In the beginning, there was the Gambling Act 2005. A piece of legislation which sought to trade off an extraordinary liberalisation of the gambling sector with the creation of a powerful statutory regulator with three principal objectives, namely:
- Preventing gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime;
- Ensuring gambling is conducted in a fair and open way;
- Protecting children and other vulnerable persons from being harmed or exploited by gambling.
These three central objectives are set out in section 1 of the Gambling Act which calls them the “Licensing Objectives”. Section 22 of the Act sets out what the Commission must do with them: “In exercising its functions under this Act the Commission shall aim – (1) to pursue, and wherever appropriate to have regard to, the licensing objectives and (2) to permit gambling, in so far as the Commission thinks it reasonably consistent with pursuit of the licensing objectives”.
That the Commission was created at precisely the same time as the ‘big bang’ by which the modern gambling landscape was born explains to a significant extent the difficulties the regulator has faced over the intervening years. The story of regulation in gambling has been one of a regulator often learning on the job and, perhaps not helped by its early preference for employing people from law enforcement and other backgrounds over those with specialist gambling experience, regulating by after the event criticism and punishment of operators rather than pre-emptive explanation of its expectations. Thinly explained, vague and ambiguous summaries of regulatory interventions and enforcement reports became central to the Commission’s attempts to educate licence holders as to what conduct was and was not acceptable.
Increasingly the Commission made it clear through the regulatory action it was taking against operators that it expected them to take the issue of customer ‘affordability’ into account when complying with their regulatory obligations. While there were no explicit rules imposing affordability checks per se, from 2018 onwards the LCCP contained terms vague enough to make it very difficult for an operator to argue that the Commission was stepping outside its powers when it complained about a lack of checks on the issue of affordability.
The consequence was that operators, understandably increasingly confused by what was required of them and made fearful by examples of punitive regulatory action, started to bring in ‘affordability checks’ long before they became so widely discussed and controversial and in the almost complete absence of any guidance as to how they should be deployed.
The government’s 2023 White Paper (‘High Stakes: Gambling reform for the Digital Age’) introduced the concept of ‘financial risk checks’. Although the Gambling Commission was known subsequently to take umbrage at the use of the terms ‘affordability checks’, it is entirely fanciful to suggest that ‘financial risk checks’ are something other than affordability checks. In 2024 the Commission launched a Pilot Scheme essentially to assist it in considering the efficacy of more prescriptive affordability checks. The results of the Pilot are still awaited but its launch has plainly sent shockwaves through the industry and the general consensus appears to be that there is a very significant danger that obligations relating to affordability checks will soon become significantly more stringent.
The obligation on operators to conduct an assessment of whether a customer might be showing signs of concerning spending habits began life as one of the factors to be considered when assessing whether that customer might be suffering from compulsive gambling problems. As a result of the direction of regulation (including the introduction of the Pilot Scheme) and the messaging from the regulator in recent years, the vast majority of operators now believe that they have an obligation to assess, by the application of some kind of criteria, whether customers who are showing no signs of problem gambling are nonetheless unable to afford to gamble in the sums they want to.
To people involved in real-world gambling, this way madness lies. What does ‘affordable’ mean in the context of the gambling habits of someone who does not show any signs of being a problem gambler? Surely the concept is no more than a curb on an individual’s choice to deploy their personal resources as they want to on an entirely legal pastime (the justification for which can only be based on some unexplained theory as to how people should properly spend their money).
Research on the impact of affordability checks is difficult to conduct and the results are patchy and open to interpretation. In particular it is difficult to establish the extent to which affordability checks, as opposed to other variables, contribute to market changes. But this is an area where common sense now needs to be applied. Punters do not like providing bookmakers with their private financial data and it is entirely obvious that many are not prepared to do so.
An EY survey (commissioned by the Betting and Gaming Council) suggests 70% of people who bet would be unwilling to allow regulated operators to carry out checks relating to their personal finances before being allowed to place a bet. A Gambling Commission funded survey in 2024 suggested that 66% of respondents were uncomfortable with operators accessing credit reference data. This is before we even get to operator restrictions on staking as a result of having carried out these checks.
That some problem gamblers will migrate to the black market as they struggle to gamble with regulated operators is sadly inevitable. It is also true to say that operator restrictions used for commercial purposes will mean that there is always some demand for black market operators. But for the regulator to have created a climate where operators are now applying often absurdly aggressive restrictions to low-risk gamblers in the name of affordability can only be a flagrant breach of the Licensing Objectives it was created to uphold.
What better way could there possibly be of encouraging crime in gambling, of ensuring that gambling is not conducted fairly and openly and of removing protection for vulnerable players, than to make it clear to vast numbers of non-problem gamblers that the only way they can freely place bets in sums of their own choosing – without having to first try and justify their choices to a compliance operative employed by a bookmaker – is by placing their bets with people who simply don’t bother with regulatory compliance?
More regulation is not automatically good regulation. The Commission now has an opportunity to deal a meaningful blow to the gambling black market by reminding itself that its role is ultimately to keep customers in the regulated market where they can be protected and where those who exploit them can be held to account. For the regulated market to now be engaged in the large-scale alienation of low-risk customers at the well-meaning but profoundly misguided insistence of the regulator is a truly extraordinary state of affairs.
The Commission must change course and prioritise ensuring that gambling stays, insofar as is possible, within the regulated market and must accept that this requires allowing operators to take the bets their customers want to place without first having to carry out affordability checks on them (always with the proviso that operators must not treat customers exploitatively). The black market is horrifyingly easy to access and already has significant competitive advantages over the regulated market. The Commission must rid itself of any notion that bets which regulated operators are unable to take are simply never placed.
If the regulator does not recognise the damage being caused by disincentivising non-problem gamblers from gambling within the regulated market then it faces a serious risk that, within 25 years of its creation, its legacy will be the mass conversion of many of those it was created to protect into reluctant and unprotected customers of the black market.
Contact Harry Stewart-Moore on +44 207 201 1857 to discuss further or email HarryStewart-Moore@childandchild.co.uk.
The information contained in this article is general guidance only. The application and impact of laws can vary widely depending on the specific facts involved. The information in this article is provided with the understanding that the authors and presenters are not giving legal, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional legal, tax or other competent advisers. Before making any decision or taking any action, you should consult a Child & Child professional.