Low limits on maximum bets for online gambling among contentious points

UK Looks To Make Big Changes To Online Gambling: Lessons For The US

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Members of Parliament (MPs) in the United Kingdom have begun pushing for gambling reform.

One of their latest recommendations, a £2-per-spin stakes limit for online slots, sent operators into a panic as it would bring revenues down significantly. A similar restriction on land-based gambling machines that went into effect earlier this year caused revenues from those machines to drop as much as 25%.

Stock prices for online gambling companies 888 and William Hill — which each has a significant UK market share — took the worst of this news, losing about 15% of their value apiece.

US would do better to be strict from the start

US state legislators would do well to keep an eye on suggestions the group is making. That’s especially true for those in states still working on legalizing online gambling.

After all, companies would prefer a tightly regulated market to no market but are likely to lobby against any new law that eats into their profits once they’ve begun operations. That makes it easier to impose restrictions upfront than to add them later.

The UK political landscape is right for tightening regulation

The group of MPs in question is what’s known as an all-party parliamentary group (APPG). APPGs are analogous to bipartisan committees in the US, but more commonplace and more critical to the functioning of government because power is split among a dozen parties. As a result, APPGs exist for issues ranging from climate change to jazz appreciation.

The recommendations of the Gambling Related Harm APPG (GRH-APPG) are likely to be seriously taken because it’s an issue both the government and opposition are sympathetic to. Many MPs criticized former prime minister Theresa May’s government for not doing enough to curb problem gambling.

May’s critics included both current prime minister Boris Johnson of the conservatives and MPs from the official opposition, the Labour Party, under which leadership gambling was liberalized in the first place.

The GRH-APPG’s report included many recommendations, but here are a few of the most specific and interesting ones.

No. 1: Make online limits consistent with land-based gambling

Last year, the UK government passed a law lowering the stakes limit on fixed-odds betting terminals (FOBTs) from £100 to £2. FOBTs are essentially slot machines, except that they offer other sorts of games beyond the usual spinning reels, such as roulette.

That law came into effect this April. It didn’t apply any such restriction to online gambling. That’s odd, as it’s much easier to gamble impulsively from home online than it is to travel to a betting shop. The omission seems a bit like putting a limit on alcohol purchases at the liquor store while allowing home alcohol delivery services with no limit.

If anything, online slots should have a lower limit than FOBTs because of the faster pace of play, which can be as low as three seconds per spin. A typical game on an FOBT takes 20 seconds. Even accounting for the higher return-to-player percentage, an online slots player betting the maximum will experience a statistical loss per minute that’s roughly twice as high as an FOBT player, if the limit per bet is the same.

The GRH-APPG considers this a glaring oversight. It recommended that there should be more consistency overall between online and land-based gambling regulation.

No. 2: Restrictions on incentives and VIP accounts

Big gamblers, or “whales,” account for a disproportionate amount of gambling revenue. This is well-known, and true across verticals, both online and land-based. The Finnish operator Paf, for instance, revealed that before it imposed an annual loss limit, about a third of its revenues had come from just 0.8% of players, who were losing €15,000 per year or more.

Paf is a rarity in that it is actively looking to decrease its reliance on whales. Most operators attempt to maximize revenues by offering special treatment to their biggest bettors and incentives for them to bet even bigger and more frequently. These can include VIP accounts which allow bigger deposit and betting limits, customized promotions and gifts.

Some big gamblers may be doing so because they’re well-off; however, that’s not universally the case. Many of the players receiving these incentives and getting VIP accounts are, in fact, problem gamblers.

GRH-APPG also recommends that operators be required to investigate the suitability of players before offering VIP accounts. This could include both internal analysis of their betting behavior and the requirement to ask the player to provide evidence that their finances allow them to afford the intensity of their gambling.

No. 3: No more credit card deposits

The GRH-APPG’s recommendations about “affordability testing” actually go beyond just VIP accounts. They would like to see all online gamblers scrutinized to ensure that they’re not gambling with money that they can’t afford to lose.

That suggestion would likely upset a lot of privacy advocates. A related suggestion is the removal of credit cards as a deposit option. It’s also bound to be less controversial and easier to implement.

Credit cards are a popular deposit method because almost everyone already has one and they’re instant. People are also accustomed to using them for other sorts of purchases online.

Used for gambling, however, they’re obviously problematic. One of the most common and important indicators of problem gambling is borrowing money or using credit to gamble.

Eliminating any deposit option that doesn’t require the customer actually to have the cash on hand seems like an obvious harm-reduction strategy. Credit cards would be on top of that list.

Takeaways for US legislators on online gambling

There are far more suggestions in the GRH-APPG’s report than just these. Some of these are somewhat specific to the UK market or its current regulatory framework. Others are arguably too intrusive to fly in the more individualistic, privacy-obsessed US.

US legislators could easily make proposals similar to the three suggestions above, however, and are all good ideas. To recap:

  • There should be consistency between online and live gambling. Online gambling should, at a minimum, not be any less restrictive than live. The £2 limit GRH-APPG proposes is somewhat arbitrary, however. Assuming that there are to be default stakes limits, these should take into consideration both the pace of games and their return-to-player, in order to produce a consistent maximum statistical loss per hour.
  • VIP accounts should receive greater scrutiny than regular accounts. Operators should be required to exercise a high degree of vigilance before targeting individual players with incentives to increase their gambling. This may require players to surrender some privacy in order to receive those benefits. That is an acceptable compromise, however, so long as it’s on an opt-in basis.
  • Credit cards could be eliminated as a deposit option. Aside from the fact that they allow gamblers to go into debt far too easily, they compound the problem with high-interest rates. They also usually treat gambling deposits as cash advances and charge that interest immediately. Prepaid credit cards could still be allowed for their convenience.

The UK online gambling market has been around far longer than that of the US. There’s been more time for these problems to be studied. It will be well worth it for us on this side of the Atlantic to keep an eye on the work the GRH-APPG continues to do and how the UK government responds to its suggestions.

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
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