Reversal of fortune

Thanks to regulatory relaxation and regulatory tightening around the world, territories that were yesterday’s losers will be tomorrow’s winners – and vice versa, says Christina Thakor-Rankin of 1710 Gaming

Last year finished on a bittersweet note for the industry. For some, there were reasons to be cheerful – two of the world’s biggest sports betting markets, the US and India, were hinting that 2018 might see them take their first steps towards online betting regulation. But for those in established markets, the prospects are less rosy.

December saw the state of New Jersey, supported by others, take the fight for regulated sports betting to the Supreme Court in a bid to overturn the PASPA Act, which restricts the right of all but a handful of states to offer legalised sports betting.

The argument is about two principles. Firstly, PASPA seems to pre-empt states regulating sports betting by banning them before they can do so. The argument is that, if PASPA were a pre-emptive law, it would create regulations for sports-related gambling, which would override any state laws doing the same. It does not do so.

Instead, it allows those states that already had sports betting in 1992 to continue to offer it, while preventing any others from doing so. So, in effect, it is regulating the states, not sports betting.

Secondly, PASPA violates the Tenth Amendment and the principle of the “anti-commandeering doctrine”, which is interpreted to mean that Congress cannot “commandeer” state officials to implement federal policy.

The comments and questioning from the justices during the hearing suggested that they are not oblivious to these arguments.

Justice Kennedy observed that “[PASPA] leaves in place a state law that the state does not want, so the citizens of the state of New Jersey are bound to obey a law that the state doesn’t want but that the federal government compels the state to have. That seems commandeering.”

This seemed to be echoed by Justice Breyer, who said, “There is no federal policy against authorising sports gambling but for a federal policy that says a state can’t authorise sports gambling. And that is to commandeer.”

The justices will now hand down their ruling, which could be as early as 22 January but possibly as late as June. And this is not the end. The major sports leagues, which have not insignificant lobbying power and have come around to the idea of regulated sports betting, would prefer regulation at a federal level.

This would require a new law allowing gambling to be legalised at that level, which Congress may have neither the time nor appetite for in an election year – for many, gambling is still a political hot potato.

Elsewhere, the Law Commission of India – following a request from the Supreme Court earlier this year to examine if betting on cricket should be legalised – looks set to recommend legalising online betting at a national level. Commission chairman Justice Chauhan said, “Online betting is difficult to prevent, so it requires regulation. We must have a stringent law.” This augurs well. 

The final report is due soon and, although the Constitution leaves gambling to the states, the law does give “Parliament the power to legislate on a matter in the State List citing national interest” in relation to internet activities, making it easier.

This would, however, be a new law requiring parliamentary time and, with national elections due in 2019, Indian politicians, like their American counterparts, may have little appetite for a subject that continues to be morally, socially and religiously divisive.

On a less positive note, 2017 saw Australia bringing in measures seeking to close the door on offshore operators, as well as more restrictive controls on regulated betting, marketing and advertising.

In the EU, the European Commission announced that it was no longer interested in infringement proceedings relating to gambling. This was met with some dismay. 

In the view of Clive Hawkswood, CEO of the Remote Gambling Association, a body that has long argued that laws and regulations that unfairly restrict or bar online gambling in many EU member states represent blatant breaches of EU law, this decision has effectively “given a free pass to non-compliant regimes”.

Only time will tell what the real impact of this is likely to be. However, in theory it potentially opens the door for those members states that have had their original stance challenged and overturned to turn the clock back.

And so to the UK, one of the world’s most mature and open betting markets. The Department of Digital, Culture, Media and Sport produced a consultation paper, Changes to Gaming Machines and Social Responsibility Measures, whose recommendations would effectively reverse or roll back some of the legislative and regulatory changes made by various governments since September 2007, when the Gambling Act 2005 came into force.

The aim of that Act was to deregulate the sector and boost revenue by allowing (among other things): betting shops to offer FOBTs; betting and gambling products to be freely and openly advertised and marketed (including radio, TV and brand and club sponsorship deals); a reduction or removal of the powers of local authorities to manage the number of gambling premises in their locale; and regulation that supports one of the most open and permissive online gambling markets in the world.

These have all been key contributory factors in ensuring the UK’s position as one of the most successful and profitable betting and gambling markets in the world.

This is attested to by the number of operators and affiliates posting record Q3 2017 performance figures, and which saw bet365 revenues break through the £2bn barrier for the first time.

It is entirely right and proper that the government should take a position that seeks to investigate and then address the negative impacts of gambling, ensuring that it is conducted in a manner that is ethical and socially responsible.

This is especially true given that the allowances made by previous governments were made without a full understanding of future risks, whether they be FOBTs, advertising or the ubiquity of online.

Time and experience have made the shape and form of the dangers of some forms of gambling much clearer, and both regulator and industry have made iterative changes in their social responsibility practices to address risks when they have been identified.

And not for a second is anyone suggesting that this work is complete. The opposite, in fact. Constantly developing technology, new products and changes in customer behaviour all mean that managing and mitigating risk are and will continue to be non-negotiable aspects of operating in the gambling industry. And this is the reality the world over.

Betting and gambling, whether regulated or restricted, is a sector that continues to be shaped by politics and perceptions, revenue and risk. The two are not natural bedfellows, resulting in the inevitable cycles of a period of pro-gambling sentiment (revenue and regulation) followed by anti-gambling sentiment (risk and restriction).

And so although some restricted jurisdictions look like they might move to regulation, those that are already regulated are now seeking to restrict, resulting in the beginning of the best of times for some, and the worst of times for others.

Christina Thakor-Rankin is principal consultant at 1710 Gaming, working with start-up, evolving and established operators internationally, regulators and industry groups. Her work covers all aspects of the gaming and gambling cycle, from initial research, licence and operational go-live, to new markets and opportunities, consumer engagement and experience. Her 20+ years of industry experience includes management roles at William Hill, Blue Square, Tote (Sport) and Virgin Games.