Paul Sculpher & Melanie Ellis: A Sisyphean task
Regular Gambling Insider columnist Paul Sculpher, Director of GRS Recruitment, returns for our September/October issue – this time joined by Melanie Ellis of Northridge Law LLP.
With the semi-mythical White Paper finally materialising, there have been more than enough opinion pieces on its contents. There are a number of potentially drawn-out consultation processes in play, so it’s safe to say there will a variety of forecast outcomes. Personally, I tend to view these in the same light as the many, many incorrect predictions about the appearance date of the paper itself. In other words, let’s wait and see.
In the meantime, it’s interesting to think about how the law and its interpretation has shaped how gaming has developed in the UK. Some would tell you that the 2005 Gambling Act was a poorly drafted piece of legislation, but it’s also worth reflecting on the level of scrutiny aimed at the detail by operators keen to gain an edge.
The history of betting shop workarounds can perhaps be traced back to the advent of the National Lottery in 1994. Under the 1968 Act, bookmakers risked losing their permit if they offered bets on the outcome of the lottery draw, but were nevertheless facing the loss of regular custom to the new gambling opportunity presented by the lottery. Undeterred, bookmakers began offering bets on the outcome of Ireland’s National Lottery and later devised the concept of betting on their own draw of six numbers between 1 and 49.
A group of operators set up a company, 49s, to run the draw (it involved the mechanical drawing of balls in a similar way to the National Lottery) and it was televised in betting shops across the country. Camelot sought to challenge the legality of the scheme, bringing a private prosecution against the bookmakers, but this was ultimately unsuccessful. The concept was now established that a bet can be made on a draw of random numbers and that such a bet did not amount to a lottery.
When Fixed-odds betting terminals (FOBT) began to appear in the UK, it was pretty much as simple as someone saying to themselves “what’s the difference between betting on a horse in a 37-runner race and betting on one of 37 numbers on a wheel?” The previous legal acceptance of betting on a basic draw of numbers facilitated that thought process. Just like that, the face of betting shops and the national conversation about gambling changed forever. We all have our own opinions about how well they fitted into the legislative structure of the industry at the time, but their genesis speaks to the entrepreneurial approachfrom operators.
Fast forward a little further to around 2005, when “Section 21” and “Section 16” machines appeared on the scene. These machines fell outside the definition of gaming machines because the RNG (random number generator) was located outside of the machine itself and offered a maximum stake of £2 ($2.57) and maximum prize of £25. Again, you’d argue the spirit of the legislation was to limit stakes and prizes on games that looked like slot machines, but nobody foresaw the technology being able to cope with 20 simultaneous games.
Through that omission, it became possible for these machines to doubly swerve around the law by offering 20 simultaneous games of prize bingo – with the prize being cash – at once, for a £500 top prize. Of course, the law ended up having to adapt to try to get ahead of the evolving situation on the ground, but with inspiration taking seconds and legal change taking months if not years, there’s only ever one winner.
““Trying to cover every base when you know some of the sharpest minds in the industry will ferret in the cracks of the legislation must feel a tad Sisyphean””
The 2005 Act formalised the status of these machine types through its definition of a gaming machine, which includes any machine offering a game that has its result determined by computer, or which has images generated by computer to represent a real or imaginary game, race or any other event or process. Section 16 and 21 machines were reclassified as category B3 gaming machines and FOBTs as B2 gaming machines.
Putting oneself in the position of the people who will eventually draft the law is a scary prospect. Trying to cover every base when you know some of the sharpest minds in the industry will ferret in the cracks of the legislation must feel a tad Sisyphean – even in the gap between writing the law and it being enacted, some parts of it will be either obsolete, vulnerable to a workaround or both. Simply think back to when arcades were only allowed four higher-prize slots per licence and legislators must have sat back, pleased with their work. Smug mode was probably short lived, however, when some operators simply subdivided existinglarge properties into, say, four smaller ones, to offer 16 slots in what was essentially the same unit (while respecting mandatorypremises licence conditions, planning, fire safety etc etc).
Online gambling also started life as something of a workaround. It had always been lawful for licensed bookmakers to take bets over the telephone so, in the 1990s when computers with internet connections began to become commonplace, they took advantage of the ability to accept bets remotely in a new way. New operators began to apply for bookmakers’ permits simply to enable them to offer online betting.
Online casinos presented a greater challenge. Operators of these sites could not be located in Great Britain without violating the Gaming Act 1968 because it was a requirement that persons participating in gaming offered under a 1968 licence were present on the premises. Eventually, the Gaming Board for Great Britain (the predecessor of the Gambling Commission) accepted that it was not illegal for British customers to gamble on unlicensed offshore websites from their own home, provided advertising restrictions in the 1968 Act were complied with.
The 2005 Act originally left this loophole open – provided operators located their key equipment in an EEA or “white list” jurisdiction, they were free to continue to provide services and advertise to customers in Great Britain. This left a significant amount of potential tax revenue offshore, as well as leaving the Gambling Commission unable to impose regulatory requirements on the majority of operators servicing British customers. It is perhaps surprising that it took until 2014 for the Government to introduce “point of consumption” licensing.
Looking ahead to the implementation of the White Paper’s proposals, a key point for the legislators to get right will be the definition of online slots games, for the purposes of applying the stake limit (wherever that ends up falling between £2 and £15).
The Remote Technical Standards currently define slots as “casino games of a reel-based type (including games that have non-traditional reels.)” Reel-based games have an enduring popularity but a stake limit at the lower end of the potential range will create a high incentive to develop games of a similar nature to slots, while not including reels or “non-traditional reels.”
Whatever the result of the consultation process, razor sharp minds will instantly be looking to determine any weak point in the legislation to get the very best angle on the embryonic law. Watch this space...
Credit for this article goes to Gambling Insider.
