"The 2005 Gambling Act is just not working and we need a new approach fit for the digital age"

"Don’t think about the moral arguments. Don’t think that we are against gambling or for gambling. What we care about is the fact that the 2005 act is just not working and we need to have a new approach to legislation, and to do that quickly, we need to identify the things that we can achieve most realistically in a short time frame with the industry," Tom Watson explained.

Tom Watson is an MP and the Deputy Leader of the Labour Party who has been leading the party’s efforts towards a gambling reform in the UK. He recently spoke with Yogonet.com to provide details on the different measures he believes are needed to improve gambling legislation in the UK, with a main focus on consumer protection, something he believes the current regulatory framework lacks.

In February, you set out the Labour party’s plans for a new Gambling Act.  What is missing in the UK’s current gambling regulatory framework?

We have an act that came out in 2005 whose main principles were that gambling should be seen as transparent, fair, and that it should make sure that vulnerable people, particularly children, were not targeted. But when it came out, lawmakers could not have imagined that just two years later the digital landscape would change completely. 

Two years later, Mark Zuckerberg released his Facebook on the world. Five years later, everyone had a smartphone in their pocket and seven years later, people were using gambling apps on their smartphones, so the whole economic market place and culture of gambling changed dramatically just after the new act was introduced. So this new act was never fit the purpose. From day one, it was already out of date because it never really responded to the needs of the digital age.

When you have legislation which does not do what it should do, you also have frustration on the part of parliamentarians because they cannot respond to the needs of the people, you have exploitation on the part of some operators, and a regulator that cannot do its job of holding the operators to account because the legislation that supports the regulator is not adequate.

“

“

We have a regulator that is not performing its core function.

”

What were the consequences of having had inadequate legislation for 14 years now?

For example, with the FOBT’s debate, because there was bad practice from some operators, a lack of education from some parliamentarians and a lack of responsiveness from the regulator, a really angry, toxic environment was created in the debate around gambling. That is why the Labour party’s main focus is on thinking of what are the key issues to make sure we have a gambling industry that is sustainable and profitable but is also limited in the sense that it does not have market excess, it does not hurt and exploit people, and it does not lead to individual, social and economic harm.

One of the problems is that in the 2005 Act, there is no space for customer protection. The Act is meant to have a substructure consisting of three parts, a ‘tripartite relationship’: one part is the regulator, who is meant to look after the license conditions and codes, the other part is an advisory board which is independent to the regulator and the third part is Gamble Aware, which is a charity that receives a voluntary levy which is then sent to the funding of research, education, and treatment. But this is notoriously not working since we have a regulator that is not performing its core function. Why do we have white labels? Why do we have an umbrella license holder which is based in the Isle of Man? Why do we need to have an independent advisor which actually isn’t that independent from the regulator? Why do we have a charity and not a health system looking after problem gamblers?

What measures and improvements to current legislation would the Labour party’s proposal include?

We propose a new tripartite arrangement of three equal parties: the regulator, who is in charge of looking after the operators, holding the license conditions and codes up, and holding the operators to account. Number two, instead of a charity looking after a voluntary levy, we propose a mandatory levy that funds the NHS (National Health Care System), which would look after research education and treatment. So if you have problem gambling in the UK, it is looked after by health care professionals. Finally, number three, we propose an ombudsman who is in charge of customer protection. At the moment, there is a focus on treatment and on the industry but nobody is actually looking at the customer.

“

“

In the 2005 Act, there is no space for customer protection.

”

What is the current situation in terms of customer protection for gamblers in the UK?

At the moment, gambling is the only sector in which we do not have a formal ombudsman. If you go to the UK and you buy a fridge freezer or if you get a pension or if you take a loan up with a bank and you have a problem, there is a transparent formal structure and legal process that investigates that problem and maybe will compensate, or maybe not, but it is done properly.

Within the gambling sector, the situation is different. Those consumers who do not feel treated in a fair and transparent way may come to an arrangement with the operator but that may be subject to a non-disclosure agreement. Besides, informal dispute resolution with each operator might look very different: one might offer you 50%, 20% or a non-disclosure. It is not a very transparent process. Consumers may also go to the IBAS (Independent Betting Adjudication Service), who do a good job but are not a formal ombudsman. We need to have legal experts, a formal framework of investigation and compensation to say in a transparent way when a problem arises, this is the protection that can be provided to the customer.

Could you provide further details on your proposal? What powers would the gambling ombudsman be entitled with to be able to protect consumers adequately? 

Compensation is obviously very important but that would only apply to a minimum of cases. Much more important is transparency of terms and conditions and transparency of data. At the moment, consumers have to fight really hard to get some basic information about what has happened to them. A lot of the terms and conditions are not clear and if you win money is very difficult to withdraw it. We need to make sure that for instance bonus offers and free bets are being used properly and they are not being used to pursue gamblers who are loosing too much money. An ombudsman would make sure that the transactional-contractual behavior of the operator is fair and transparent. 

How did the industry leaders react towards the ideas you are proposing?

We work closely with the industry, we are not anti-industry. We try and find moderate, sensible, achievable, solutions. We are sometimes successful in that and we seem to have good relationships with everybody.

A lot of the industry like the idea of the ombudsman because at the moment, they fear that if one of them does something that entails a compensation, it will set a precedent for their competitors or their competitors will then undermine them. The ombudsman would be purely objective, so I think this arrangement would release some of the pressure from the industry.

Most of the operators fined by the UK Gambling Commission for failing to protect costumers and prevent money-laundering are based overseas. What are the current licensing arrangements for remote operators like in the UK?

People talk about the industry, but what is the gambling industry? Are we talking about the big five? Are we talking about UK license holders based in the UK? Are we talking about overseas operators? Are you talking about sports betting? There is a whole range of options that a lot of parliamentarians are not familiar with.

We have lots of conversations with UK operators where we say ‘you need to protect the customer more,’ but they rightly say, ‘What about these guys in the Phillippines, or in Nairobi, or these guys in the Chinese market who do not have any UK customers but sponsor a UK football shirt to target their domestic audience back at home?' We do not know who owns that companies, the character of that ownership, their turnover, or who they pay taxes to. Sometimes there are even concerns about criminal elements to some of these operations. We expect so much of UK operators and yet we are not actually doing anything about these so-called white labels who are currently in the market place.

In which ways do you believe the government and the regulator can improve or implement adequate controls for remote license-holders?

Before 2014, people were operating with their remote casinos in the UK and the gambling commission wanted to bring white labels under their umbrella, so we could keep an eye on them, tax them and make sure that they were accountable to the license conditions and codes. I see the logic in that, but the problem that created is this: the commission in 2014 just rubbed a stamp. Every single application. And as a result of that, we have inherited now license holders who we think should not be license holders in the UK and a lot of the main UK operators agree with us. We are very concerned about that, particularly when they sponsor UK football clubs.

So at the Labour party, we propose to really look at everyone who holds a license. We should go through that entire list in a way no one has ever done before and examine who owns these companies, where they are operating, where they pay taxes, what is their revenue, what is their customer due diligence and who they are sponsoring. If there is a situation where a license holder or an operator in the UK is deemed to be not fit for that operation or that license, the review would enable us in the government to take that license away.

“

“

An ombudsman won’t happen tomorrow since it requires new legislation but a mandatory levy could happen now.

”

Do you think some of the measures you are proposing or at least similar measures could be implemented in the UK? Do you think you could have a gambling reform soon?

As you know, we are arguing for a new Gambling Act, so when we become the party of government, we will be in a position to achieve legislative change.

A lot of what we are proposing requires primary legislation. A new act could take up to four or five years, so that is why we are trying to be very practical and work with our Conservatives counterparts and with the industry to identify what we can do now even if the Labour are not in government.

For example, an ombudsman won’t happen tomorrow since it requires new legislation but a mandatory levy could happen now. And actually, we have recently had a debate in Parliament on that. The Secretary of State could actually make that happen. So we want it in the Labour party, the Gambling Commission wants it, academics want it, a lot of Conservatives want it but the politician who was the power to do that at the moment is holding back.

“

“

In the next year or so, we will see universal cross-operator affordability checks being rolled out in the UK

”

As regards online gambling, you’ve mentioned the UK needs tighter preventative perimeters, especially on affordability. What type of measures could be implemented to ensure users do not gamble more than they can afford?

Another example of what we can do quite quickly with the industry are affordability checks since it is an issue on which pretty much everybody agrees. We need preventative affordability checks where before people start getting into a problem gambling situation there can be intervention on the part of the operator and across operators. I have spoken with a lot of operators they say this is a common desire. It would require the operators to have a common pool of data on their customers, a common framework for intervention, sharing best practice and a little bit of political encouragement from people like us to make that happen.

And I am confident in the next year or so, we will see universal cross-operator affordability checks being rolled out in the UK which means that if you go online and you start to gamble someone from somewhere will pick up on there quite quickly and ask questions. And if you go to another operator, the same questions will be asked.