Ever since the legalization of online gambling in the early 2000s, the UK has been a haven for online casino companies. With a ravenous domestic market, most online casinos experienced unbridled growth for more than a decade. Even the worst effects of the 2008/09 recession could not cast a pall on the online casino sector for too long in the UK.
But just as it happens in most free markets, massive expansion has come with its own set of problems. Once it swells beyond a certain point, the negatives start to outweigh the positives, and regulators are forced to react.
We can see this happening right now in China, where the government allowed online lenders far too much freedom in the early days of mobile internet. Now, with increasing cases of fraud, defaults, and bankruptcies, the Beijing government was forced to do a massive crackdown on the P2P lending markets in China.
The UK Gambling Commission too is in crackdown mode
As the ultimate authority on the gambling industry in the United Kingdom, the Gambling Commission wields enormous power. But in the last couple of decades, it had largely allowed the industry to function with freedom, within the basic limits set by the gambling laws in the country.
But since 2018, the Commission has changed its stance on several issues significantly. The most important of these is the one related to player verification. Based on the new rules, online casinos will have to verify a player’s age before they allow him/her to do virtually anything and everything on the website, including:
- Depositing money
- Placing real money bets
- Or even playing games for fun (no cash)
As you can see, these steps are pretty drastic in nature, given the fact that you can do at two of these three things at most online casinos before completing the Know Your Customer (KYC) verification process.
The casinos will also have to ensure that they seek all the requisite information and documentation from the player at the first instance. Customers have to be informed of all the IDs and documents required before they start gambling.
The crackdown is already taking a toll
The Gambling Commission has already inspected over 120 different operators working in the online casino market in the country. Of these, only 34 were found to be largely compliant with the regulations. The rest were asked to make changes or face the consequences.
Since the new rules came into effect a year ago, the Commission has fined several operators to the tune of £19 million, as of June 2019. Operators like Daub Alderney, InTouch Games, Betit, and MT Secure Trade were all fined for not maintaining the required standards related to player verification and money laundering.
Such has been the tumult caused by the Gambling Commission that several operators have taken the drastic step of leaving the UK market altogether. Dafabet, a big casino brand with sponsorship deals in the Premier League, was one of the early casualties in 2018.
And they are not the only ones. Jackpotjoy, owner of the casino brands Vera&John and InterCasino will cease all UK operations from September 2019. Others, like the Malta-based Kindred Group, are reducing the number of casino brands on offer in the UK
And these are just the big-name brands we are talking about. If the big guns cannot deal with the hit to profitability caused by the increasing cost of compliance, how can the smaller operators survive? It may not be long before a list like this only shows your standard behemoths like Bet365 and Ladbrokes still offering bonuses and casino games in the UK.
Why the UK Gambling Commission is doing this
As the UK gambling market has grown, it has led to a massive increase in the number of gamblers. Predictably, the number of gambling addicts and problem gamblers also increase, based on the simple law of averages.
Easy access to gambling sites has also raised the issue of underage gambling. Online casinos are caught between regulatory requirements and player demands. Virtually all players want to start gambling as soon as they create an account.
And due to intense competition in the market, many casinos allow players access to games after a basic registration process. Earlier, the rules gave the casinos 72 hours to verify the player’s age and other details.
This had several implications – children could easily open an account and play slots for free, or real cash if they had a credit card, within those 72 hours. Problem gamblers whose names are on the exclusion list could also end up gaining access to real money gambling games.
With increasing pressure from the media, public, and anti-gambling advocacy groups, it was quite clear that the Gambling Commission had no option but to react.
How effective will the new regulations be?
The UKGC is trying to kill multiple birds with a single stone here. By making it mandatory for online casinos to complete full verification KYC before allowing players in, they will achieve the following:
- Prevent children from having any access to gambling, even slots for fun play
- Make it harder for problem gamblers to access casinos online
- Reduce the number of customer complaints related to delay in withdrawals
That last point is related to a tactic commonly used by some casinos to delay payment of winnings to players. When a player sends a withdrawal request, these casinos use the stalling tactic of asking for more KYC documents. The new rules have been drafted specifically to prevent casinos from indulging in this again.
And on top of everything, the Commission is also backing the rules with increased scrutiny and oversight. There is no doubt that the recent actions have had a definite impact – operators are rattled by the magnitude of fines and the increased oversight.
What are the long-term implications?
The changes were necessary because the status quo was giving online casinos a bad reputation in society. That can have serious consequences in the long term, especially if more politicians are persuaded towards anti-gambling legislation.
Most of the big casino brands have fully cooperated with the Gambling Commission on these changes precisely because of this reason. They have even increased contributions to gambling charities and enacted a voluntary ban on gambling ads during live sports telecasts.
There will undoubtedly be some short term pains for the online casino industry in the UK due to the recent changes. But the long term outlook is still very bright, simply because the demand is always there. Some of the smaller casino brands will undoubtedly suffer, but if you think that this is the beginning of the end for online casinos in the UK, then think again!