BGO ruling a warning of things to come

A major operator fine from the British Gambling Commission has felt like a long time coming, and yet it was still something of a shock when it arrived on a quiet Tuesday in May. But BGO’s £300,000 beating from the end-level boss that is the Gambling Commission should not be looked at in isolation. This was a very loud and clear warning shot from the Commission and there is every expectation more is to follow.

We’ve heard from several sources the Commission is looking at future actions and it would be no surprise to see enforcement escalate from the level seen in the BGO case with a licence revocation a real possibility. One well-placed source told EGR Intel they viewed the BGO fine as a “relatively minor” one and that “a bigger one might be on the way”, and added that sports betting promotions were a particular concern.

The Gambling Commission itself hinted at the issue in a quote from the ironically named programme director Paul Hope. “We want operators to take note that the issues identified in the decision notice are likely to form the basis for future compliance assessments and could lead to enforcement action,” Hope said. This does not appear to be a regulator looking to take a backwards step.

Misleading advertising

The BGO case is part of an issue that had been brewing for nearly two years. Concerns were first raised with BGO in July 2015 over potentially “misleading” advertising. Following a change in the licence conditions and codes of practice (LCCP) in May 2015 it had become a legal requirement to include “significant limitations relating to promotions” in all advertising, and it’s safe to say not all operators latched onto this quickly.

Throughout 2015 and 2016 there were a number of operators reproached by the Advertising Standards Authority (ASA) over misleading advertising. The list includes BGO, but also Coral, Ladbrokes and BetStars among others. Prior to 2015 it felt like an almost monthly occurrence for operators to be pulled up by the ASA and it’s likely the Gambling Commission has a lengthy list of operators on its naughty list.

So could there be trouble brewing for other operators with additional cases under review? Perhaps, but a key component of the BGO fine appears to be the lack of remedial action taken by the operator. The Gambling Commission noted BGO “did not take timely and effective action to address the misleading advertisements” and “provided inaccurate assurances that the issues had been fully addressed”.

While not impossible, it seems improbable that large corporations with substantial compliance teams would not take action when facing a charge by the Gambling Commission. And a flood of similar fines for the top tier would likely be a very big price. However, there is another, arguably larger, part of the business that may not yet have fully adapted to the new regulatory spotlight.

Trouble ahead?

The online casino sector contains a large number of smaller operators with a heavy reliance on affiliate marketing and a business model designed for a different era. Prior to the regulated revolution the main concerns operators had were fraud, bonus abuse and chargebacks and many of the onerous T&Cs that exist and the adversarial and opaque approach to customer communications from some firms stems from this. But times have changed.

The Gambling Commission made its views quite clear on how it wants to drag the industry into the open by forcing it to be more transparent with customers. “We want to make sure that gambling is conducted fairly and openly. So, we have made it clear to the industry that misleading advertising is a serious issue. We have powers to tackle it, including the power to impose financial penalties such as this,” Hope said in the statement explaining the BGO decision.

Online gambling firms are no longer operating partly hidden in the shadows of the internet, but in the full glare of the public spotlight. Social media and some more willing sections of the media quickly amplify cases that would have only been debates on a forum and little more, and T&Cs once considered standard now look archaic and punitive to regulators and players alike. And it’s far from a problem just with bonus terms.

There are also likely bigger issues waiting in the wings around AML and KYC, with operators facing much closer scrutiny in these areas from the regulator. Wider issues on customer restrictions gets a lot of coverage, although it’s uncertain there is much appetite from the regulator to intervene here. But customer verification and communications around payments and withdrawals is another potential hot button issue.

Taking evasive action

From talking to operators and other interested parties there is a sense that the industry is at a crucial point where a shift in approach is needed to avoid future issues with regulators both in the UK and further afield. Ultimately the egaming sector may find the defences it’s built against risks from its customers ultimately present a danger to the industry itself unless it beings to pick them apart and rebuild.

The warning shot has been fired, and would be extremely unwise of the industry not to treat it as such. Only a brave man would lay big odds on BGO being the last operator to be fined or censured by the Commission and sources suggest that this is something like the end of the beginning for the online gambling sector. It’s a game everyone is playing in and the stakes are very high indeed.