Gambling Regulators – Who is the Best? By David Clifton, Director, Clifton Davies Consultancy Limited June 19, 2019 at 2:45 am I spoke as a panellist two months ago at SBC Events’ Betting on Sports America conference, held in New Jersey, USA, on the subject of “Avoiding the pitfalls – Lessons to be learned from other regulated markets”. The moderator of that panel, William J Pascrell III, partner at Princeton Public Affairs Group, made very clear his view that the New Jersey gambling regulatory model is far superior to that in any other jurisdiction in the world. Last year, Neil McArthur, the Chief Executive of the UK’s Gambling Commission (UKGC), said that he wants it to be “the most respected gambling regulator in the world”. Recent experience has indicated that the UK regulator considers the route to the top is to set ever-higher regulatory standards for its licensees to achieve. Well-respected online gambling jurisdictions such as Alderney, the Isle of Man, and Malta vie to attract new licensees, competing not only on standards of regulation but also on tax incentives, comparative levels of licence fees, and ease of access to new markets.All of this prompts the question, “What makes a good gambling regulator?”. Once upon a time, in what already seems like the distant past, the UK’s Department of Culture, Media & Sport (as it was then called) evaluated regulatory standards when determining which international gaming jurisdictions should be included within a ‘whitelist’ granting their licensees authorisation to advertise their gambling facilities in the UK. The results of that process raised questions such as why were Tasmania and Antigua & Barbuda whitelisted when other applicants, namely Curacao, Kahnawake, and Alexander First Nation, were refused inclusion on the list? Readers of this article will no doubt have their own views. Regardless, applications to join the ‘whitelist’ were closed in 2009 and the ‘whitelist’ itself was consigned to history in 2014, when new legislation required all gambling operators wishing to transact with or advertise to British consumers to obtain a licence from the UKGC.So we can reframe the question above, into this: “What criteria should be used to determine what makes one gambling regulator better than another?”. Some criteria should be givens: effective implementation of mechanisms designed to keep crime out of gambling, ensure fairness and transparency on the part of gambling operators, and protection of children and vulnerable people. Let me pause for a moment on the last of those criterion because it serves well to display contrasting regulatory approaches on either side of the Atlantic Ocean. My business partner Suzanne Davies moderated a “Betting on Sports America” panel session in April entitled “Tacking problem gambling – what is effective?”. Both that and my above-mentioned session were highly illuminating, not least because they shone a very insightful light on the quite different approaches taken (historically at least) in relation to the issue of player protection by gambling regulators in the UK on the one hand and the USA on the other. Putting it as succinctly as I can: although the overturn of PASPA has led to bodies such as the American Gaming Association and others involved in the Responsible Gaming Collaborative charting new player protection territory, it will be some time yet before U.S. regulators move the focus of debate from responsible gambling to safer gambling, as has occurred on this side of the pond, where the UKGC takes the view that “responsible gambling suggests that the individual customer is principally in charge of keeping themselves safe. By focusing on safer gambling … there is a clear onus on gambling operators to protect their customers.” What is also driving the UKGC’s direction of policy is the fact that public trust in the UK’s gambling industry has plummeted to a record low, with latest statistics showing that 69% of people consider gambling to be dangerous for family life and only 33% think that gambling is fair and can be trusted. By way of contrast, recent AGA research indicates that an all-time high proportion (88%) of American adults view gambling as an acceptable form of entertainment. Another quite major difference is that, with U.S. gambling activities being taxed and regulated at State level, a very positive view is taken of the industry’s role as a community partner, with that same AGA research indicating that 80% of people recognise gambling’s role as a job creator, and 60% believe that casinos help their local economies. As matters stand, a similarly positive public reaction seems a forlorn hope in the UK, where as many as 41% of people take the view that gambling is associated with crime. Perhaps the criteria for determining the relative merits of different international gambling regulators should include an assessment of how efficiently and effectively they each implement principles of regulatory inspection and enforcement of the type advocated within the UK’s 2005 Hampton Report entitled “Reducing Administrative Burdens: Effective Inspection and Enforcement”. Those principles are often summarised as “proportionality, accountability, consistency, transparency and targeting”. The UKGC set out its stall in April 2009 when responding to the Hampton Report implementation review. It said: “The Commission is committed to regulating in a manner that is consistent with the Hampton principles and the Macrory characteristics of better regulation. The Commission will therefore seek to work in a transparent, accountable, proportionate, consistent and targeted way. Its approach to regulation is risk-based, with a focus on required outcomes and avoidance of fine prescriptive detail.” Ten years later, it would be illuminating to see how the UKGC measures its performance against the Hampton Report’s recommendation that “regulators should recognise that a key element of their activity will be to allow, or even encourage, economic progress and only to intervene when there is a clear case for protection”, not least because a Government-sponsored review conducted in October 2008 had concluded that the UKGC “could be clearer about its responsibilities with regard to the economic vitality of its regulated sector”. In particular, the review had “found some conflicting views within the Commission as to the extent to which the Commission is responsible for setting a regulatory framework within which (other things being equal) members of the gambling industry can operate effectively as businesses”, adding that “while some employees accept this, other parts of the Commission appeared to the Review Team to be less comfortable with this role. We believe that this may be partly due to perceived sensitivities regarding the ethical issues associated with the gambling sector. The Commission should work to clarify its responsibilities here, and to improve the economic modelling of the likely impacts of regulations on the sector”. The UKGC’s response at the time was as follows: “As we have access to improved data, we will work with the industry to improve the economic modelling of the likely impacts of regulation on the sector and with Commission employees to ensure regulatory policymaking takes proper account of the economic impact of proposals”. It is clear that the UKGC has for some considerable time had “access to improved data”. I suspect that opinions may vary on the extent to which its regulatory policy-making has taken proper account of the economic impact of its proposals on gambling businesses. A key factor in this respect is surely how well a gambling regulator understands (a) the sector it is regulating and (b) the nature of the businesses (and challenges facing those businesses) that are operated within that sector. As others have commented, since the decision of the UKGC not to attend the annual ICE event in February, it has been notable by its absence from a variety of other industry-sponsored events. That may be because it is under-resourced and/or because it has set itself too great a work burden, with ever more frequent consultations on proposals for yet more robust regulation, ongoing investigations into regulatory failings by operators and, most recently, with it taking over ownership of the UK’s Gambling Harm Reduction Strategy and the accompanying responsibility for its implementation. In that strategy, the UKGC justifiably says that “working collaboratively in a coordinated manner to focus efforts and share more widely what does and does not work, will achieve greater impact than more isolated efforts”. In a rare nod in the direction of the industry, it also acknowledges that “the gambling industry is increasingly collaborating on activities to promote safer gambling”, adding that “even more can be achieved through active targeting, direction and support for this collaboration by the Gambling Commission as the industry regulator”. Achieving greater collaboration necessarily involves the UKGC participating in that collaborative effort. This demands a large commitment from the regulator in terms of both time and work. Some collaboration already takes place. The UKGC’s new co-creation workshops and recent feedback to the largest 40 or so gambling operators that have participated in its three-year pilot Annual Assurance Statement (AAS) programme provide examples of that. It has just launched its Gambling Harm Reduction Strategy in Cardiff and Edinburgh with the promise of a future such event in London. However, with a view to achieving a better balance between the “stick” and the “carrot” in terms of its regulatory approach, I hope that the UKGC will find the available resources to enable its active re-involvement with the gambling industry’s own events. By so doing, not only will it learn more about the implementation of striking new initiatives to achieve best practice in the field of player protection (as was exemplified by the recent KnowNow Player Protection Forum and Workshop events in London, for example), but it will also help dispel the myth in some quarters that the UKGC has developed an anti-gambling mentality. I hope that my comments will be regarded by the UKGC as constructive criticism. They are certainly intended as such. It is in the interests of the industry, those who advise it (such as my business), its customers, the gambling regulator, and the public at large that honest dialogue takes place freely and openly on all matters of regulatory concern. Room for improvement will always exist and I believe that this is now well-recognised by the UK’s gambling industry, with major operators leading by example clear for all to see. That does not mean that there will be no future regulatory failings. Human error will always occur from time to time, but I do feel that the UK industry has now fully woken up to the need to ensure that systemic errors are avoided at all costs. If nothing else, financial penalties imposed by the UKGC for AML and social responsibility failings, totalling £7.3 million in the last month alone, should most certainly have served to drive that message home to those who have still to wake up and smell the coffee. Slightly further afield, recent enforcement action in Sweden, culminating in revocation by that country’s regulator (Spelinspektionen) of Global Gaming’s licence, will have served to deliver a similar message there. We will see whether the Malta Gaming Authority takes any regulatory action of its own against each of Global Gaming and those operators licensed by both the MGA and the UKGC that have recently incurred very substantial financial penalties with the UK regulator for serious regulatory failings. My final comment is that, despite the title of this article, I do not for one moment advocate a competition to determine which gambling regulator is better than the rest or indeed that anyone should assert that one is better than another. Far more important is that gambling regulators work together and in close collaboration with their respective licence-holders to ensure that, in an increasingly global gambling environment, consistently high standards of proportionate regulation apply to gambling operators wherever in the world they undertake business. David Clifton is the co-founder of Clifton Davis Consultancy Ltd: www.cliftondavies.com. He can be reached at email@example.com.