Consultation response
Autumn 2023 consultation – Proposed changes to LCCP and RTS: Consultation Response
This response sets out our position in relation to the consultation on the proposed changes to LCCP and Remote Gambling and Software Technical Standards.
Contents
- Executive summary
- Summary of topics
- Customer-led tools - Consultation Response
- Improved transparency on customer funds in the event of insolvency - Consultation Response
- Removing obsolete Gambling Commission requirements due to the government's upcoming statutory levy - Consultation Response
- Evaluating the impact of relevant changes
- Annex
Summary of responses and our position to the consultation on improved transparency on customer funds in the event of insolvency
We sought views on our proposal that gambling businesses should actively remind customers if their funds are not protected in the event of insolvency.
We proposed 2 options for the consultation – option A would make this subject to the value of funds reaching a threshold amount, and option B would not include a threshold. Both options would require a reminder to be sent to the customer once every 6 months (although option A would be subject to the threshold amount being reached), and for that reminder to be acknowledged by the customer before being permitted to use the funds for gambling.
Consultation questions
To what extent do you agree with the Gambling Commission’s (the Commission's) proposal to add a specific requirement to the Licence Conditions and Codes of Practice (LCCP), which requires gambling licensees with a ‘not protected’ rating to remind its customers that their funds are not protected in the event of insolvency?
If the proposal were to be adopted, which option do you prefer? Option A (reminder to customers when value of funds reaches a threshold amount) or Option B (reminder sent to all customers irrespective of the value of funds held)?
With regard to option A only, to what extent do you agree with the Commission’s proposal to make this subject to a threshold amount for the value of funds held which the customer must reach before the gambling licensee must send the reminder?
If a threshold amount were to be applied, please indicate which of the suggested values you consider to be appropriate: £100, £250, £500 or £1,000?
To what extent do you agree with the Commission’s proposal to ensure gambling licensees send a reminder to consumers no more than once every 6 months that their funds are not protected when the value reaches the threshold amount?
To what extent do you agree with the Commission’s proposal to require gambling licensees to ensure customers acknowledge a reminder before being permitted to gamble?
Do you have any comments about the application of this requirement to non-remote gambling licensees and/or the likely scale of impact?
Do you have any comments about implementation issues, timelines and practicalities?
Please provide an estimate of the direct costs associated with implementing these proposals.
Do you have any evidence or information which might assist the Commission in considering any equalities impacts, within the meaning of section 149 of the Equality Act 2010 (opens in new tab) in the context of any proposal considered in this section of the consultation?
Respondents’ views
The majority of respondents agreed with the proposal. For example, some respondents commented that the proposal supported higher industry standards and aided customer choice between gambling licensees.
However, society lotteries and/or External Lottery Managers (ELMs) requested an exemption from the requirement. One trade body, on behalf of its members, requested an exemption from the requirement for land-based casinos (or for the provision of a reasonable alternative). Another respondent, representing a charity/non-profit, suggested that the reminder could give rise to unintended consequences (that is, the reminder might inadvertently prompt the recipient to gamble).
More respondents favoured option B (where a reminder would be sent to all customers irrespective of the value of funds held), although some were in favour of option A (a reminder would only be sent out to customers when the value of the funds reached a threshold amount). Society lotteries and/or ELMs favoured option A (threshold approach), whereas land-based casinos favoured option B (no threshold).
If a threshold were to apply, more respondents were in favour of the lowest threshold of £100. The next most favoured threshold was £500 but many of these respondents were society lotteries and/or ELMs.
Responses were divided for the proposal for licensees to remind to customers once every six months that their funds are not protected. Many of those who disagreed with this proposal were society lotteries and/or ELMs.
The majority of respondents agreed with the proposal for an acknowledgement. The main issues against the proposal were that it would be disruptive to players and that it would be logistically difficult for non-remote licensees to implement (particularly society lotteries and/or ELMs). Some commented that it should be less frequent (for example, annual) or more frequent (for example, monthly), others thought it was about right.
In terms of how the proposal would impact non-remote operators, some respondents indicated that the overall proposal would be logistically difficult to implement and could have a substantial impact (particularly for society lotteries and/or ELMs).
Equalities impact assessment
We received 2 responses to the consultation question inviting respondents to provide evidence or information which may assist us in considering any equalities impacts in the context of this consultation proposal. One respondent raised issues of potential vulnerabilities of different groups more generally, in relation to problem gambling and gambling harm. The other respondent (a member of the public) considered that those with disabilities would benefit from the creation of a trust account into which winnings could be paid, however this was in relation to tax laws and not in relation to the consultation topic being considered.
Our position
We have considered all of the responses to the consultation and have decided to proceed with our proposal to improve the transparency requirements for customer funds. We have also decided to implement option B (the no threshold approach). This change to the LCCP will apply to all Gambling Act 2005 operating licences1, apart from society lotteries and/or ELMs (not including licensees providing high-frequency lotteries and instant win games). The change will only impact those licensees who have a ‘not protected’ rating. An alternative route to complying with the new requirement would be to offer a ‘medium’ or ‘high’ level of protection.
Society lotteries and/or ELMs
In general, society lottery respondents and/or ELMs did not agree with the proposal and requested an exemption. They raised the following points:
It would be an undue administrative burden, where non-remote society lotteries would need to use email or post - We agree with the sector representations. This is potentially the case for non-remote society lotteries and/or ELMs. It may not be proportionate for non-remote society lotteries to send reminders by post or email to customers. It is not possible to apply the requirement to only non-remote society lotteries as the same lottery may consist of remote and non-remote players. Some players may even enter the same lottery on a remote and non-remote basis.
Many players would not respond (that is, provide the required acknowledgement) - We agree with sector representations. It is foreseeable that many players may not respond or that this would be too slow to be workable (particularly via post).
Many players see their entry as a donation - On balance we agree with sector representations. A respondent cited Commission evidence which says 55 percent of charity lottery and/or other lottery players said they gambled to help good causes.
It would increase costs, therefore reducing funds to good causes, which would have a significant impact on the sector - Respondents have provided evidence to support their concerns. Although it is difficult for us to assess the full validity of costs presented, the costs do appear to be significant and could have an impact on the sector. For example:
- one respondent calculated the cost to be £30k per mailing, another calculated it to be £63,750
- two others suggested that each notification might cost £5 labour administration and £2 stationery and postage
- another commented that the cost would relate to direct financial costs but also the consequential loss of player drop-off or attrition
- the same respondent also stated that it would be complex and difficult to calculate costs but where mailings are needed, this is expected to be very significant (“potentially crippling”) and would not be a viable option for most charities.
The proposed requirement is disproportionate - On balance we agree with sector representations. The proposal as drafted could be disproportionate for the sector when considering the risk to consumers. The amounts held per customer will be small, and a significant proportion of the notifications would need to be sent by post. There is also research to suggest that many consumers no longer consider the money to belong to them
There are issues around definitions where the terminology does not fit the sector - Although some of these issues could be resolved, we broadly agree with sector representations.
Some consumers may find the reminder annoying and/or confusing, or they may become unnecessarily concerned about insolvency - We agree with sector representations that in this specific circumstance, including the mailing of reminders, the approach may not be welcomed by consumers. We realise this may also be an issue which applies to other sectors, but posting of reminders (as opposed to the use of pop ups, notifications or emails) could accentuate this for society lotteries and/or ELMs.
We have decided to grant an exemption for the following reasons.
We consider that the majority of society lotteries and ELMs do not hold customer funds due to their business models. Although we do not hold specific data in relation to this, our view is supported by our knowledge of the sector and responses received during the consultation.
Proportionality - we take our duties to consider impact and the Regulators’ Code seriously, and the requirement may have disproportionate impact on the lottery sector, without bringing significant consumer benefits.
Consumer reaction - we agree with the representations from respondents that the improved transparency if implemented may drive some consumer frustration and/or confusion amongst a significant proportion of customers who may receive the notifications (particularly via post).
However, high-frequency lotteries and instant win lotteries will not be exempt from the code provision as these are much more likely to involve funds being held on account. There is a precedent already set within LCCP and Remote Technical Standards to provide similar exemptions (for example, Social Responsibility Code 3.4.3 - Remote customer interaction). No consultation responses requested an exemption for high-frequency lotteries and the rationale for an exemption set out above for this type of lottery does not apply. Licensees of both high-frequency lotteries and instant win games would be required to improve the transparency to consumers where there is no protection. Where funds from high-frequency lotteries and instant wins are co-mingled with funds from non-high frequency lotteries, licensees could choose to develop systems to separate out these funds or they could choose to apply the proposed requirement to all lottery products that they offer to customers. Where licensees already have a single wallet for high frequency lotteries and/or instant wins, they could develop a dual wallet model. Alternatively, they could obtain a level of protection for their customers. Taking a risk-based approach, we consider the range of options open to these operators provides reasonable and proportionate routes to compliance.
Land-based casinos
One trade body, on behalf of its members, requested an exemption from the requirement for land-based casinos (or for the provision of a reasonable alternative), on the grounds of logistical impracticalities. For example, the respondent states that "many land-based casinos often have less direct contact methods with their customers than remote operators and would therefore find it difficult to notify customers remotely at the required frequency".
However, given that licensees are holding funds for customers, and are required to establish and verify the identity of their customers for anti-money laundering purposes, licensees should already hold current residential addresses for those customers which could be used for the proposed communication if required. Further, we consider that it would be reasonable and proportionate for licensees to obtain customer email addresses in addition to postal addresses, where available, to assist with sending the proposed communication.
An alternative would be for the sector, or individual licensees, to choose to offer some protection of the funds that would avoid the need to provide notifications in a manner which they consider to be difficult to implement.
We have decided not to exempt land-based casinos from the requirement. Although we do not hold data on the range of funds held, it appears reasonable to assume that, due to the nature of the casino sector, the amounts held per customer have the potential to be significant and more than those held per customer for society lotteries and/or ELMs (who are exempt from the proposed requirement). As a result, the potential risk to consumers of land-based casinos could be greater and therefore the regulatory change is more proportionate than for society lotteries and/or ELMs.
Unintended consequences
Although supportive of the overall proposal, one respondent representing a charity and/or non-profit suggested that the reminder could act, to the recipient, as an inadvertent prompt to gamble. They advised caution about the language and messages used in the reminder. Having considered this issue, we have decided that if we receive evidence of any issues arising from implementation of the new requirement (such as via consumer complaints), the Commission could consider issuing additional information to licensees or consider making the LCCP provision more prescriptive.
We do not foresee any issues around how the reminder may interact with self-exclusion or gambling management tools. If a customer has self-excluded, the licensee must close the customer’s account and therefore the customer will not receive the proposed reminder. If a customer has elected to have ‘time-out’ for six weeks, it would be possible that the customer could receive the reminder during that time, but in any event would not be permitted by the licensee to gamble until the end of the time-out period.
Construction of the requirement
In relation to the construction of the requirement, we have considered:
- whether to introduce a threshold at which increased notification would be required
- frequency of notifications
- whether licensees must require an acknowledgement from the customer before permitting them to use the funds to gamble.
Whether to introduce a threshold at which increased notification would be required
More respondents favoured option B, where a reminder would be sent to all customers irrespective of the value of funds held, though there were variations by type of respondent. Although society lotteries and ELMs favoured option A (the threshold approach), they are to be exempt from the proposal.
Option A (the threshold approach) could represent a more targeted and risk-based approach. As there would be fewer reminders (as they would only be sent to those who hit the threshold), this option would be less disruptive to the customer journey (if consumers were required to acknowledge receipt of the information before being permitted to gamble). However, there may be challenges to setting an appropriate threshold level, which can be personal to the customer. Amounts held may fluctuate significantly, meaning that the amount held could increase but the customer does not receive messaging to improve transparency of the level of protection rating. There could be long gaps between reminders, and a risk of error (for example, a gambling licensee could, in error, omit to send a reminder to some customers who should receive a reminder). It may also be more complex and onerous for licensees to implement, particularly for smaller licensees who may have to develop new systems to comply with a threshold approach (which may be expensive). Gambling licensees could still choose to issue reminders to all customers even if a threshold is set, unless we amend the provision wording to expressly prohibit this (which we consider to be unnecessary and disproportionate).
Option B (the no threshold approach) has the advantage of being a uniform approach would mean that all customers should be made aware irrespective of the value of funds held (avoiding what one respondent referred to as ‘economic discrimination’). It avoids the need to set a threshold at an appropriate level, which can be personal. It provides a greater level of transparency, enabling more informed decision making. It would also be a less complex and onerous process for licensees to issue notifications to all customers who hold customer funds. It could be a cheaper option for some licensees to implement (particularly smaller licensees, who may have to develop new systems to implement a threshold requirement). On the other hand, this option is a less targeted and less risk-based approach, which could be more disruptive to the customer journey (if customers are required to acknowledge information sent by the gambling licensee before being permitted to gamble). This could be a more expensive approach for some gambling licensees (for example, those that already have the technical systems needed to deliver a threshold approach so no and/or minimal development would be required) as they would have to send reminders to all customers. It could be considered to be seen as interfering with personal choice and/or unnecessary.
Having considered the advantages and disadvantages of each policy option, along with the consultation responses, we decided on option B (the no threshold approach). It provides a uniform approach which means that all customers should be made aware irrespective of the value of funds held. This, in turn, provides a greater degree of transparency than option A. It is a less complex and onerous process for licensees to issue notifications to all customers who hold customer funds, particularly for smaller licensees who may need to develop systems to comply with the requirement (and could, therefore, be considered to be a more proportionate approach).
The new requirement will only apply to customers where the licensee is holding funds for that customer.
In line with existing Licence Condition 4.2.1, the gambling licensee must ensure that the information is provided in writing. It would be up to the gambling licensee to determine the appropriate channel for this information (for example, through using a pop-up message on its website, sending an email etc). Information provided to customers should be clear and must include the value of customer funds held as at the date of the reminder.
Frequency of notifications
It is important that messages are effective and easily understood, and, if sent too frequently, the customer may 'tune out' of the message being delivered. This is why we proposed a six-monthly frequency for both options.
Consultation respondents did not provide any comments on any issues or practicalities on this aspect for option B. Therefore, we have decided to proceed with a six-monthly frequency. We consider it to be a proportionate, risk-based approach which strikes a balance between protecting against communication fatigue and/or annoyance versus ensuring a greater level of transparency to consumers.
Whether licensees must require an acknowledgement from the customer before permitting them to use the funds to gamble
More respondents agreed with the proposal to require gambling licensees to ensure customers acknowledge a reminder before being permitted to gamble, several noting that they considered this requirement to be consistent with the overall proposal. Many of those who disagreed were from the society lottery sector who are to be exempt from the requirement.
An advantage of requiring an acknowledgement is that it is more likely to ensure that customers review information about the 'not protected' rating, providing them with an opportunity to decide whether to withdraw funds and/or choose to use a licensee with a 'medium' or 'high' level of protection. Requiring an acknowledgement is also consistent with the existing framework in Licence Condition 4.2.1, as existing paragraph 2 requires licensees to provide certain information to customers in writing in a manner which requires the customer to acknowledge receipt of the information and does not permit the customer to use the funds for gambling until they have done so. Disadvantages of an acknowledgement include: it could be disruptive to the customer journey; it could cause communication fatigue or complaints; and customers may still not read the information properly or consider the implications, despite being required to provide an acknowledgement.
We decided that the new provision will require licensees to obtain an acknowledgement from the customer before permitting them to gamble. It is an important part of the proposal, which ensures that customers provide confirmation that they are content with the arrangements in place. It is consistent with the overall proposal which is designed to aid a greater level of transparency to customers.
Equalities impact assessment
We are committed to giving consideration to potential equalities impacts, having regard to the need to eliminate discrimination, advance equality of opportunity and foster good relations between those who share a protected characteristic and those who do not.
Having taken into account the consultation responses, our position remains the same, which is that our assessment is that the proposals do not present a negative impact on the protected characteristics stated within the Equality Act 2010, and they do not contribute towards unlawful discrimination, harassment or victimisation and/or other conduct prohibited by the Act.
Business impact
Having regard to consultation responses, those impacted the most are likely be land-based casinos (where, for reasons already given, we expect the overall impact and cost to be relatively low and proportionate to the risk).
We have also considered any impact on land-based bingo. According to a consultation response from a trade body, customer funds are predominantly held on tablets (called electronic gaming terminals (EBTs)) used for playing bingo. "EBTs already have a requirement to display to customers the protected status of any funds. This occurs at the first point of log in for each new account, and the customer is asked to accept [the status] in order to progress [to play bingo]. A 6-month reminder can be triggered quite easily for tablets used in licensed bingo premises." In terms of direct costs associated with implementing the proposal, this "[D]epends on EBT functionality across all operators but the majority of EBTs in bingo clubs should already be enabled." Therefore, we expect the impact of the proposal to be largely mitigated by the use of EBTs and existing functionality.
Smaller licensees may also be impacted if they need to develop new systems to comply with the new requirement.
Final wording
This requirement will come into force on 31 October 2025.
Applies to: All operating licences, except gaming machine technical, gambling software, host, ancillary* remote bingo and ancillary remote casino licences.
Paragraph 3 does not apply to any lottery licences except where the holder of which provides facilities for participation in instant win 1 or high frequency2 lotteries.
Licence Condition 4.2.1 – Disclosure to customers
- Licensees who hold customer funds must set out clearly in the terms and conditions under which they provide facilities for gambling information about whether customer funds are protected in the event of insolvency, the level of such protection and the method by which this is achieved.
- Such information must be according to such rating system and in such form the Commission may from time to time specify. It must be provided in writing to each customer, in a manner which requires the customer to acknowledge receipt of the information and does not permit the customer to utilise the funds for gambling until they have done so, both on the first occasion on which the customer deposits funds and on the occasion of any subsequent deposit which is the first since a change in the licensee’s terms in relation to protection of such funds.
- Where the licensee has selected a ‘not protected’ rating (as set out in the rating system specified by the Commission), it must remind the customer, once every six months, that their funds are not protected in the event of insolvency. The reminder must refer to the value of funds held for the customer. The licensee must require the customer to acknowledge receipt of the information and must not permit the customer to utilise the funds for gambling until they have done so.
- In this condition 'customer funds' means the aggregate value of funds held to the credit of customers including, without limitation:
- cleared funds deposited with the licensee by customers to provide stakes in, or to meet participation fees in respect of, future gambling;
- winnings or prizes which the customer has chosen to leave on deposit with the licensee or for which the licensee has yet to account to the customer; and
- any crystallised but as yet unpaid loyalty or other bonuses, in each case irrespective of whether the licensee is a party to the gambling contract.
1 An instant win lottery is defined as "A lottery in which every draw takes place either before, or at the point of, purchase of tickets by participants in the lottery" (RTS).
2 A high frequency lottery is defined as "A lottery in which any draw takes place less than one hour after a draw in a previous lottery promoted on behalf of the same non-commercial society or local authority or as part of the same multiple lottery scheme." (Remote gambling and software technical standards (RTS)).
References
1 Except gaming machine technical, gambling software, host, ancillary remote bingo and ancillary remote casino licences.
Last updated: 4 February 2025
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