Online Slot Gaming - Setting New Limits

The Department for Culture, Media and Sport (“DCMS”) has announced that new limits for online slot gaming will be introduced from September 2024.

Background

Following the publication of the gambling white paper in April 2023 (“White Paper”), multiple stages of consultation have been launched by the DCMS and the Gambling Commission to test the proposals set out in the white paper and drive policy forwards.

Between 26 July and 4 October 2023, the DCMS ran a consultation on proposals for stake limits on online slot games (“Consultation”). The response to the Consultation was published on 23 February 2024 and outlines regulatory changes that will come into force in September 2024 with respect to online slot games (“Response”).

New Limits

New regulations will be introduced in September 2024 to implement the following maximum stake limits on online slot games:

• £5 per spin where the player is aged 25 and over; and
• £2 per spin where the player is aged 18 to 24.

The Response is clear that operators should view these as maximum stakes, and highlights that operators should not advertise these limits as default stakes which customers are driven towards or do anything which may lead customers to view these as stakes equivalent to safe gambling. The government will expect operators to offer customers a range of stake options falling significantly below these maximum thresholds, as they do now.

Rationale

The implementation of maximum stake limits for online slot products looks to promote the objectives set out in Chapter 1 of the White Paper, aiming to protect vulnerable players. Specifically, these changes will look to make online slot games safer by ensuring that the risk presented by a single spin is capped at a certain level.

£5 Limit

The £5 limit which will be introduced will mean that online slot games are brought in line with the maximum stake limit applicable to B1 gaming machines in land-based casinos. The Consultation put forward four options for the cap which should apply to all adults. The £5 limit was the second lowest option contained in the Consultation, which the government viewed as being the most proportionate way to balance the need to protect players from gambling related harms whilst ensuring that operators do not suffer significant financial setbacks.

This limit will apply to all slot games offered by licensed operators, and operators will under no circumstances be allowed to offer higher stakes even if customers can evidence affordability or their lack of vulnerability.

£2 Limit

The £2 limit, which will be applied to 18-24 year olds, was the lowest limit put forward in the Consultation. The Response refers to a weight of evidence which indicates that young adults aged 18-24 are associated with higher rates of gambling harm. Amongst other factors, the fact that this group have low disposable incomes and lower risk perception were cited as issues which pushed the government towards a lower limit. This may be indicative of the government’s focus on protecting young adults and may provide a sense of what is to come with future regulatory change in other areas.

Impact

Whilst this decision is unlikely to come as a surprise to operators, it is less likely to be universally welcomed. The customer protection rationale of limiting stakes for this product category would appear to be clear, as high frequency slots with no stake limits obviously present a higher potential to cause harm to those at risk. However, those staking at higher limits include not only those at risk, but also those who can genuinely afford it and are entitled, in the Government’s own words, to spend their money on gambling. The ‘black market’ argument against overly restrictive regulation of the gambling industry has been made many times, and in this case there does seem to be a real risk that those regularly using higher stakes slots (both those at risk and those who can afford it) may move to the unregulated market, where they will not be subject to the consumer protection measures that those accessing the British licensed market are.

Whilst one can appreciate that equivalent stake limits for online and land-based slot games sound attractive and logical from a political perspective, player data on spending and potentially at risk behaviour is far more readily available to online operators as compared with offline operators. Online operators already (and over recent years much more consistently and effectively) use such data to afford consumers greater protection, and are soon to be compelled by regulation to do so in an increasingly standardised way, as (we assume) financial risk checks at specific levels will be imposed in place of the less standardised affordability checks which have effectively been imposed through years of Gambling Commission enforcement.

There is, therefore, a question as to whether the new stake limits on online slots limits constitute a "belt and braces" approach which - even if they do succeed in making the regulated market safer - could nevertheless undermine the efficacy of the proposals from an outcomes perspective. Pushing more online players to the unregulated market (both those who are at risk and those who can safely gamble at higher stakes) would be a less than ideal outcome from both a customer protection and treasury perspective.

In addition, those operators who cater to ‘high value’ customers are likely to suffer a greater hit on revenues than those with a broader customer base. This is likely to lead to more consolidation in the market, and potentially more operators giving up their British licences altogether, in our view.

Next steps

Draft regulations will now be presented to parliament and a final stage impact assessment of these changes will be published in due course. The Response indicates that operators will be given 6 weeks to implement the £5 limit following the passing of legislation, followed by an additional 6 weeks to implement the £2 limit. Whilst the government will therefore afford operators some opportunity to develop any technical solutions which may be required for age-based limits, operators should take action now to ensure they are prepared for these regulatory changes, which will occur later this year.

In the meantime, there are several other consultations which have now closed and the response is awaited. This includes:

• the DCMS consultation on measures relating to the land-based gambling sector, which closed in October 2023;
• the DCMS consultation on a statutory levy to apply to gambling operators, which closed in December 2023; and
• two Gambling Commission consultations on changes to the LCCP and RTS, one of which closed on 18 October 2023 and the other on 21 February 2024. The Gambling Commission has indicated responses will be issued in March 2024 and have already publicised that a pilot financial risk check programme will be launched in the near future.

The Gambling Commission consultation on proposed changes to financial penalties and financial key event reporting will also close next month.

We will continue to report on the outcomes to these consultations and other news relating to regulatory changes in the gambling industry when the information becomes available.