98% of the online gambling market is licensed and underregulated. But the industry just wants to talk about the black market …

Howard Reed is a director of Landman Economics.

Gambling damage is a real problem in the UK. A third of a million of us are problem gamblers. On average, a problem gambler commits suicide every day.

For many years, the gaming industry has been pushing for greater regulation of gaming and fears lower profits. In the 2010s, the industry campaigned to stop reducing the maximum use of fixed odds betting terminals in betting shops from £ 100 to £ 2 (the change finally came in April 2019).

As a result, the focus of the industry has shifted to online gambling, which is less regulated than gambling in the betting shop. The outdated regulatory structure is based on the Gambling Act 2005 (passed before smartphones existed).

With the UK government in the process of undertaking a Gambling Act review that will focus on updating the legal framework for online gambling, the Betting and Gambling Council (BGC) – the lobbying group for the gambling industry (although calling itself a ‘standard body “referred to in its press releases) against stricter regulations. In the latest press release, the BGC claims there is a risk of complacency about the threat posed by unlicensed and illegal gambling providers.

Behind the spin

The BGC’s claim is based on a report it commissioned from PricewaterhouseCoopers regarding the extent of unlicensed online gambling in the UK. All gaming companies that provide services to consumers based in the UK require a license from the UK Gambling Commission (UKGC – the industry regulator).

The PwC report (a sequel to an earlier 2019 report that was never published) uses two research methods to examine the extent of illegal, unlicensed gambling in the UK. One is an analysis of the results of Google’s search for gaming-related terms, which shows how many unlicensed gambling websites are shown in the results. The other is a survey of just over 2,000 active online gamers in the UK.

The results of the Google search analysis show that unlicensed operators were less likely to appear in search results in 2020 than in the previous survey in 2018. However, the survey results suggest that the share of online gambling stakes made by unlicensed operators has increased is 1.2% in 2018 to 2.3% in 2020.

While this seems like a significant increase, it is important to note that the 2020 survey was conducted in November and December and the betting shops were closed for most of the period due to Covid-19 restrictions – resulting in a significant increase in the Online gambling led was the only option available. PwC’s interpretation of the survey results does not take these unusual circumstances into account.

In any case, 2.5% is a relatively small market share. The UK Gambling Commission – the regulator for the gambling industry – already has a number of tools in place to combat unlicensed gambling, including blocking payment processing to unlicensed operators and “geoblocking” UK consumers from illegal gambling sites.

High stakes

The under-regulation of 97.5% of licensed online gambling is a bigger problem. Online gambling must be limited in terms of stakes and speed of play in order to balance it with gambling in betting shops and to reduce the risk to players.

Instead, the BGC is opposed to tighter regulation of stakes and game speed, essentially trying to ensure that the licensed online gambling market becomes more similar to the unlicensed market, which they (correctly) call unsafe.

The UK government’s upcoming gambling regulation review needs to put the safety of online gamblers at the forefront, requiring a stricter regulatory framework that better matches the £ 2 betting limit on gaming machines in betting shops.

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