 2020 on such an important area, which frankly does need scrutiny more widely than just DCMS and the Department, and that was not released publicly. I thought that would be of interest to parliamentarians, rather than for it just to be handed covertly to officials at DCMS. That seems a very strange approach and lacking in transparency, frankly.”

Strange indeed. A lack of transparency on the part of the Commission has unfortunately permeated this issue; coupled with the Commission’s sleight of hand in introducing affordability requirements outside due process, this has left operators confused by the relationship between their regulatory obligations in law and the Commission’s expectations, as explained in more depth in our second article (The Affordability Debate (2): Ambiguous Regulatory requirements). Mr Rhodes again pleaded ignorance:

“I was not at the Commission at the time, so I am very happy to look at what the reasoning was for it not being published. My understanding since I have joined the Commission is that we have fed into the White Paper that affordability checks will be considered as part of the White Paper’s recommendations, rather than have essentially two bites at that.”

More disappointing is that he did not explain what the Commission is doing now in relation to affordability. Given that the Committee referred to this as being “such an important issue”, we consider this to be somewhat disingenuous: it does not reflect the degree of transparency which the Committee felt entitled to expect, nor to the level which the Commission expects of its licensees.

Realpolitik

As operators are painfully aware, the Commission has for some three years done rather more than, in the word of Mr Rhodes, “…fed into the White Paper…”.  The Consultation was followed just three days later by the Compliance and Enforcement Report 2019 to 2020 (6 November 2020) (the “2020 Enforcement Report”).  In fact, even earlier – in its Compliance and Enforcement Report 2018 to 2019 (27 June 2019) (the “2019 Enforcement Report”) – the Commission outlined various open-source data that may help licensees to “assess affordability for its GB customer base and improve its risk assessment and customer interventions.”  In referring to the recommendations it made in the 2019 Enforcement Report, and considering customers who have “demonstrated gambling related harm indicators and been able to continue to gamble without effective engagement”, the Commission opined that: “Furthermore, these individuals have funded their gambling without satisfactory affordability checks and appropriate evidence being obtained.” . The 2020 Enforcement Report proceeded to outline various open-source data that can help licensees to “assess affordability for GB customers and improve risk assessment and customer inventions”. Similar to the 2019 Enforcement Report, this data primarily focuses on average annual salary as outlined in the ONS survey of Hours and Earnings.

The core, critical “requirement” is that:

“Operators must interact with customers early on to set adequate, informed affordability triggers to protect customers from gambling related harm. Failure to do so could render the operator non-compliant.”

“Customers wishing to spend more than the national average should be asked to provide information to support a higher affordability trigger such as three months’ payslips, P60s, tax returns or bank statements which will both inform the affordability level the customer may believe appropriate with objective evidence whilst enabling the licensee to have better insight into the source of those funds and whether they are legitimate or not.”

The Commission takes the view that its Enforcement Reports serve as indicators to licensees of its expectations, for which licensees can be held to account; these reports therefore arguably contain policy positions that, if enforced, are more akin to licence conditions or code provisions. We have discussed previously our concerns that the Commission may be making indirect changes to licence conditions and/or code provisions through its introduction of requirements to adhere to guidance and this is perhaps another, somewhat broader, example of that. Aside from the fact that the Commission is not adopting a risk based and proportionate approach, the evidential basis for the Consultation included research in which customers admit to having sometimes lost more than they can afford, rather than their gambling being unaffordable. The Commission cite the Enforcement Reports as evidence in support of their proposed measures, when in fact the Enforcement Reports deal with “clearly unaffordable” gambling, whilst the proposed affordability constraints go far beyond customers losing tens of thousands, extending to affordability checks after lifetime losses of as little as hundreds of pounds; a point not missed by the Committee, when the Chair referred to “consumers potentially having to submit bank statements or tax returns to bet as little as £100 a month.”

We do not agree that the Enforcement Reports carry the weight of formal guidance. It is clear from the content of the Licence Conditions and Codes of Practice (the “LCCP”) that in cases where the Commission expects licensees to adhere to formal guidance, it says so. Social Responsibility Code Provisions 2.1 (anti-money laundering – casino) and 3.4 (customer interaction) are examples of the Commission explicitly requiring licensees to adhere to, or take account of, specific formal guidance. Nowhere in the LCCP is there any reference to the Enforcement Reports carrying such weight, as we have previously explained (The Affordability Debate (2): Ambiguous Regulatory requirements).  

So, in the case of affordability, the Commission expects licensees to abide by a series of “requirements” none of which are clearly set out in licence conditions, codes of practice, or formal guidance issued by the Commission under its statutory remit, but in their Enforcement Reports and the existing Customer Interaction Guidance and more broadly the Consultation. Breach of a Code under section 24 of the Gambling Act, 2005 may properly be taken into account by the Commission in the exercise of its statutory function but acting contrary to whatever opinions it expresses in its Enforcement Reports, or in speeches, may not. There can therefore be no basis for the Commission, when raising safer gambling concerns, to refer to those Enforcement Reports in its compliance assessment findings, licence review threats or regulatory actions, as it is increasingly doing.

A Bridge Too Far

As licensees know from sometimes bitter experience, and as we explained in our second article on this subject, whilst the Commission has not formally imposed the proposals in the Consultation, it has sought to require operators to abide by them, or variants of them, referred to in its Enforcement Reports, by exerting pressure and threatening regulatory action for failing to implement affordability checks. This is clearly inconsistent, unfair and possibly exceeds its powers. Operators subjected to regulatory action have been pressured by the Commission to adopt affordability checks as if they were a legal requirement. The consequence, aside from placing them at a disadvantage to competitors, has been to create a climate of fear.

This has been exacerbated by confusion as to what the Commission actually requires. Moreover, despite the fact that the Consultation contains proposals for such checks to be applied solely to the online industry, the Commission is requiring such checks also from the land-based industry. The Commission has not merely pre-empted the Government’s decision, it has taken upon itself the role of Government and Parliament, i.e. that of lawmaker.

The whole truth

Mr Rhodes was unambiguous in saying that the issues relating to affordability checks “are something for the White Paper.”

Against the background explained above, it is reasonable to ask how he found himself able to make this statement. He was certainly correct in his pithy summary of how the Commission should have addressed affordability. However, he failed to explain that the Commission has been acting on many of the proposals on which it purported to consult for some three years, without reference to any higher authority. We find this strange indeed, not least given the Committee’s obvious interest and concern about the subject and the Chair’s statement that “affordability and affordability checks are of great public interest.”  Given this “public interest” in the issue and the Committee’s concern as to lack of transparency on the part of the Commission, the Committee should have been informed of the Commission’s existing enforcement on the whole industry of affordability checks.

There is little point in speculating as to the reason for this absence, but it is reasonable to question whether (1) Mr Rhodes did not consider it relevant; (2) he was unaware of it and of the numerous licence reviews in which affordability has been an important feature; or (3) he chose not to mention it. If (1) obviously his view was misconceived; if (2) this would be a cause to question his grasp of the Commission’s work; and if (3) one wonders why not.

In the first article on affordability (The Affordability Debate: Protection, Responsibility and the Right to Choose), we commented that in disregarding the Consultation and pre-empting the results, the Commission had become the emperor that had no clothes. He has now been defrocked.

A question of trust

In conclusion, the Committee Chair asked Mr Rhodes if the Commission “have any measures or metrics in place to decide exactly how you are trusted by your licensees, for instance? Is there an overarching survey of that?” His answer was: “Not presently, no. There isn’t.”  The answer from Mr Rhodes was correct: an answer that the Committee probably found disappointing.The fact of the question being asked hints at the possibility that the Committee considered there could be a negative response to such a survey.

There are stronger remarks that leave little doubt as to the Committee’s opinion; in questioning on metrics to determine whether the National Strategy to Reduce Gambling harms works, the Chair described the approach set out by Mr Rhodes as “very slipshod”. Having then heard Mr Rhodes admit there were no metrics to determine whether the £40 million spent does any good, the Chair concluded the hearing by saying:

“What do you do? There seems to be money going out the door and no accountability for that money, apart from when you make the award. This money just splashes out there and you have no idea in terms of what this impacts with the licensees. I am struggling to think precisely as an organisation how you are doing your job, because these seem to be key measures and indicators of whether you are successful.”

It is not for us to speculate on the views of licensees, who are quite able to make their views known themselves, but this withering criticism from the Committee reflects what was said by the All-Party Parliamentary Group on Betting and Gaming: there is reason to suppose it may well be shared by others.

As we know from experience, the degree of engagement between the Commission, those whom it regulates and even independent advisers, is negligible. The Commission seems interested in canvassing the views of those whom it knows to be anti-gambling or have reason to dislike the industry. This has been demonstrated by its formation of a group of people with “lived experience”, which meant only those who had suffered a problem with gambling. The Commission has never, to the best of our knowledge sought views from the vast majority who enjoy gambling as an adult leisure activity. For most licensees, the only real engagement with the regulator is through regulatory reviews or other confrontational issues.

In short, this issue demonstrates the need for the Commission to go on an “improvement journey”, be put into “special measures”, or even the equivalent of a “licence review” to establish whether it is fit, able and prepared to carry out the function with which it is charged under the Gambling Act, 2005 and not to make law according to its own whims.

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05Jul

Lexology – Getting the Deal Through, Gaming 2022

5th July 2022 Harris Hagan Anti-Money Laundering, Harris Hagan, Marketing, Responsible Gambling 222

As Harris Hagan continues its contribution to the Lexology GTDT Gaming publication, we are pleased to share with our subscribers, complimentary access to the full reference guide which is now available online.

Our Associate, Jessica Wilson, remains the author of the United Kingdom report, which covers a range of British regulatory insights including land-based and remote gambling and quasi-gambling activities, including legal definition; anti-money-laundering regulations; director, officer and owner licensing; passive/institutional ownership; responsible gambling; taxes; advertising; supplier licensing and registration; change of control considerations; and recent trends in the industry.

The reference guide also allows for side-by-side comparisons with other local insights from jurisdictions such as Australia, Brazil, Germany, Hong Kong, Japan, Macau, Nigeria, South Africa and the USA.

We invite you to review the reference guide at your leisure.      

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08Apr

Welcome To Harris Hagan’s Vlog

8th April 2020 Bahar Alaeddini Harris Hagan, Training 336

In a blog post last week I mentioned the launch of our video blog with weekly vlogs or blog tutorials providing training on key topics in the gambling industry. These will be published on our website and available completely free of charge.

I am pleased to share our very first vlog in which I discuss our desire to bring a new perspective to what we do and how we interact with you.

Harris Hagan is committed to creating and sharing content you will be interested about and will find useful.  Please email us with any (reasonable!) suggestions for future training vlogs.

If you have enjoyed watching our vlog, please like, comment or share.

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06Apr

Banks Tackling Gambling-Related Harm

6th April 2020 Lucy Paterson Harris Hagan, Responsible Gambling 344

Last year the Department for Digital, Culture, Media and Sport (“DCMS”) ministers met with banks and gambling operators to discuss their growing concerns, and how companies could use technology and customer data to help those at risk of developing gambling problems. Brigid Simmonds, chair of the Betting and Gaming Council, recently called for the banking industry to intervene with their customers in the same way that gambling operators are required to – but are banks now starting to play their part?

In November 2018, Barclays became the first high street bank to assist problem gamblers in controlling their gambling, by allowing customers to block payments relating to certain categories of spending, including gambling.  Unhelpfully, it can be switched instantly on and off through its online banking app.  Since then, many other high street banks have followed suit in making similar measures available to customers, which work by automatically declining any attempted payments within selected categories.

Payment blocking is just one way that banks are attempting to protect customers from gambling-related harm, and the range of measures on offer varies greatly between banks.

Whilst many banks provide the option of blocking gambling payments via both credit and debit card, at present NatWest, RBS and MBNA only offer blocking on credit card payments. When the Gambling Commission’s ban on credit cards comes into effect on 14 April 2020 and customers have no option but to use their debit cards should they want to gamble, these banks will need to review this feature if it is to provide any useful function for customers at all.

Some banks are carefully considering how best to protect their customers from gambling-related harms and are innovating new ways to do so. Starling Bank now:

  • signposts a customer removing a gambling payment block to the National Gambling Helpline; and
  • has an automatic 48-hour cooling off period before actioning a customer’s request to remove a gambling payment block.

Similar cooling-off periods are already offered by a number of other banks, including HSBC, Lloyds Bank and Royal Bank of Scotland, and is likely to prove a useful tool for problem gamblers.  Research shows that providing customers with a break or interruption in play provides a valuable opportunity to reflect on their gambling and, therefore, their decision to remove the gambling payment block, minimising the risk of impulsive decisions.

Monzo and NatWest go one step further.  Monzo requires customers to speak to customer services before the gambling payment block can be removed, creating friction and perhaps another opportunity to reflect on their spending.

NatWest recently launched free psychological counselling in-branch to anyone, whether or not they are a NatWest customer, who has a gambling problem. The scheme was initially launched in several branches in London and the South East, but will be extended based on  demand from problem gamblers.  HSBC, meanwhile, has sought the assistance of GamCare to train its staff to respond to calls from customers about gambling, and has announced that it will analyse data on card spending to see who might benefit from advice.

A holistic approach is undoubtedly the best way to help those experiencing gambling-related harms and is also the approach advocated by the Betting and Gaming Council in key action four of its Safer Gambling Commitments. It is therefore encouraging to see banks of all sizes accepting that they too have a part to play in tackling the issue, and it is hoped that banks will continue to work closely with the gambling industry, DCMS, the Gambling Commission and gambling charities to improve the tools already on offer and to innovate new ways to help customers manage their gambling.

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