The latest edition of our "UK regulatory roadmap" identifies key upcoming and ongoing regulatory developments impacting the betting and gaming sector.
UK regulatory roadmap
New Customer Interaction guidance - Gambling Commission (Q3)
In June 2022, the Commission published its "Customer Interaction Guidance – for remote gambling licensees" which was intended to help gambling businesses comply with the new provisions of the LCCP for remote operators on Customer Interaction rules (we wrote about the new rules on our blog here). Whilst it was originally planned for both the new LCCP provisions and the guidance to come into effect on 12 September 2022, the Gambling Commission has since reviewed the timeline. On 2 September 2022 it announced that whilst the majority of the new rules will come into effect on 12 September 2022, the following rules will not:
- The requirement to take timely action where indicators of vulnerability are identified and to take account of the Commission’s approach to vulnerability as set out in the Commission’s guidance (paragraph 3)
- The requirement to prevent marketing and the take-up of new bonus offers where there are strong indicators of harm (paragraph 10).
The Commission states that it will conduct a further consultation on the guidance document lasting 6 weeks. In light of this, the guidance document will also no longer come into effect on 12 September. The Commission states that the consultation is expected to launch in late September and the intention is to publish the resulting guidance in December 2022. The Commission intends to bring the remaining new rules and the associated guidance into effect on 12 February 2023.
The guidance published in June provides further information for remote gambling businesses on:
- Identifying vulnerable customers – for example, this should be an ongoing process of monitoring and using indicators of harm to flag signs that a customer may be at risk.
- Indicators of harm they must monitor for – e.g., customer spend, patterns of spend, time spent gambling, gambling behaviour indicators, customer-led contact, use of gambling management tools, and account indicators.
- When to use automated systems and processes. For example, the greater the harm identified, the more important it is to take swift action, often this is best achieved by automated processes.
- How to evaluate the impact of customer interactions. For example, licensees must follow up interactions with monitoring of changes in play data including number of products used, spend, deposit patterns and more nuanced play patterns.
The new social responsibility code provision 3.4.3, together with the Customer Interaction Guidance published in June, would introduce a number of new requirements. For example, where a customer shows a 'strong' indicator of harm, then a number of steps must be taken (such as using automated processes to interact, and stopping bonus offers). But there remains uncertainty as to what operators are now expected to do, and the Guidance does not provide an appropriate level of clarity. In particular, the Commission has not delivered on its previous promise that the Guidance would clarify what is meant by a 'strong' indicator of harm. It will be interesting to see how this Guidance may change following the new consultation on the guidance.
Licensing, Compliance and Enforcement Policy: Consultation Response (Q2)
On 17 November 2021, the Commission launched a consultation on proposed changes to its Licensing, Compliance, and Enforcement policy. You can view a copy of our response here. The Commission's response to the consultation was published on 23 June 2022.
In summary, the key changes to the policy are as follows:
- The Commission will not normally grant operating licences to applicants whose products name, branding, marketing or game rules contain language associated with financial products such as 'stock', 'share', 'index' or 'investment';
- Applicants will be required to "fully satisfy" the Commission that the funds used to finance the applicant are not the proceeds of crime; it is not clear what this means in practice, and whether or not it will apply to applicants on a change of corporate control);
- The Commission will no longer recognise "good" levels of compliance in its compliance assessment findings. Categorisation of findings will be limited to: Serious Failings; Improvement Required; and Compliant;
- Special Measures will be formally added to the Commission's regulatory "toolkit" without amendment which means that: (i) licensees will generally be expected to accept the alleged failings without adequate opportunity to fully response to the allegations; (ii) licensees will be encouraged to make divestments, notwithstanding the absence of an opportunity to fully respond to the allegations; and (iii) licensees will remain at risk of a licence review even if they fully implement the action plan;
- The Commission will take into consideration the financial resources of any parent or group company or UBO. In our view this clearly overreaches section 121 of the Gambling Act 2005; and
- Offers of regulatory settlement as a means of bringing a licence review to a conclusion may only be made up until the deadline for responses to the Commission's preliminary findings.
We are concerned that a number of the proposed changes could present significant challenges to new applicants and existing licensees and risk causing procedural unfairness and disproportionate regulatory outcomes.
It appears that the Commission attaches great weight to the fact that a "majority" of respondents support a proposal, irrespective of the legitimacy and/or forcefulness of any arguments made against them.
The response is self-serving; there has been a selective approach to using quotes which are supportive of the Commission's proposals (with little or no consideration being given in the consultation response to any well-reasoned objections).
Stricter approach to late 'Change of Corporate Control' submissions (Q3)
The Gambling Commission has announced from July 2022, it will take a more strict approach to late submissions for a 'Change of Corporate Control'.
If a change of corporate control occurs, operators must:
- notify the Commission of a Change of Corporate Control by means of a key event within five working days of the event happening; and
- apply for a change of control within five weeks of the change taking place.
From July, if a Licensee submits a late application, and the reason is not "adequate or reasonable" then the Gambling Commission will no longer grant an extension and there will be a revocation of the license if the following criteria apply:
- The new controller is unknown to the Gambling Commission;
- Either of the following apply to the new controller:
- not regulated by the Financial Conduct Authority (FCA); or
- not an immediate family member entering a small family business.
Changes to the way Licensing works (Q2)
On 27 June 2022, the Commission announced it is stopping the use of dedicated account managers.
Instead, its licensing team will be divided into four sub-groups: The Operating Licence New Group (responsible for new operator applications); The Change of Corporate Control Group (responsible for processing applications relating to changes of ownership and control for existing licensees); The Operating Licence Vary Group (responsible for processing applications to vary); and The Personal Licence Group (responsible for processing all personal licences).
The Commission hopes that this will make the best use of its resources and enable it to process applications more quickly. It also hopes that the changes will enable it to resolve queries more efficiently and effectively.
Queen's Speech 2022 (Q2)
There was no mention of gambling in the Queen's Speech on 11 May 2022.
When the white paper on gambling reform is published it is highly unlikely to include draft legislation (for further commentary, see our previous article 'UK Gambling Act Review: What happens next'). Instead, we expect it to outline areas on which the Government intends to legislate and seek further feedback from relevant stakeholders in advance of drafting legislation.
Our expectation is that any primary legislation arising out of the Gambling Act review is unlikely to be laid before Parliament until after the Queen's Speech in 2023 at the earliest. Any primary legislation proposed at that time would be unlikely to come into force until around at least Q1 2024, just ahead of the likely date for the next General Election.
You can read more about this in our article here.
The status and timing of the Gambling Act Review are currently uncertain, following a number of ministerial changes and the departure of Boris Johnson.
However, the Gambling Commission has indicated that in the meantime it may seek to pursue reform through further changes to the Licence Conditions and Codes of Practice (LCCP).
Update on the Gambling Act 2005 Review (Q3)
The publication of the widely-anticipated White Paper has now been delayed until the new leader of the Conservative party is appointed. Following the resignation of Chris Philp, Damian Collins is the current UK minister responsible for the Gambling Act review.
UK Government will not ban loot boxes (Q1 2023)
The Government has published its response to the call for evidence on loot boxes in video games.
The Government does not presently intend to make changes to the Gambling Act or to other statutory consumer protections with regards to loot boxes. Instead, industry-led measures will be pursued. The Government's view is that:
- purchases of loot boxes should be unavailable to all children and young people unless and until they are enabled by a parent or guardian;
- all players, including children, young people and adults, should have access to, and be aware of, spending controls and transparent information to support safe and responsible gaming; and
- better evidence and research, enabled by improved access to data, should be developed on the positive and negative impacts of video games to inform future policy-making on loot boxes and video games more broadly.
DCMS will convene a technical working group to pursue enhanced industry-led solutions to mitigate the risk of harms for children and young people and adults from loot boxes in video games. The group is scheduled to deliver its first update in the first three months of 2023. In addition, they will work with academics and other partners to launch a Video Games Research Framework by the end of 2022.
The Government has decided to pursue industry-led measures as a first step, in contrast to some other European countries such as Belgium, where loot boxes have fallen within a broader definition of gambling regulation.
The Government's reasons for this are that an industry-led approach, at least in the first instance, can enable the development of tailored tools and information. Industry-led measures would be adaptable, and may be more able to keep pace with a fast-changing environment for in-game purchases, in comparison to legislative options.
The Government will continue to keep the position under review and will consider legislative options in the future if necessary.
Tim Miller speech (ongoing)
ON 6 July 2022, Tim Miller from the Commission gave a speech where he announced that, this summer the Commission will be seeking views from stakeholders on a number of issues. This will include:
- exploring whether the Commission can improve the way it calculates financial penalties for regulatory breaches to ensure they better drive compliance with the licensing objectives;
- seeking to be more transparent in the way the Commission calculates such penalties; and
- whether accountability for meeting regulatory obligations can be increased within businesses through expanding the personal management licence regime.
He also announced that the method of conducting consultations will be changing. First, there will be two periods a year where any consultations will be published, meaning respondents can plan better and updates to guidance is more predictable. Second, consultations may have a specific proposal or may consist of an emerging idea being shared at an early stage.
Guidance regarding Russian sanctions (ongoing)
In April 2022, the Commission published further guidelines regarding the current sanctions against individuals and entities in Russia and Belarus.
Licensees are reminded that they need to make a key event notification to the Commission if the licensee (or any of its key individuals) is subject to any form of regulatory investigation (which would include any investigation into alleged breaches of the sanctions regime).
In addition, whenever a licensee makes a suspicious activity report in respect of a customer or supplier, that must be notified to the Commission.