How Will the New Regulatory Approach to Gambling Affect UK’s iGaming Industry?

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The UK online gambling industry has been expanding quickly over the past decade in a bid to accommodate the explosion in demand. Figures from the UK Gambling Commission showed that online gaming and betting services generated the amount of £4.5 billion in the period between October 2015 and September 2016, up from £817 million in 2009, when the regulator published its first financial report. The sector thus became the UK gambling industry’s largest one and is now poised to grow even more.

However, developments from the past several months have indicated that UK’s iGaming sector, and the gambling industry as a whole, is facing powerful opposition that might be ready to deploy different means and resources to hamper the otherwise imminent growth of the market.

The UK gambling industry has been subjected to extensive media coverage this past year, mainly due to last October’s launch of the Government’s triennial gambling review and its delayed publication, but not solely. It was announced that the review would be particularly focused on the highly controversial fixed-odds betting terminals, and evidence about their addictive nature and the consequences from their widespread popularity among British gambling customers has been a topic broadly discussed across media.

However, the scope of coverage gradually extended to other segments of the industry, until iGaming and the way that portion of the market is regulated became a topic almost as popular as FOBTs. Concerns were voiced that the sector has grown to a level that required additional, stricter, regulations, record sanctions were imposed on operators who were believed to have violated existing rules, and it did not take long before the first indications of looming re-regulation of the field emerged.

Proper regulations are a must, particularly within an industry that offers products and services that might cause addiction and other mental health issues. However, burdening that same industry with stiff regulations may pose just as much of a problem as lax rules or the complete lack of any regulatory oversight.

It is true that finding the balance is a time-consuming and painstaking process, but events from the past several months have shown that regulators might not be looking for balance, or at least the direction that have chosen in their search for balance may be one that will block the future development of an industry that generates billions in revenue.

Regulatory Doubts and New Rules

In recent months, the UK Gambling Commission has imposed several fines, including seven-figure ones, to operators for failing to provide their customers with socially responsible services and for failing to promote these services in compliance with advertising codes and principles.

The penalties gained quite a lot of media attention and multiple questions were raised about the effectiveness of UK’s existing gambling regulations in relation to the provision of iGaming services. And doubts emerged over operators’ compliance with those rules.

Several of the violations for which operators were fined involved failure to promote gambling services in accordance with advertising rules. UK-facing operators are required to follow the principles set in the Advertising Standards Authority’s CAP Code as well as in the UK Gambling Commission’s Licence conditions and codes of practice.

What is more, online gambling operators need to make sure that the promotion of their brands is conducted in legal manner throughout all possible mediums, including their affiliate partners. Affiliate marketing has turned into a key tool for operators to advertise their products, to reach more players, and to build wider playerbases. And it can be said that the recent regulatory movements have affected affiliates just as much as operators.

The fact that the UK Gambling Commission has imposed several hefty fines to operators in a relatively short period of time and the extensive media coverage of the latest happenings in the industry gave bright indications that there will be some form of a crackdown within the iGaming space and that we are not that far from it.

The first signals of such a crackdown have already appeared and we would like to dwell a little bit more on them. UK-facing operators have been warned by the local regulator that there will be more severe penalties for those failing to comply and that stricter rules will be introduced so that a more secure gambling environment is created.

The gambling companies were further informed that they would be watched very closely how they advertise and how third-party entities advertise their products. Sign-up promotions used by operators and their affiliate partners to attract players were among the advertising means targeted by regulators. For example, as recently noted by members of the Gambling Portal Webmasters Associationthe wording “free spins” has been found to appear misleading to players, and as a result there have been operators that have decided to change the term to one that gives better picture of the nature of a given promotion.

Generally speaking, regulators have urged operators to be open and transparent when advertising their products, and to show that they realize both the benefits and the risks of their offering. And while it is indeed operators’ responsibility to provide services responsibly and with the players’ well-being on their mind, it is rather questionable whether a series of painfully stringent regulations would make them more compliant.

Implications for the Industry

Operators (and affiliates) are well-aware of the fact that targeting customers from a regulated jurisdiction means that they should comply and that their activities are watched closely. And proper regulation with proper regulatory oversight is probably the only way for the effective provision of safe gambling services.

However, the UK Gambling Commission’s recent decisions, probably made as a result from growing media pressure, may wreak havoc in the industry instead of clarifying how iGaming operations should be conducted and promoted.

Following a Sunday Times article about the use of cartoon characters by gambling operators, the UK Gambling Commission sent a letter to its licensees that they and their affiliate partners should remove all their promotional content that features such characters and might be found appealing to children.

The issue of protecting those under 18 from gambling and falling victims to gambling addiction is huge. A 2016 research by the UK Gambling Commission showed that around 450,000 children gambled each week. However, it might be a bit naive to believe that by removing images from one gambling-related website or another would be enough to solve this big problem.

There is an apparent need for new regulations in that direction. For instance, it should become much more difficult for children to circumvent regulations and access gambling websites. And the industry, those regulating it, and those who parent gambling children are all responsible for steering these vulnerable members of population away from gambling.

On the other hand, quarreling over pictorial representations of children’s books and movies as well as over what one word or another implies is not helping anyone. And the UK Gambling Commission’s latest rulings have actually caused namely that – an unstoppable bickering between operators and affiliates, operators and regulators, affiliates and regulators, etc.

Doubts and gloomy thoughts about the future of the UK iGaming market have also surfaced. It now slightly looks as if the nation’s online gambling space may be marred by overregulation not so far from now, and overregulation may kill that space. It may drive operators and players away, it may boost black-market activity, and it may eventually reduce tax proceeds from an industry that is only poised to become a larger and larger tax payer if handled properly.

Following the latest developments in the UK online gaming space, Casino News Daily has decided to produce a series of articles on the topic and to present a different viewpoint from the general opinion introduced in media outlets over the past several months. Our intention will be to offer a look into what the looming overregulation could mean for the industry, its stakeholders and those consuming its products.