Rhodes spoke at the Gambling Commission’s CEO briefing.
UK.- The British Gambling Commission’s CEO Andrew Rhodes has outlined the regulator’s plans and challenges to industry stakeholders at the regulator’s CEO briefing. Addressing the audience at the regulator’s largest single gathering of the gambling industry, he talked about the year ahead, including ongoing work related to the UK government’s gambling white paper.
“The debate around gambling has not become an easier one. I have found myself saying a number of times how polarised different positions sometimes are,” Rhodes said, noting that he had “challenged people where they have misrepresented statistics“, seeking to “bring some balance and evidence to the arguments”. However, he stressed that as a regulator, the Gambling Commission “should be impartial in the way we go about things”.
He added: “Everyone is entitled to their opinion, but some of what has gone on has been an unedifying sight and I am not sure is helping anyone. However, what I am very committed to is we will have the difficult conversations and do the difficult things because that is our job. We will do that in conversation with others and by being genuinely open about what we are doing but equally open in listening to views and concerns as we make progress.”
Tackling gambling harm
He noted progress on tackling gambling harm but said that ensuring continued progress required “a much more grown-up relationship where we can be transparent about the issues that matter and collaborative in how to address them”.
He said that in the last 12 months, the Gambling Commission had seen fewer “extreme cases” of breaches of industry duty of care. He said: “We believe an outcomes-based approach is proportionate and reasonable. We recognise that the market is diverse and one-size-fits-all solutions aren’t always best. What one operator regards as risk will differ to another’s – which makes the middle ground harder to judge. This also means consistency isn’t easy.
“You all represent large businesses with large, dynamic customer bases – technology can be your friend to reduce reliance on manual processes, but some human judgement is needed, especially in that middle area. So we need to establish that appropriate balance, and to do that, we need an effective and constructive relationship.
Rhodes said that thanks to additional funding, the Gambling Commission had invested in work to combat illegal gambling and had succeeded in “disrupting and reducing illegal traffic”. He added.
Although he reiterated his opinion that the black-market risk is often overstated by the industry, Rhodes said: “There is a great deal more we will do in this area and I am optimistic we will soon have additional powers, thanks to the hard work of colleagues in the Commission, Department for Culture, Media and Sport (DCMS) and wider government.” He said he hoped the regulator would “soon begin seconding people from industry into the Commission to boost our insight and expertise in this area”.
Risk and compliance
As for risk, Rhodes said the regulator was “very conscious of how the risk profile within the sector can change”. He noted that the sector is “relatively static in terms of participation, but actives are up, staking patterns have changed for some and there is displacement within the industry”.
He stressed that the regulator’s compliance programme is focussed on risk and that it has specifically been looking at operators in tiers two and three, particularly where they have grown rapidly. “This is not because we think growth must be a bad thing, but we have seen examples of operators growing their business faster than the underpinning compliance infrastructure,” he said.
The Gambling Commission’s role
Rhodes also spoke about the regulator’s role in the ecosystem that it exists in and the pressures it faces from different stakeholders. He mentioned the Regulators’ Code and its statement that “Regulators should carry out their activities in a way that supports those they regulate to comply and grow”, noting that “some feel that puts an onus on the Commission to actively encourage the Gambling industry to grow and should also stress the benefits of gambling as a pastime”.
On the other hand, he noted that some reference the regulator’s licensing objective set out at the start of the Gambling Act, which says it must protect children and other vulnerable persons from being harmed or exploited by gambling. He said: “Taking these two examples, depending on who you are and your view of the world, they can conflict and people will take different meanings from each. The Commission’s job is to balance the two.
“The Regulators’ Code stresses throughout that growth must come when the business is compliant, not instead of it. Likewise, the Gambling Act also says the Commission has a duty to ‘aim to permit’ gambling, providing it complies with the licensing objectives and the Statement of Principles and Regulators’ Code requires the Commission to take an approach to regulation which is based on risk. This does not mean ‘no risk’ or ‘zero tolerance’.
“This balance requires us to make complex judgements,” Rhodes argued. “When someone will experience a problem with gambling, when they cross from being in control to not and when they and or others are negatively impacted is not entirely predictable or linear. Yes, we have markers of harm and we can say where associations between activities and actions increase the likelihood of harm. We know from in-depth research into problem gambling these factors were present in those who did have negative consequences from gambling – those are sometimes incredibly severe. So, between the regulator and the industry, we have things in place that seek to manage those risks.”
The financial risk debate
Rhodes also mentioned the recent debate with the horseracing sector over proposals for financial risk checks for online gambling, noting that it had “become an exceptionally difficult and sometimes very bitter debate”.
He said: “I’ve had a range of opinions expressed to me, which have been equally diverse but have become increasingly extreme in some cases. It is not the job of the Gambling Commission to consider or advise on the wider implications for any given sport – that is the role of DCMS. However, that doesn’t mean the Commission does not therefore consider what is proportionate or is indifferent. I can completely understand the passion for their sport, for their sector and this is something DCMS explicitly factored into its impact assessment.
He noted that horseracing is unique in its relationship with gambling and “has a critical dependency on gambling as a funding stream”.
“The Patterns of Play research showed us that for accounts used for horseracing bets, the most profitable 1 per cent from the operators’ perspective accounted for 70.4 per cent of Gross Gambling Yield (GGY), which suggests horseracing not only has a critical dependency on money lost to operators gambling anyway but relies on 70 per cent of that money coming from a proportion of bettors five times smaller than other sports betting.
“Alongside other markers of harm, the financial thresholds you each apply for assessing the risk of customer spend differ, but for many of your backstop checks tend to range from the equivalent of 0.4 per cent to 0.2 per cent of accounts, based on annual gambling levels found in the Patterns of Play research. For later readers of this speech, I am talking about accounts that were gambling at the time and not dormant accounts. Anti-Money Laundering (AML) checks exist just beyond those levels to a greater or lesser extent, depending on the operator. These are far from the ‘low-level blanket checks’ some sought to argue have been imposed.”
Rhodes noted that many in the horseracing industry argue that there should be no checks at all, which he said would mean “unlimited losses being sanctioned when betting on horseracing”. He stressed that “as things stand today, no such checks exist for on-course bookmakers, nor are any planned. Likewise, the frictionless checks set out in the government’s White Paper do not apply to the land-based sector at all. The call being made here is for unlimited and, quite literally, unchecked gambling losses on a sport, to support the growth and continuation of that sport.”
However, he said that “there were just too many examples of clearly unaffordable gambling taking place with little or no intervention”. Rhodes added: “In common with some other sectors, the gambling industry is seen as a whole, so even if there are compliance issues not taking place in your company, if they take place elsewhere you get tarred with the same brush. The industry is very often described as a ‘whole’, despite the very obvious differences within it. These very difficult stories have become socially and politically unacceptable and despite there being an outcomes-based regime that gave the industry the ability to address this problem, it simply didn’t happen consistently. Enforcement action escalated and ultimately a line was drawn.
“I worry quite a lot at how what the government actually said and what the Commission actually consulted on has been lost in the noise of worry and disagreement. Both I and the Secretary of State have reiterated that financial risk checks would only be tested, trialled or rolled out when there are credible, practical tools available for frictionless checks. How the Commission and the industry now work together to work to deliver a solution that really does achieve the outcome government wants, will now be critical.
“Ultimately, it is government that decides the policy direction for regulation. The Gambling Commission set out its advice as part of the Gambling Act review and the Government published its White Paper which set out the policy direction. In many areas, the government agreed with the Commission’s advice, but not in all. The Commission is implementing what the government has set out and before any of the White Paper consultations have been launched we have had confirmation from DCMS the consultation meets the direction and intent of the White Paper. Government will naturally respond to a range of points of view as it decides what to do.”
Rhodes picked up on the sector’s “right to bet argument”, noting that “there is no legal right to bet and government made it clear in the White Paper it does not intend to change that – the desire to gamble is not a protected characteristic. We get a lot of people who argue we should be prosecuting you for refusing to take their bets – especially when they believe they have been limited or refused because they are ‘winning punters’.
Rhodes added: “We have seen an explosion in complaints about withdrawals being delayed, though much industry data shows exceptionally high proportions of withdrawals being processed very quickly. Our social media accounts, and mine personally, are littered with screengrabs of emails from operators asking for photographic verification – sometimes outside an address with ID documents held up in plain sight.
“Gambling is essentially adversarial – someone gaming or betting wants to win money from the operator. In turn, the operator wants to win money off the consumer – certainly in the longer-term. It is an adversarial relationship. Some consumers resort to using the accounts or personal data of friends or relatives – I’m in plenty of Telegram groups where I see this discussed very commonly and openly – and no doubt there are other co-ordinated practices going on to tilt things to the advantage of someone.
“My concern here is how transparent the reasons for delays or requests for additional information are. We have seen some practices of withdrawals being unfairly frustrated, but it is not our automatic assumption there is no reason for delay or there is some nefarious intent. However, it is by no means being made clear to consumers why they have been asked for more information and sometimes there are some very specific requirements put in place by operators. It has become a widespread assumption that requests for information are for safer gambling reasons, when this is not always the case.
“This is an area we will be exploring during the coming months ahead and we will expect operators to be transparent with their customers on the reasons additional information has been requested and for those reasons to tally with what is seen in their accounts and operator policies, accepting there are some specific AML tipping off requirements to be met.”
Rhodes said that introduction of an ombudsman is likely to “significantly change the ecosystem further”. He said that over 90 per cent of the complaints the Gambling Commission receives and a very big section of our contact from consumers is not for the Gambling Commission as it was set up to be. But it is very likely to be for an Ombudsman. This will be a good thing for consumers, but I would not underestimate how this will change perceptions for the industry, government and its regulator.”
Gambling Commission Corporate strategy
Rhodes finished with an update on how the Gambling Commission is developing its new three-year Corporate Strategy, due to be published in spring. He said it would “focus on communicating clearly, and building effective partnerships“.
“This will include engaging constructively with industry to try and ensure compliance at the earliest opportunity, educational efforts, clearer guidance as well as hosting events such as this today,” Rhodes said. “Much of this is not new, but what we are saying is we want to invest more in this approach to reduce the reliance on formal enforcement where we can.
“There is a very clear steer from the Board of Commissioners in the early drafting that transparency around compliance will be a key theme. It will (I hope) offer us, you and the public a clear framing for what we are doing and why it all connects and why it matters.”
Last week, the Gambling Commission named Nick Rust (OBE) as the chair of its new Industry Forum. Announced in September, the ten-member Gambling Commission Industry Forum was created to improve the regulator’s understanding of operators’ views.
Rust served as the chief executive of the British Horseracing Authority (BHA) for six years until 2020. He is now the chair of the Starting Price Regulatory Commission, a non-executive director of Redcar Racecourse, a founding partner of GVS EQ and a trustee of the Injured Jockeys Fund.