Shares in the UK-listed gambling companies took a sharp dive on Monday 4 November 2019 after the release of a report on harm-related gambling from the All-Party Parliamentary Group (APPG).

According to The Guardian, the report echoes the Labour Party’s call for the Gambling Act 2005 to be replaced, dismissing the exiting law as “analogue legislation in a digital age”, ill-suited to regulating the multi-billion pound UK e-gaming sector.

This stance is a little surprising when the 2005 Act was brought into being by a previous Labour Government specifically because of the internet revolution that did not exist when the 1963 Gambling Act was written.

The 2005 Gambling Act also gave powers to the regulator, the Gambling Commission, to adjust to changing circumstances without recourse to Parliament.

The APPG recommendations include:
(1) A £2 stake limit on online slot machines.
(2) An end to betting by credit card.
(3) Restrictions on “VIP” accounts.
(4) An investigation into non-disclosure agreements.

A spokesman for the Gambling Commission said: “We are disappointed that this report has been released before we have been given the chance to give evidence.”

“The report does not reflect our considerable action and progress on most of the areas of concern set out in the report and we look forward to being given the chance to outline that work to the APPG.”

GVC Holdings’ (Ladbrokes, Coral) shares fell from 897 on 1 November to 796 on the 4 November – an eleven percent fall.

The report was introduced by APPG chair Caroline Harris, Labour MP for Swansea East: “We intend to go after the online companies just like we did with the fixed odds betting terminals”.

It would be pointless for the industry to seek support from the Conservatives – the report has the full approval of Iain Duncan Smith MP.

What is the likely outcome from the publication of the report?

Given that the previous report called for a £2 stake on FOBTs, the DDCMS will surely consider the recommendations of this new report. There are several competing factors to be considered:

(1) The FOBT stake has caused betting shops to close – around 1,000 so far based on reports from betting shop supplier SIS.
(2) Provisional figures from HMRC show that MGD has fallen since the new regime began in April 2019.
(3) But the decline in MGD seems to have been offset by the increased rate of RGD (21%). This was always the Treasury’s intention.
(4) Restricting online gaming stakes could lower RGD take, which would negate its ability to offset the lower MGD. The Treasury’s tax revenues would be a net loser.
(5) Would further tax rises help the situation or worsen it?

The DDCMS has a few options:

(1) Consider the findings and consult with the Gambling Commission and Treasury. The Gambling Commission is likely to say that progress has been made by the e-gaming companies, the report is premature and that the findings are based on the past, not the present. The Treasury will point to the Government’s spending plans, the limited scope for gambling tax increases (that will actually increase tax take over the long term). It will wish to maintain the status quo. Much will depend on the view of the new minister for gambling at DDCMS after the December 2019 election.

(2) If the minister is persuaded by the arguments for more control, the share price falls seen in November will be justified. Indeed, they are likely to accelerate. A £2 limit on slots will have far reaching implications. The creep will continue. First they came for the FOBTs, then it was the online slots because there was now a mismatch between retail and online – why not sports bets, table games, God forbid even horserace bets.

(3) The DDCMS is likely to enter a period of consultation with the industry finally pressing the self-destruct button.

There will be consequences -intended and otherwise – from further restrictions on stakes. A lot will depend on which party, or parties – forms the next government after 12 December. No party can be said to be pro-gambling, so it will be a case of which is the least bad in its stance on UK gambling. All options seem to be promising more government spending, which requires tax revenues and borrowing.