Betting and Gaming horizon scanning: UK regulatory roadmap: Winter 2021 edition

The Commission has announced changes to its approach to regulatory panels, after a consultation was launched in May 2020.

Regulatory panels, currently chaired by Commission employees (referred to as "Commissioners"), provide the opportunity for applicants / licensees to attend an oral hearing to challenge the Commission's decisions with regard to operating and personal licences. These panels also make decisions on a wide range of other issues, including (a) the granting or refusal of licence applications where a Commission employee is minded to refuse; and (b) in an enforcement context, as to whether an operator has breached the LCCP / the financial level of any sanction to be imposed.

Following consideration of the responses to its consultation, the Commission has announced the following changes:

• the Commission will employ between four and six independent adjudicators ("Adjudicators"), who are legally qualified persons employed solely for the purposes of sitting on regulatory panels. In order to preserve their impartiality, Adjudicators will be home-based and will not have open access to Commission offices;
• the quorum for conduct of any business by the regulatory panel will be one Commissioner and one Adjudicator (acting as chair) for matters relating to operating licences, with a proviso that a panel will normally comprise two Commissioners and one Adjudicator;
• for matters relating to a personal licence, the quorum will be one Adjudicator;
• the regulatory panel will occasionally (but not always) be asked to provide steers on regulatory settlement proposals / indicate an appropriate figure for a financial penalty;
• changes will be made to adjust timescales for the service of hearing bundles (now 21 days in advance of the hearing), requests to submit further evidence (to be considered on a case-by-case basis), the process for arranging hearing dates (licensees / applicants will now be offered 4 dates over 3 months) and the process for considering additional evidence at a hearing. In addition, case management hearings will now take place before one Adjudicator sitting alone;

The Commission will also publish a new Adjudicator Governance Framework ("AGF"), to codify the role, training and operating framework of Adjudicators.

On 7 October 2021, the Commission published an update regarding its challenge to the industry to develop a single customer view (SCV) solution, and urged the industry to move swiftly towards trialling a SCV scheme.

In the update, the Commission referred to the ICO's Regulatory Sandbox Phase 1 outcomes report. In its report, the ICO examined the possible bases on which a SCV scheme might be lawfully operated in accordance with UK GDPR. The ICO indicated that the sharing of behavioural data between gambling operators in order to identify individuals who may be ‘at-risk’ of gambling related harms via the SCV may be permitted under the 'legitimate interests' or 'public task' lawful bases.

However, the ICO noted that while they were satisfied that those bases may apply, a further analysis of the specific circumstances will be needed (once the SCV scheme has been further developed) to ensure the sharing is necessary and proportionate to meet those aims.

The Commission welcomed the publication of the ICO's report, stating that:

• Publication of the ICO’s report provides an important and helpful steer on how a SCV could be delivered in accordance with data protection law. However, there are still plenty of issues and complexities that need to be addressed as part of a pilot phase of work.
• At this stage the Commission has no plans to mandate a particular SCV solution – that is for industry to develop and test – but the Commission does expect industry to demonstrate the impact its piloted solution has against the challenge set by the Commission.
• The Commission now expects industry to move swiftly towards trialling its SCV solution and invited industry to do so in collaboration with the Commission and the ICO, within a Sandbox environment.

A number of potential legal hurdles will need to be grappled with before a SCV solution can be introduced.

A SCV scheme would involve the surveillance of a large number of individuals, and it is possible that a significant number of consumers could formally object to their data being processed for the purposes of a SCV scheme.

It should be noted that the ICO has not yet considered one of the fundamental issues concerning the SCV data sharing scheme, which is whether it could be justified as "proportionate" for the purposes of GDPR.

On 7 June 2021, the Department for Digital, Culture, Media & Sport commenced a review into the regulation of BetIndex Limited (t/a Football Index) conducted by Malcolm Sheehan QC.

The report arising from that review was published on 22 September 2021 and highlights the complexities in assessing the regulatory framework(s) applicable to novel operating models, where the line between gambling (as defined under the Gambling Act 2005) and other types of products, including those more akin to investments, is blurred.

The Commission published a response on 13 October 2021, answering questions from former customers of Football Index regarding the Commission's roles, responsibilities and actions in connection with its regulation of Football Index.

On 12 November 2021, the Information Commissioner issued a decision that the Gambling Commission should respond to a request made under the Freedom of Information Act 2000 relating to the decision to grant BetIndex Limited a gambling licence. Whilst the Commissioner considered the balancing act in the case to be very fine, she concluded that the public interest lies with disclosure. The Gambling Commission must disclose the information sought to the requester within 35 calendar days (the Gambling Commission no longer publishes responses to FOI requests on its website but this information will now also be disclosable to further requesters).

We provide our commentary on the report in our article from October, which includes practical guidance for operators of novel products.

The Parliamentary All Party Betting and Gaming Group (APBGG) has launched an investigation into the competence and effectiveness of the Gambling Commission.  The APBGG press release and website highlight concerns about the regulator which are wider and more extensive than those identified in recent criticism of the Commission by the House of Lords Select Committee, Public Accounts Committee, National Audit Office and others.  The APBGG reports that many licensees feel constrained from raising complaints directly to the regulator itself (in our experience they are also generally reluctant to commit to appeals and judicial review proceedings), and so APBGG has positioned itself as a platform to which the industry and its advisors may submit examples of poor practice and service by the regulator. 

The APBGG has invited submissions on or before 1 December 2021.  It states that these will be treated confidentially and, assuming sufficient material is received, the APPG will produce a report.  The intention is for the report to be considered alongside other reports (such as that of the APPG on Gambling Harms) as part of the Gambling Act review.

The APBGG indicates that for the purposes of the report, submissions will be anonymised.  The APBGG identifies three broad categories into which submissions should be directed: (a) examples of the regulator acting ultra vires, (b) breaches of the Regulators' Code, and (c) poor service/incompetence.  

Any report is likely to be susceptible to the criticism that it lacks balance, in part because many of the members of the APBGG are broadly supportive of the industry (at least indirectly in some cases through their support of horse racing), and also because of the manner in which submissions are invited, which many perceive as inflammatory.  Equally, very significant issues do exist with the regulator and this is a forum in which those can be aired.   

Many in the industry are nevertheless sceptical about the process.  Our view is that any submissions should be constructive in nature, recognise the importance of the work undertaken by the Commission and the challenges it faces, and be directed to the principles of good regulation.

On 8 December 2021, the Minster for Tech and the Digital Economy, Chris Philp, gave a speech to the GambleAware Conference following his appointment to the role in September. Philp reiterated the government's view that gambling-related harm is a public health issue, indicated that the intention was to publish a White Paper on the Gambling Review in the "coming months" and set out his vision for proportionate affordability checks, a single customer view solution and improved data capability within the Gambling Commission. This follows on from a speech in September by Tim Miller, executive director of the Gambling Commission who also spoke about the Commission's intention to collaborate more closely with international regulators.

Affordability Checks

Philp would like a robust system to prevent unaffordable gambling. This would involve not only operators stepping in when they identify a customer at risk of harm but also proportionate affordability checks in addition to those checks already in place. He gave a clear indication that the government's view is that intrusive affordability checks should be reserved for high levels of gambling; but that technology and data (such as those used by credit references agencies) may be leveraged to ensure that less intrusive checks can be made (alongside existing monitoring requirements) to ensure interventions are appropriate for each individual.   

Single Customer View

Philp also said that, in order to ensure support this strategy, a single customer view solution was now a priority, especially as the Information Commissioners Office (ICO) had confirmed this was possible in a safe, secure and proportionate way. He urged operators to work closely with regulators to find a system that works. (NB. Please see our commentary on the ICO's report above.)

Improved Data Capability for the Gambling Commission

Philp suggested that significant benefits could be derived from the development of a "Data Repository" to improve the quality of data available for the regulator to monitor compliance, but which might also allow researchers and clinical experts to better understand the drivers of gambling disorder. He added that in order to analyse such data effectively, as part of the Gambling Act review the government is looking at investment in data capability within the Gambling Commission and at ensuring it has the powers to requisition bulk account-level data.

International Collaboration

Philp's speech follows a talk in September by Tim Miller, executive director of the Commission, who spoke at the 2021 IAGR Conference. Miller said the Commission is keen to work more closely with international regulators, with a "commonality of approach" being desirable in relation to policy positions and codes of practice.

Miller made clear that the Commission intends to continue to take a hard line with operators in order to drive up standards, and that lapses in regulatory standards from the GB perspective won't be tolerated by the regulator, even if operators' focus is drawn by emerging markets in the US and beyond.

Following a consultation launched in July 2020, the UK Government has confirmed its intention to introduce an "Economic Crime (Anti-Money Laundering) Levy", which will be payable by entities subject to the Money Laundering Regulations in the UK. This will therefore include remote casino operators regulated by the Gambling Commission, including those which are not UK-resident. 

The levy will come into effect on 1 April 2022. It will be payable annually in arrears, with payments in respect of the period from 1 April 2022 to 31 March 2023 due in the FY 23/24. 

Please see further details and analysis here.

In November 2021, the Gambling Commission launched a consultation on its Licensing, Compliance and Enforcement Policy. The consultation closes on 9 February 2022. Some of the proposed changes are set out below:

• Until legislative clarity about how such products should be regulated (which it considers is necessary), and to avoid potential risk to the licensing objectives, the Commission proposes to refuse all licence applications for products that in their name, branding or game rules contain language associated with financial products.  This would militate against the use of language such as "stock", "share", "index" or "investment".  This is clearly a response to the Football Index report (see above).
• Clarification on requirements relating to operating and personal licences. For example, the consequences of submitting an incomplete application (they will be rejected, with a further fee potentially payable), and further examples are given of who is a "relevant person" to be identified in an application.
• Applications may be rejected if they Commission concludes that licence will not be used within "a reasonable period" after it is granted.
• The Commission proposes not to grant a licence until it is "fully satisfied" that the business will not be financed by the proceeds of crime, and that its profits will not be used to finance crime. Whilst this is consistent with the first licensing objective, it raises the troubling prospect of applicants having to prove a negative. 
• Formalisation of the "special measures" process which had been "piloted" in enforcement proceedings.
• Proposal to extend the use of remote compliance assessments rather than in-person assessments and clarifying the framework that Compliance officials use during an assessment to judge levels of compliance.
• Changes to the process on licence review, suspension and regulatory settlement. For example, the Commission proposes to amend the policy to clarify that it may take a "flexible approach" to the review procedure, in particular to permit it to investigate further, and to issue further preliminary findings, after a licensee has made representations in response to a previous set of preliminary findings.  The Commission says this is justified to ensure all facts and matters are investigated.
• The Commission also proposes to amend the policy to state that regulatory settlements should be offered at an early stage of the process, and that they will not normally accept regulatory settlements offered after the licensee has made representations in response to the Commission's preliminary findings.

Should you wish to make representations in response to this consultation, please get in touch with us.