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CEO Briefing 2023 - Andrew Rhodes speech

09 November 2023Speech by Andrew Rhodes

This speech was delivered by chief executive Andrew Rhodes at the CEO Briefing on 8 November 2023.

Please note: This is the speech as drafted and may slightly differ from the delivered version.

Thank you Sarah, and thank you everyone for making the effort to join us today.

We have a larger audience this year than last year and I am very grateful for you all taking the time to attend. You will hear from several of us today as well as an opportunity for questions towards the end.

Firstly, I’d like to set out what this event is actually for. It’s perhaps the largest single gathering of the gambling industry we host, and I would like to use this event to talk to you about the year ahead, as we see it. The challenges we face, how we plan to navigate them and also how we see the environment more generally.

I also want to talk about how we want to work with the industry, especially at a time of unprecedented change, as we implement the Government’s Gambling Act Review White Paper. I will also give you my reflections, such as they are, on the ecosystem we find ourselves in at the moment.

The debate around gambling has not become an easier one. I have found myself saying a number of times how polarised different positions sometimes are. The Gambling Commission, as a regulator, should be impartial in the way we go about things. We have clear statutory objectives and responsibilities. We don’t have a commercial interest in what happens, but that doesn’t mean we ignore commercial realities.

The debate on gambling has been exceptionally hard to engage in during the past year and, as I said we would last year, we have challenged people where they have misrepresented statistics and we have sought to bring some balance and evidence to the arguments.

Everyone is entitled to their opinion, but some of what has gone on has been an unedifying sight and I am not sure is helping anyone.

However, what I am very committed to is we will have the difficult conversations and do the difficult things because that is our job. We will do that in conversation with others and by being genuinely open about what we are doing but equally open in listening to views and concerns as we make progress.

Last year I was clear that eliminating those cases of extreme harm would lead to a new and - if anything - more challenging phase – how to tackle the more difficult issues where the balance between the licencing objectives and legitimate innovation, consumer choice and fair business practice is harder to define. So I want to discuss how I see that moving forward.

And all of that comes together in how we want the relationship between us, as the regulator, and you, as operators, to be if we want to continue to keep pace on the progress we have made over the last 12 months. A much more grown-up relationship where we can be transparent about the issues that matter and collaborative in how to address them. And to that end I’ll spend a bit of time talking about where we see our relationship with you all at present and what you can expect from us going forwards as we prepare to launch a new three-year Corporate Strategy next year.

I will of course touch on our work on the Gambling Act Review and the work we’re doing in our Operations teams to provide a more effective service. Which means touching on our work with operators across our licencing, compliance and enforcement functions. But I am pleased to say that Tim Miller and Kay Roberts will be speaking later on those topics.

Of course, there will be plenty of time for your questions at the end.

My colleague Kay Roberts will be addressing our operational improvements later in a bit more detail but for now I want to return to an image I shared last year. It is an illustration – not based on real data – of what we see in our casework and where we want to get to which is a more grown-up relationship discussing the less clear-cut issues that we have to tackle.

Last year I said we are still seeing too many of the extreme cases – the top of the chart – and that this was holding us back from grappling with those more complicated and harder to solve challenges about where the right balance of risk is – in the middle.

Now I’m not going to say everything is perfect now, but twelve months on we are seeing far less of those extreme cases emerge from our casework. The industry has made progress and I want to thank the many operators in the room today and your trade bodies for having worked with the Commission to achieve this step forward.

And so that does allow us to start looking at those more complex issues. We believe an outcomes-based approach is proportionate and reasonable. We recognise that the market is diverse and one-size-fits-all solutions aren’t always best. What one operator regards as risk will differ to another’s – which makes the middle ground harder to judge. This also means consistency isn’t easy. You all represent large businesses with large, dynamic customer bases – technology can be your friend to reduce reliance on manual processes, but some human judgement is needed, especially in that middle area. So we need to establish that appropriate balance, and to do that, we need an effective and constructive relationship.

I’ll say more about what I think that relationship looks like shortly and give you my thoughts on some of the issues that we can now start to look at with you as a result. But first it would be wrong to reflect on the last year and not mention some of the other areas of progress we’ve seen.

I don’t want to steal too much of Kay’s thunder, but Kay and her team have worked extremely hard during the last year on several key areas. Kay will say more on this later, but we’ve had a clear focus on the performance within our operations delivery – namely Licencing, Compliance and Enforcement. We’re hoping this will provide better results for our communication and support for operators. We’ve also recognised that as operators raise standards we also need to assure ourselves against displacement – either by those competing on compliance or through illegal routes.

Thanks to the additional funding we have received, we have been able to invest in work to combat illegal gambling and have succeeded in disrupting and reducing illegal traffic into our market. There is a great deal more we will do in this area and I am optimistic we will soon have additional powers, thanks to the hard work of colleagues in the Commission, Department for Culture, Media and Sport (DCMS) and wider Government, which will help us in this area.

I have been misquoted many time on this topic, so let me say this once again. The risk of illegal gambling and the black market as an argument against reform of regulation is, I think, overstated, based on what we see in reality.

That does not mean there is no risk, as I have said many times. It does not mean there are no problems. I hear quite a lot of anecdotal examples from you, but we need to turn that into something actionable and I am genuinely grateful to those who have provided confidential information to us, which has helped us in this area.

I am also hopeful we will soon begin seconding people from industry into the Commission to boost our insight and expertise in this area.

However, it is worth noting that other regulators around the world are looking at this problem too and some of you are the black market in those countries. You should expect a greater degree of attention from Governments and regulators internationally, especially where there are legitimate routes to gain a licence in that country.

We are also very conscious of how the risk profile within the sector can change. The overall sector is relatively static in terms of participation, but actives are up, staking patterns have changed for some and there is displacement within the industry.

Our compliance programme is focussed on risk and we have specifically been looking at operators in tiers two and three, particularly where they may have grown rapidly. This is not because we think growth must be a bad thing, but we have seen examples of operators growing their business faster than the underpinning compliance infrastructure.

So much of the year ahead and beyond will be dominated by the implementation of the Gambling Act Review. We know the resulting White Paper took some time to come but we are now well into the consultation phases, with our first round of consultations closing last month. Our Executive lead on the Gambling Act Review, Tim Miller, will say more on this shortly and give you our forward look as to our next steps, and I am also pleased to have several colleagues from DCMS with us today.

As such, I wasn’t intending to go into detail about the consultations or next steps. I am very conscious there are deregulatory elements in the White Paper many of you will want to see delivered as a priority, as well as areas where Government wants to see different regulatory standards.

One of the things I want to talk to you about today is the very particular ecosystem we have. The Gambling Commission often comments on movements we see in the industry, what consumer research shows, what participation and prevalence tells us and no doubt a myriad of other things. What we rarely ever talk about is the ecosystem we exist within as a regulator and what we are trying to balance around us. You will be relieved to know, this is not a bid for sympathy. However, the Commission’s actions do not exist in a vacuum – far from it. There is also a strong tendency for different groups to put extra emphasis on specific requirements placed upon the Commission, which may then conflict with others. The reality is, the Commission is constantly seeking to resolve conflicting requirements and, in reality, none of these is ever meant to become dominant at the expense of others.

What do I mean by this? As an example, I see plenty of questions about the Commission’s adherence to the Regulators’ Code – a seven page document written some years ago. I also see plenty of questions about how we protect vulnerable people, based on the drafting of the Gambling Act, which created the Gambling Commission 16 years ago. The Regulators’ Code is not a long document – just seven pages, as I said. It contains a number of very sensible guiding principles for Regulators, but it is meant to be just that – a sensible set of guiding principles – it does not try to cover the exact application of regulation in all circumstances. The Code says ‘Regulators should carry out their activities in a way that supports those they regulate to comply and grow’. Some feel that puts an onus on the Commission to actively encourage the Gambling industry to grow and should also stress the benefits of gambling as a pastime.

Others refer to the licensing objective set out at the very start of the Gambling Act itself which says we must protect children and other vulnerable persons from being harmed or exploited by gambling. They feel gambling is inherently harmful and should be much more heavily restricted in order to protect people from harm. The very definition of when someone moves from making a choice, which other people may not make themselves or think is unwise, into become vulnerable or harmed is hotly debated.

Taking these two examples, depending on who you are and your view of the world, they can conflict and people will take different meanings from each. The Commission’s job is to balance the two. The Regulators’ Code stresses throughout that growth must come when the business is compliant, not instead of it. Likewise, the Gambling Act also says the Commission has a duty to ‘aim to permit’ gambling, providing it complies with the licensing objectives and the Statement of Principles and Regulators’ Code requires the Commission to take an approach to regulation which is based on risk. This does not mean ‘no risk’ or ‘zero tolerance’.

This balance requires us to make complex judgements. When someone will experience a problem with gambling, when they cross from being in control to not and when they and or others are negatively impacted is not entirely predictable or linear. Yes, we have markers of harm and we can say where associations between activities and actions increase the likelihood of harm. We know from in-depth research into problem gambling these factors were present in those who did have negative consequences from gambling – those are sometimes incredibly severe. So, between the Regulator and the industry, we have things in place that seek to manage those risks.

22.5 million people gamble in this country each year – 44 percent of the adult population. The overwhelming majority do so without any issue, but we know that some can and do experience terrible consequences. It is our collective role to balance these risks.

This is far from easy and some have very strong opinions on where the balance of this should be, ranging from relying entirely on personal choice and judgement to significant intervention and restriction from the Government. The reality is, neither of those responses is likely to work well. Our job is to strive to get the balance right between protecting those who need it and not infringing on the rights of those who do not.

That brings me to horse racing and what has become an exceptionally difficult and sometimes very bitter debate. Over the last year, I and my senior team have spent a lot of time meeting with and speaking to both senior leaders in horseracing as well as groups representing punters. I am very conscious of how many will scrutinise every word in my spoken and published speech today. Some will be looking for meaning, some to interpret and some to criticise. The conflict I mentioned just now in the balance of opinion as to what the regulator should do is writ large in horseracing and I’ve had a range of opinions expressed to me, which have been equally diverse but have become increasingly extreme in some cases. It is not the job of the Gambling Commission to consider or advise on the wider implications for any given sport – that is the role of DCMS. However, that doesn’t mean the Commission does not therefore consider what is proportionate or is indifferent. I can completely understand the passion for their sport, for their sector and this is something DCMS explicitly factored into its impact assessment.

There are people and organisations in this room today that have spoken publicly and privately about the challenges facing horseracing as a gambling product, which have nothing to do with financial risk at all. Many people have commented on the relationship between football and gambling, but we could probably agree football would still happen even if people could not gamble on it. We could debate what would happen to the overall money in the sport as a result of changes to sponsorship and so on – especially outside the Premier League, but the sport would still have significant media and audience appeal and would likely still be a massive presence. How racing innovates, attracts future audiences, addresses falling attendance numbers and provides something consumers want to bet on that competes with the massive offering they have on other sports and games, is for others and not the Commission. However, horseracing is unique in its relationship with gambling and has a critical dependency on gambling as a funding stream. If less people lose money betting on horseracing, the income into horseracing goes down. Media rights are again linked to betting, so even where racing has income that is not derived from the levy, it is nonetheless connected.

The Patterns of Play research showed us that for accounts used for horseracing bets, the most profitable 1 percent from the operators’ perspective accounted for 70.4 percent of Gross Gambling Yield (GGY), which suggests horseracing not only has a critical dependency on money lost to operators gambling anyway but relies on 70 percent of that money coming from a proportion of bettors five times smaller than other sports betting.

Alongside other markers of harm, the financial thresholds you each apply for assessing the risk of customer spend differ, but for many of you your backstop checks tend to range from the equivalent of 0.4 percent to 0.2 percent of accounts, based on annual gambling levels found in the Patterns of Play research. For later readers of this speech, I am talking about accounts that were gambling at the time and not dormant accounts. Anti-Money Laundering (AML) checks exist just beyond those levels to a greater or lesser extent, depending on the operator. These are far from the ‘low-level blanket checks’ some sought to argue have been imposed.

The current campaign from many in the horseracing industry is to petition that there should be no checks at all on how affordable someone’s gambling is on horseracing. This is a point of principle disagreement – it does not matter whether checks are frictionless or not, the point of the argument is there should be no checks at all. In short, I suppose that would mean unlimited losses being sanctioned when betting on horseracing. I think it is open to any group to say what they think should happen. As things stand today, no such checks exist for on-course bookmakers, nor are any planned. Likewise, the frictionless checks set out in the Government’s White Paper do not apply to the land-based sector at all. The call being made here is for unlimited and, quite literally, unchecked gambling losses on a sport, to support the growth and continuation of that sport.

The perennial challenge in gambling regulation, as set out in the Act, is the balance between individual choice and protecting those who are now being harmed. The Act liberalised gambling in this country and we now have one of the largest and most liberalised gambling industries in the world – certainly online. The Act is very clear in its obligation on the Regulator to aim to permit gambling. However, that is subject to the licensing objectives being satisfied, including that the vulnerable are protected – they are not intended to be an either or – they are intended to be balanced. That will be a crucial consideration for Government in the coming months.

How did we get here though? How did the Government end up writing financial risk checks into the White Paper at all? The answer is simple, in many ways. We got here because there were just too many examples of clearly unaffordable gambling taking place with little or no intervention. In common with some other sectors, the gambling industry is seen as a whole, so even if there are compliance issues not taking place in your company, if they take place elsewhere you get tarred with the same brush. The industry is very often described as a ‘whole’, despite the very obvious differences within it. These very difficult stories have become socially and politically unacceptable and despite there being an outcomes-based regime that gave the industry the ability to address this problem, it simply didn’t happen consistently. Enforcement action escalated and ultimately a line was drawn.

I worry quite a lot at how what the Government actually said and what the Commission actually consulted on has been lost in the noise of worry and disagreement. Both I and the Secretary of State have reiterated that financial risk checks would only be tested, trialled or rolled out when there are credible, practical tools available for frictionless checks. How the Commission and the industry now work together to work to deliver a solution that really does achieve the outcome Government wants, will now be critical.

Ultimately, it is Government that decides the policy direction for regulation. The Gambling Commission set out its advice as part of the Gambling Act review and the Government published its White Paper which set out the policy direction. In many areas, the Government agreed with the Commission’s advice, but not in all. The Commission is implementing what the Government has set out and before any of the White Paper consultations have been launched we have had confirmation from DCMS the consultation meets the direction and intent of the White Paper. Government will naturally respond to a range of points of view as it decides what to do.

These very difficult challenges are a major part of the ecosystem of the Gambling Commission, but for many others too. I said at this event a year ago I felt it was not for the Gambling Commission to make a moral judgement on how much someone should spend on gambling. Government said the same in the White Paper. That leaves all of us, and especially you, with a vexed question – what is the dividing line between choice and harm? Where do you pitch your risk appetite? Where does the Commission draw the line? How much is enough information in a risk-based model? These are the sorts of very difficult questions I alluded to when I spoke to you all last year.

This does take me to the ‘right to bet’ argument which is another common feature in our ecosystem. This varies from those who see this as infringed because there is some limitation placed on them by an operator for safer gambling reasons on to those who have seen their business refused. There is no legal right to bet and Government made it clear in the White Paper it does not intend to change that – the desire to gamble is not a protected characteristic. We get a lot of people who argue we should be prosecuting you for refusing to take their bets – especially when they believe they have been limited or refused because they are ‘winning punters’. We have seen an explosion in complaints about withdrawals being delayed, though much industry data shows exceptionally high proportions of withdrawals being processed very quickly. Our social media accounts, and mine personally, are littered with screengrabs of emails from operators asking for photographic verification – sometimes outside an address with ID documents held up in plain sight.

Gambling is essentially adversarial – someone gaming or betting wants to win money from the operator. In turn, the operator wants to win money off the consumer – certainly in the longer-term. It is an adversarial relationship. Some consumers resort to using the accounts or personal data of friends or relatives – I'm in plenty of Telegram groups where I see this discussed very commonly and openly – and no doubt there are other co-ordinated practices going on to tilt things to the advantage of someone.

My concern here is how transparent the reasons for delays or requests for additional information are. We have seen some practices of withdrawals being unfairly frustrated, but it is not our automatic assumption there is no reason for delay or there is some nefarious intent. However, it is by no means being made clear to consumers why they have been asked for more information and sometimes there are some very specific requirements put in place by operators. It has become a widespread assumption that requests for information are for safer gambling reasons, when this is not always the case.

This is an area we will be exploring during the coming months ahead and we will expect operators to be transparent with their customers on the reasons additional information has been requested and for those reasons to tally with what is seen in their accounts and operator policies, accepting there are some specific AML tipping off requirements to be met.

Be assured, the introduction of an Ombudsman is very likely to significantly change the ecosystem further. Over 90 percent of the complaints we receive and a very big section of our contact from consumers is not for the Gambling Commission as it was set up to be. But it is very likely to be for an Ombudsman. This will be a good thing for consumers, but I would not underestimate how this will change perceptions for the industry, Government and its regulator.

Likewise, depending on how the Government decides to implement the Statutory Levy in the future will also likely alter the ecosystem further. It will resolve some old arguments, but it will bring new forces to bear too, which we will have to adapt to.

Gambling regulation today doesn’t exist in its own vacuum, but sits within a wider context of regulation. The Financial Action Task Force (FATF) rates us very highly on our AML controls, but there are jurisdictions that have been grey-listed over concerns at the robustness of theirs. This has a serious knock-on effect in terms of how banks view them and can cause significant disruption when it comes to financing and banking – already an increasing challenge in gambling. The Government is consulting on potentially moving to a single regulator for AML. Even if there were no financial checks at all, the highest spending accounts would still be subject to AML checks and whilst I recognise there are current and emerging markets around the world who do not have the same standards we have here, much of this is really about the core importance of financial markets to the economy and the risks that AML can present to the standing of nations and financial markets.

We have also put considerable effort into working internationally with other regulators. There are many reasons for us doing this. The first is, as the largest global online gambling market, a lot of existing and emerging regulators seek to learn from our experiences – good and bad. The second is we see benefit in standards being high globally. That means anyone in or entering our market has realistic expectations of what is acceptable in the first place. For all regulators, it is also a good way of sharing experience and co-operating. Increasingly, this will be concerning operators who are licensed in multiple jurisdictions but perhaps more so co-operating to aggressively attack unlicensed gambling. The third reason is about realism. There are countries who are liberalising or regulating their markets which will naturally change the balance of the industry on a global scale. Great Britain is always likely to be a very important market, but it is of a finite size to some degree, and as new markets open up we want to ensure global standards of regulation are high, that the standards in Great Britain are secured for the future.

A year ago I set out, at a high level, how I wanted our relationship to work. There is an unavoidable and inescapable tension between the regulator and the regulated. However, that does not need to be adversarial as a point of principle.

I said last year that one of our guiding principles would be compliance at the earliest opportunity. In short, I wanted to see issues proactively resolved and for the Commission to engage quickly and early to secure that compliance.

Over the last twelve months we’ve held a regular cycle of roundtables with different operators, representing different sectors and sizes. I think these have been genuinely helpful exchanges and I hope those that have attended them think so too. They’ve allowed us to air issues in a transparent way and on occasion to improve outcomes too. We’re committed to this approach and we have some knotty things to work through in 2024.

We’re committed to getting out there and engaging with you and others as much as possible – including seeing how your operations work. We have already ramped up our engagement, with last financial year around 220 meetings, visits and events with our stakeholders, of which nearly half were with you. This financial year we’ve already clocked up about 150. Many of you are part of global businesses and we’ve sought to reach out to understand and see how those operations work as a whole.

We’ve also managed more regular engagements with some operators as we work through certain matters – so we’ve established both more and deeper conversations with many of you.

In Spring this year we held a one day Conference where we invited collaboration with operators, academics and the third sector to discuss how we improve the evidence base in gambling. It was a great success – despite snow and train cancellations! And I’m delighted to say that we will be holding a similar event next March too, looking at topics around our Evidence Gaps work, including more practical elements like the steps we can work together on to prevent illegal online gambling and our new Participation and Prevalence data too, which we continue to move forwards with as we develop them into the best possible official statistics in this space.

So the Commission is committed - where possible - to a more supportive, transparent and grown-up relationship with any operator that is committed to their compliance and open to working with us. And it’s not just me – you have some of the Exec team here – and the wider team are increasingly reaching out to help ensure we are familiar and reachable to you.

I expect us to continue to build on our level of engagement with you and the work we have done to change the tone and nature of the relationship.

Compliance is non-negotiable and having a better relationship, a more constructive mutual relationship, does not mean standards drop. It can mean, however, we navigate difficult things in a better way and that is very much my intention.

Finally, on how we want to move forward, I thought I’d give you a little update on how we’re developing our new three-year Corporate Strategy, due to be published next Spring. As a statement of intent we are baking into it a focus on communicating clearly, and building effective partnerships. This will include engaging constructively with industry to try and ensure compliance at the earliest opportunity, educational efforts, clearer guidance as well as hosting events such as this today. Much of this is not new, but what we are saying is we want to invest more in this approach to reduce the reliance on formal enforcement where we can. There is a very clear steer from the Board of Commissioners in the early drafting that transparency around compliance will be a key theme. It will (I hope) offer us, you and the public a clear framing for what we are doing and why it all connects and why it matters.

So to round up before I hand over to Tim, thank you for being here today and thank you for the progress we’ve made over the last 12 months.

As regulator and licensees we will always have our rocky times and we at the Commission will continue to take action where we see failings.

But we also want to build on the progress of recent months to further build that collaborative and transparent approach – which is why your presence here today matters.

Ultimately if we can all commit to working together it will lead to a better regulation, better outcomes and safer, fairer and crime free gambling across Great Britain.

Thank you.

Last updated: 9 November 2023

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