Analysis: The regulation of UK sports spread betting

On Tuesday, the Gambling Bill left the House of Commons without amendment and made its way to the House of Lords for further consideration. This came after shadow sports minister Clive Efford saw a number of his proposed amendments rejected by sports minister Helen Grant.

One of the amendments concerned what Efford described as an “anomaly” where spread betting firms offering sports bets are not regulated by the Gambling Commission but are instead governed by the Financial Conduct Authority (FCA).

The proposed clause read: “In order to promote consistency of sports betting regulation, regulation of remote sports spread betting operators and of all sports spread betting as defined herein shall be transferred from the FCA to the Gambling Commission.”

Although rejected by Grant, this clause caused much debate, especially in relation to a specific licence condition adhered to by fixed-odds operators but, due to their distinction, not applied to the two spread betting firms offering sports bets, namely Sporting Index and Spreadex.

Informal arrangement

The licence condition code in question is 15.1, which obliges operators to report examples of suspicious activity to the Gambling Commission and relevant sports governing bodies. According to the FCA, the regulator has an “informal arrangement” with the two spread firms whereby when “they identify signs of suspicious activity, they talk to us”.

What the FCA’s agreement fails to cover is the obligation to converse with sports governing bodies. When giving evidence to a public committee earlier this month, the FCA admitted that it had yet to meet with any sports body concerned with sporting integrity.

With this in mind, Efford’s clause also included the provision that the Gambling Commission should “have power to require and obtain from its licensees including spread betting organisations information concerning actual or potential suspicious activities in relation to sporting events, and to share such information with the relevant sports governing body”.

Why, Efford argued, should fixed-odds operators have to follow strict guidelines in reporting suspicious betting activity while spread betting firms operate under an “ad hoc” regime that has resulted in just one report of suspicious betting in the last 12 months? By way of comparison, the Gambling Commission received 50 reports of suspicious betting in a five month period stretching from October 2012 to March 2013, albeit from a larger pool of operators.

High risk?

In written evidence to the Department for Culture, Media and Sport, Phill Brear, chief executive at the Gibraltar Gambling Commission (GGC), was also puzzled as to why spread betting wasn’t subjected to stricter regulation. In Gibraltar, the GGC regulates all sports betting, including spreads.

“Some of the most high profile financial failures of UK sports players have centered on the use of spread betting,” Brear said. “This form of betting attracts high risk, high value and ‘better informed’ customers, offering open ended winnings and losses. It is a service overdue closer regulation.”

However, Mark Maydon, Sporting Index Group’s business affairs director, told eGaming Review measures are in place to ensure firms report suspicious betting patterns, measures Sporting Index are fully compliant with.

“Leading sports spread betting companies such as Sporting Index are dual regulated by the FCA and the Gambling Commission, by the latter in respect of binary bets and other fixed-odds bets,” Maydon said.

“Under FCA regulations, a spread betting firm is obliged to report any suspicions of ‘market abuse’ and whenever we see any suspicious activity at Sporting Index we also report it to the Gambling Commission, a stance which has the FCA’s full approval.”

“Moreover, Sporting Index always co-operates fully with the Gambling Commission in any request for information they might legitimately make of us, in line with their investigative powers, the data protection rules and crime prevention. Our privacy policy, which forms part of our account operating rules, spells this out to our customers.”

Coming to a compromise

Perhaps the problem with Efford’s attempt to give the two spread betting firms with the same reporting responsibilities as their fixed odds counterparts was that the clause went too far. As Remote Gambling Association chief exec Clive Hawkswood told the committee, relieving the FCA of its duties isn’t an altogether necessary measure.

“We are not suggesting that spread betting companies need to come wholly under the Gambling Commission’s ambit as that issue has been looked at many times in the past, but this is one specific area where it appears there is a hole.”

Nic Coward, Premier League secretary and former chairman of the Sports Rights Owners Coalition, agreed with Hawkswood: “We do not think that the regulator’s identity matters, but there must be the same obligation and effect as is imposed by licence condition 15.1 on whatever form of operator. That should include a spread betting operator. We think that is a serious flaw in the current system,” he said.

Indeed, it is an issue the FCA itself has admitted needed addressing and revealed it has been in discussions with the Gambling Commission in an attempt to improve consistency and align the conditions. Furthermore, this week the FCA confirmed it is to draw up further guidance for spread betting firms in order to underpin the arrangements it currently has in place ““ a move Grant believes to be sufficient and proportional at this stage.

Setting priorities

However, Jenny Williams, Gambling Commission chief executive, conceded both the FCA and the Commission had been a little slow in responding to the problems highlighted by the debate surrounding licence code 15.1.

“If you think about priorities and what else the FCA has had on over the past couple of years, as well as some of the things that we have been concentrating on, such as the Olympics, you can see that this has not been the highest priority to push on, but it is being given a welcome push now,” Williams said.

With around 26,000 companies falling under its remit, the question has been asked as to whether or not regulating the two firms to offer spread betting is high on the FCA’s list of priorities. As Williams alluded to, you could understand if it wasn’t, however, unless the Lords decides differently as they pour over the Bill in the coming weeks, Sporting Index and Spreadex’s sports spread betting operations will remain a matter for the FCA.