The Gambling Review White Paper: Land-based gambling “levelling-up”?

The Government takes a noticeably different approach in respect of land-based gambling, to that of online gambling, in the proposals for gambling regulatory reform put forward in its White Paper. Whilst it largely seeks to tighten regulations relevant to the online space, with respect to land-based gambling its primary aims are to “reset” the existing regulatory regime and level the playing field with the remote sector.

In respect of the former aim, the Government’s key focus appears to have been to do away with restrictions which are no longer seen as necessary in light of the availability of online gambling today. As the Government puts it, “a central premise of the Gambling Act 2005 was to regulate gambling and manage gambling-related risks through controls which included restricting the number and location of gambling products, in particular gaming machines. The Act embedded a principle that gambling should generally take place in gambling-specific premises as opposed to places where it would be incidental to the establishment’s primary purpose…It also assumed that restrictions on machine availability and numbers of casinos were important protections for customers. The continual accessibility of online gambling has challenged these underpinning assumptions”.

In coming to its conclusions, the Government also acknowledges the particular headwinds that the non-remote sector has faced in comparison to the online sector: the “channel shift” from land-based in recent years and the more pointed impact that COVID-19 and the energy crisis has had – as well as the contribution that the sector makes to the economy and society more broadly in terms of the workforce that it employs and the importance of protecting its long-term viability.

In this article we look at each of the Government’s proposals for the land-based gambling sector.

Alignment of gaming machine allowances and betting in casinos

The Government proposes to align the gaming machine allowances afforded to those authorised to operate a casino under the Gaming Act 1968 (which restricts casinos to “permitted areas” based on population density and seaside resorts), with those licensed under the Gambling Act 2005 (which are sub-divided into “small” and “large” casinos).

Under the Gambling Act 2005, small casinos are limited to 80 machines and large casinos are limited to 150. 2005 Act casinos are also subject to minimum overall and non-gaming space requirements, with a ratio of machines to tables aimed at ensuring a balanced offering of different products. For small casinos, this ratio is set at 2:1 (permitting two gaming machines per table up to a maximum of 80 machines) and for large at 5:1 (permitting five gaming machines per table, up to the maximum of 150 machines). Casinos authorised under the Gaming Act 1968, meanwhile, are limited to 20 machines, irrespective of their size.

The current approach is not only problematic for 1968 Act casinos. As the Government points out in the White Paper, given the current machine to table ratio requirements, a small 2005 Act casino would need 40 tables to be allowed 80 gaming machines whereas a large would only need 16. Such requirements have forced some small casino operators to provide redundant tables which has “contributed to making them commercially unattractive for development”.

The Government now proposes to rationalise gaming machine allowances, for which it aims to consult during the course of summer 2023. It will consult on introducing a common machine to table ratio of 5:1 across the board. 1968 Act casinos which meet the size and non-gambling space requirements of a 2005 Act small casino (a minimum table gaming area of 500 square metres and a minimum non-gambling area of 250 square metres) will be entitled to the same 80 maximum machine allowance and the same 5:1 ratio. The Government estimates that there are currently 45 such casinos. The Government also proposes to allow 1968 Act casinos which do not meet such size requirements (of which the Government estimates there are a further 50 such casinos) to benefit from extra machines on a pro rata basis commensurate with their size.

When the 2005 Act was passed, 1968 Act licensees could apply to convert to licences under the 2005 Act and it was intended that the 1968 Act casinos would eventually be phased out or moved over to the new system. However, this has not happened and 137 1968 Act licences still remain, with only seven active 2005 Act licences. Despite the Gambling Commission’s recommendation in its advice to the Government for 1968 Act premises to convert to 2005 Act premises – mirroring calls for the same in the House of Lords Select Committee report of 2020 - the Government has opted to give the same machine allowances between the two rather than merging the regimes. The Government does, however, state in the White Paper that it may also consider whether changes are required to simplify the system of casino licences when Parliamentary time allows, so whether the Government changes its approach in the future remains to be seen. This does feel like somewhat of a missed opportunity, given the Government’s drive to modernise regulation more generally throughout the White Paper.

An alignment between 2005 Act casinos and 1968 Act casinos is also proposed in respect of the offer of betting. 2005 Act casinos currently have another advantage – at least on paper – over their 1968 counterparts in that they can offer sports betting in-premises. According, however, to the Gambling Commission’s data, no 2005 Act casino actually makes use of such opportunity. Despite this, the Government proposes to permit betting in all casinos, further relaxing the restrictions currently imposed on 1968 Act casinos. 

Reallocation of unused 2005 Act licences

There has been limited uptake of 2005 Act licences to date, with only 7 out of 16 in use – three small and four large. In order to rectify this, the Government will take steps to reallocate unused licences which it claims “has the potential to bring economic benefits to communities where a casino would add value to their area as a destination”. The Government will write to each local authority that has been allocated a licence which is not in use to ask them to confirm whether there is an intention to develop the licence. Where an authority has no such intention, the Government will seek to reallocate the licence to another authority, and where an authority confirms it retains an interest, the Government will enquire further about the barriers to allocation, assessing whether the licence should be reallocated.

Offering credit to international casino visitors

The 2005 Act currently prohibits casino and bingo premises from offering credit. This has proved particularly problematic for casinos catering for high net worth individuals. Such visitors are often based overseas and are used to receiving short-term credit arrangements in other jurisdictions, thus avoiding multiple currency exchange fees. As a workaround, until recently, casinos have been able to accept cheques from customers (which is permitted under the 2005 Act), with the customer then either settling their debt or being paid winnings at the end of a visit to the UK. The Gambling Commission has, however, made clear that it expects casinos to bank customer cheques in line with their normal banking arrangements, which has proved problematic with banks now removing overseas cheque processing facilities.

The Government proposes to amend the 2005 Act to remove the prohibition on the giving of credit in land-based casinos in respect of customers not resident in the UK. The Gambling Commission will, subject to consultation, specify in the Licence Conditions and Codes of Practice (LCCP) which checks must be made by operators wanting to take advantage of this.

As the Government notes, this change will allow the high-end sector (which has arguably been even more affected by COVID-19 than the rest of the land-based sector, given travel restrictions) to more effectively compete with jurisdictions such as Monaco, Singapore and Macau, and in turn support inward tourism.

It is worth highlighting that high-end casinos advocated for a further proposal to introduce a new sub-category of machine with a higher stake limit of £50 and a prize limit of £100,000. Whilst the Government was sympathetic to the idea of a bespoke machine, it considered that there would be substantial difficulties with ensuring it was only available in casinos or areas of casinos where a high-staking machine would not substantially increase the risk of harm and, as a result, it does not intend to take forward that proposal.

Electronic terminals in casinos

Casinos are permitted to offer electronic terminals offering games based on ‘real events’ (only games based on the spin of a roulette wheel are currently available). Electronic terminals are distinct from gaming machines, and do not have stake or prize limits, and only wholly automated terminals (which are linked to an electronic wheel as opposed to one controlled by a croupier) are limited in number. There is no limit on the number of semi-automated terminals that a casino may offer (i.e. those linked to a wheel operated by a croupier). Casinos cannot offer virtual casino games where a random number generator (RNG) is required (e.g. to replicate cards being dealt in blackjack) via any such terminals. Such games may only be offered on gaming machines.

Various operators advocated when responding to the Government’s Call for Evidence for the opportunity to offer electronic RNG-based games via electronic terminals. The Gambling Commission, however, expressed concerns that this would upset the balance between live table games and electronic gaming, as such terminals would not be subject to the same stake and prize controls, or game speeds, and customers at electronic terminals would not be monitored at a table or subject to online safeguards, thereby increasing the risk of harm.

The Government appears to have been persuaded by certain operators’ arguments and has confirmed that it is not opposed in principle to allowing a wider range of games via electronic terminals, subject to “appropriate protections” being in place first. It will consider this further, together with the Gambling Commission, noting that limits would need to be set on the total number of terminals, as well as the player protections that would need to be put in place.

Electronic payments

The use of debit cards on gaming machines is prohibited by the Gaming Machines (Circumstances of Use) Regulations 2007. The rationale for this was to protect players, as cash-only gambling was assumed to give players more control over their play by providing natural interruptions in play to obtain more cash, helping players play within their limits. However, since such restrictions came into force, the use of non-cash payments has increased greatly across society, in part due to technological change and consumer behaviour (the latter being accelerated by COVID-19).

The Government commits in the White Paper to working with the Commission to develop consultation options for cashless payments (with such consultation expected in summer of 2023). In line with the Commission’s recommendation that “the onus should be on industry to demonstrate how developments on cashless payments can be offered in a manner which does not increase the risk of gambling harm or gambling-related crime, such as money laundering”, before the prohibition is lifted, however, additional player protections (which the Commission will also consult on) will be put in place. In coming to its conclusion, the Government acknowledged the steps taken so far to ensure cashless gambling has safer gambling controls, and the further potential for this in the future. In particular, the Government cites the cross-industry submission to its Call for Evidence made by the Cashless Group, which pointed to the scope for future protections, including transactions taking a minimum time to complete (e.g. 30 seconds), double confirmation of each transaction, maximum deposits to enforce time breaks and operator-led aggregated data on spend levels and trends for players.

Machine games and licensed bingo premises

The Government received a number of responses to its Call for Evidence pushing for changes to rules surrounding gaming machines in venues, in particular in respect of the range of products permitted. The Government has shown willingness to explore many of these proposals further:

• New machine games: There were calls for new machine games and categories of gaming machine which do not currently fit into existing regulations and technical standards. Noting that “proposals put forward by industry for new machine games are not yet fully developed and will require further exploration with the government and the Gambling Commission”, the Government concluded that it (with involvement from the Commission) will test some of the proposals through planned pilots. Changes in this regard are, however, unlikely to be forthcoming any time soon. The 2005 Act does not currently allow for pilots of new machine games that would be inconsistent with laws on stake and prize limits, nor does it provide for any sub-divisions of Category C gaming machines (unlike Category B machines).  As a result, primary legislation will be required to implement some of these proposals. The Government intends to pursue this (like much in the White Paper) when Parliamentary time allows. The Government also received proposals to allow linked jackpots in more land-based venues. The 2005 Act only permits gaming machines to be linked in casinos, and only sub-category B1 machines on the same premises. The Government has again concluded that, if Parliamentary time allows, it will consider making changes to allow trials of linked machines in venues other than casinos.
• Category B machines in land-based venues: Currently no more than 20% of the total number of gaming machines in licensed bingo premises and adult gaming centres can be Category B machines (with the rest being Category C or D). This is known as the ‘80/20 rule’. As the Government explains, “this rule is intended to ensure a balance of machines available for customer use, limiting the number of machines with higher stakes and prizes and allowing larger operators to make commercial decisions on machine availability, rather than relying on fixed limits”. In response to claims that the 80/20 rule is no longer fit for purpose, and prevents the industry from meeting consumer demand (the Bingo Association pointed out that the rule can mean operators have to oversupply other types of machines in order to meet customer demand for Category B machines), the Government will consult in summer 2023 on reducing the ratio from 80/20 to 50/50.
• Side bets: It is common for bingo operators to offer in-game bonus prize opportunities (such as staking an additional amount via a tablet on certain numbers being called). Such additional games are subject to restrictive rules specific to bingo - participation is required in the main game of bingo, the numbers are allocated rather than selected by the player, and part of the stake is taken as a fee to play. Given such rules, operators have argued there is a lack of flexibility in offering further side bets. The Government has decided to work with the Commission and the industry to explore further options under which bingo premises would be permitted to offer side bets.

Whilst the Government is clearly open to innovation in this area, it is worth noting that various proposals put forward in the Call for Evidence have been pushed back on. In particular, the Government concludes in the White Paper against permitting split-screen bingo and B3 machine games on tablets in bingo venues, as well as not permitting bingo premises to offer bingo via social media or outdoors, nor to extend default playing hours for bingo.

Licensed authorities: powers and resources

Finally, the Government considered the range of powers and resources available to local licensing authorities.

Section 153 of the 2005 Act applies what is known as the ‘aim to permit’ requirement to the licensing powers of such authorities. As the Government points out, “in essence, the ‘aim to permit’ means that gambling should be permitted unless there is a valid reason why it should not be, but controls may be introduced as necessary to minimise risk”. Some local licensing authorities expressed concerns in their submissions to the Government that “their powers were not sufficient to apply local considerations and to shape gambling in their local areas when making licensing decisions. They considered that factors such as deprivation and crime, as well as public health factors, did not have significant weighting in their decision making processes, and that the primary reason they were not able to limit the number of premises is because of the principle of ‘aim to permit”. In line with the Gambling Commission’s recommendation, the Government concluded that, when Parliamentary time allows, licensing authorities would benefit from the introduction of cumulative impact assessments (CIA) – in line with alcohol licensing - which explicitly allow them to consider the “cumulative impact” of gambling premises in a particular area. Again, as this will require primary legislation, the introduction of CIAs is unlikely to be imminent.

The Government also considered the current cap for local authority licensing fees, which has not been updated since 2007 (despite a sharp increase in Gambling Commission fees in 2021). The Government will therefore consult in summer 2023 on increasing the cap.