Internet Gambling

Internet Gambling and the UK General Election Problem gambling is an extremely destructive phenomenon, negatively impacting life and relationships both at work and at home. The Government estimates that currently there are about 284,000 problem gamblers in the UK. 1 Internet gambling (sometimes called remote or on-line gambling) is proving to be especially hazardous for those with a propensity towards gambling addiction. Its 24hour availability, and the inability of family members to perform a restraining, gatekeeper function - because addicts do not need to leave the house to obtain funds or place bets - marks out remote gambling as particularly dangerous. A recent gambling prevalence study in the UK found that out of the five types of gambling most associated with problem gambling, two operated on-line and three operated exclusively on-line. 2 Spread betting was the form of gambling most associated with problem gambling.

Online gambling in the 2005-2010 Parliament The UK Gambling Act 2005 regulates segments of remote gambling for the first time.

The Act, which was passed just before the 2005 General Election, established the UK Gambling Commission to oversee and keep companies accountable to the Licensing Codes of Conduct which are tied to renewable gambling licences. Many of the codes and much of the Gambling Commission’s work did not start in earnest until 2007.

CARE has been monitoring the implementation of the Gambling Act and pressing for more protections for vulnerable people, particularly in relation to internet gambling.

The current legal framework CARE believes that there are some real problems with the current legal framework: In the first instance, spread betting is almost completely lacking in regulation. Spread betting has traditionally been concerned with betting on the behavior of the stock market. It is not the same as trading, because no stock is actually purchased in the transaction. Rather a bet is made about how much a company or an index will grow or lose in value over a given period. According to the Government’s own measures, spread betting is the type of gambling that is most likely to lead to problem gambling. 3 Unlike all other forms of gambling (apart from the lottery) it is not regulated by the Gambling Commission but by the Financial Services Authority (FSA). The FSA has 1

See Gambling Commission website HERE. See Gambling Prevalence Survey 2007 page 94 HERE 3 The problem prevalence figure for Spread Betting is 14.7%, see Gambling Prevalence Survey 2007 page 94 HERE 2

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done little or nothing to keep spread betting firms accountable to the primary objectives of the Gambling Act in terms of protecting the vulnerable. This needs to change.

In the second instance, the Licensing Codes of Conduct, enforced by the Gambling Commission, provide special protections allowing, for example, problem gamblers to ‘self-exclude’ from gambling websites. Self-exclusion involves the problem gambler formally asking companies not to allow them to gamble. The company should then freeze their account and not allow them to gamble for an extended period. This is based on the individual’s own initiative and requires a mark of personal responsibility.

The Codes of Conduct also require website owners to prevent access to gambling for vulnerable people and children. However, this settlement is not working. In one recent case a gambling company allowed somebody who had self excluded to open another account. 4 Furthermore the Codes of Conduct only relate to companies based in the UK. Many remote gambling operators engaging with British citizens are actually based abroad.

Finally, the Gambling Act’s method of regulation encourages a culture of gambling. Put simply, the only mechanism the Gambling Act provides for regulating operators based abroad is through advertising. 5 The Gambling Act allows remote gambling service providers located in the UK (who have a Gambling Commission licence) and any remote gambling providers operating in other EU states or in ‘white-listed’ countries (who don’t need a Gambling Commission licence) to advertise their services here.

White-listed countries are deemed by the Secretary of State to be places where the regulatory framework is similar to that of the UK. Allowing companies in these areas to advertise creates an incentive for providers based in non ‘white-listed’ countries (i.e. ‘black-listed’ countries), which are not permitted to advertise in the UK, to move to ‘white-listed’ jurisdictions, so they can advertise in the UK. However, it also creates an incentive for British firms to relocate to other EU white-listed countries where the regulatory framework is actually less demanding than that imposed by the British Gambling Commission.

Remote Gambling in the next Parliament: Pressures for Change First, more must be done to properly regulate spread betting. Given the high association of risk between spread betting and problem gambling, and the danger of the quick loss of large amounts of money, CARE believes the Government should take urgent action to ensure that the Gambling Commission and the Financial Services Authority work closely together to keep companies accountable to the aims of the Gambling Act. Candidates should be pressed on this issue.

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In a recent Legal case a problem gambler took a well known gambling service provider to court after the company had allowed him to reopen an account only 2 months after he had asked to be self excluded, even though the company had confirmed that he would not be allowed to gamble for 6 months. To read the judges verdict please go HERE. 5 This is more than a little ironic given that advertising gambling was actually illegal before the introduction of the Act! On this basis one might point out that claims to regulate remote gambling for the ‘first time’ arguably seem somewhat euphemistic given that remote gambling was previously regulated very effectively with respect to advertising by virtue of the fact that advertising remote gambling was illegal.

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Second, self-exclusion mechanisms need to be tightened up in the Licensing Codes of Conduct. This is largely a matter for the Gambling Commission to take up via the work of their Commissioners. However, future government ministers must highlight this problem to the Gambling Commission and demand action. Again, candidates should be pressed on this issue.

Third, preventing an operator based in a ‘black-listed’ country from advertising in the UK does not mean they cannot sell their services to people in the UK. Candidates should be encouraged to support the use of web site blocking technology (used, for example, in Australia, see more below) to block internet gambling sites based in blacklisted countries in order to protect British citizens from potentially dangerous unregulated products.

Fourth, the rules allowing companies based abroad to advertise in the UK must be revisited. At present, in determining whether a country should be placed on the whitelist, the UK Government seems more interested in assessing whether regulators in other countries keep companies accountable to properly pay-out winnings, and avoid contact with illegal activities (like money laundering), than their actions in relation to protecting problem gamblers. Given that (as noted above) the British Gambling Commission regulatory framework is often tighter than that of other EU and Whitelisted countries, there is an incentive for UK based firms to relocate to other EU of white listed countries. This is further compounded by the introduction of a 15 per cent tax on remote gambling operators. Two of the largest UK companies have already moved away from the UK. Candidates must be made aware of the importance of introducing better regulation of companies based beyond the UK that are allowed to advertise in the UK. Finally, candidates, when elected, should press the UK government to argue for a tough European regulatory framework. Free trade laws and differences in national regulations mean that there is currently no EU regulation of remote gambling. But because of the ratification of the Lisbon Treaty and because of the growing interest in harmonizing remote gambling legislation in the EU by Members of the European Parliament, there is a real opportunity for change here. An incoming elected government should pursue EU wide protections.

There are two lines of argument that suggest the EU is not in a position to restrict internet gambling, which it is vital to critique:

a) You can’t regulate the internet The most popular argument is that states or nations simply cannot control or regulate the internet. It just isn’t technologically possible.

Response: Candidates must be made aware of the fact that there is increasing recognition that regulating the internet is not as ‘impossible’ as was once suggested.

The issue is currently being investigated by the UN, 6 while Australia has already implemented some fairly effective controls to back up its ban on internet gambling 7 .

The Digital Economy Act also gives more powers to Internet Service Providers (ISPs such as Virgin or Talk Talk) to regulate sites. Moreover, the point should be made that in the film and TV industry, companies do not make their web content available to

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Please read more at the website of the world summit on the information society HERE Please read more about Australian policy HERE

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people who are not in a specific jurisdiction. For example the BBC iPlayer does not work outside of the UK, because people outside the UK do not fund the BBC.

b) Regulation would not be consistent with single-market commitments The EU Single Market is founded upon a commitment to the free movement of goods and services. This does not mean that states cannot raise moral objections to certain forms of trade and ban them for the purpose of protecting public morality BUT these must be enforced consistently.’ The long and short of this is that if a state wanted to ban gambling per se it could do so and, subject to technological concerns about regulating the internet, endeavour to implement these restrictions with respect to internet gambling. The EU, however, does not look kindly on the idea that a country might want to ban or restrict internet gambling whilst allowing other forms of gambling to continue. This is deemed to be allowing a double standard and contrary to free trade commitments.

Response: Candidates must be persuaded that the risks associated with internet gambling are greater than those associated with other forms of gambling. They must be encouraged to press the Government to fight for European legislation that allows states to adopt a more restrictive approach to internet gambling than in relation to other forms of gambling. Of great relevance, the European Court of Justice has recently intimated a change of attitude, in which safety concerns are given priority over free trade. Moreover, there also appears to be some encouraging movement on this issue within the European Commission.

Remote Gambling and party lines Labour: Labour has reformed gambling law in this country through the Gambling Act 2005, which has had a largely liberalising effect, although it does regulate internet gambling for the first time. Currently the government minister in charge of gambling has indicated that there is a need to change the regulations in relation to remote gambling for firms based in the EU and white-listed jurisdictions 8 .

Conservative: The Conservatives want to reopen the debate on gambling 9 . They have announced that they would combine the Gambling Commission and the National Lottery Commission in order to save money 10 .

Lib Dems: The Liberal Democrats have not as yet outlined any policy proposals on gambling.

Gambling and devolution The Gambling Act 2005 applies to the whole of the UK and Northern Ireland. The Gambling Commission regulates gambling in all parts of the country

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http://www.culture.gov.uk/reference_library/media_releases/6562.aspx (22 April, 2010) http://conservativehome.blogs.com/platform/tobias_ellwood/ (22 April 2010)

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http://www.conservatives.com/News/Speeches/2009/11/Jeremy_Hunt_Ensuring_more_National_Lottery _money_gets_to_good_causes.aspx (22 April 2010)

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Gambling: Questions for Candidates 

Ask your candidates whether they would be in favor of creating a spread betting liaison officer between the Gambling Commission and Finacial Service Authority in order to ensure that spread betting is properly regulated.

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Ask your candidates whether they would be in favor of putting the Licensing Code of Conduct on a statutory footing.

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Ask your candidates whether they are in favor of blocking websites that are in ‘black-listed’ jurisdictions.

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Ask your candidates whether they would put pressure on the European Council and Commission for a directive which would allow either: Member States to require service providers to apply for licences irrespectively of what state they operate from or The regulation at EU level of gambling service provision.

Policy Document for Make the Cross Count 2010 CARE 53 Romney Street London SW1P 3RF T: 020 7233 0455 mail@care.org.uk www.care.org.uk www.makethecrosscount2010.net Charity number 1066963 Scottish Charity SC038911

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