UK operators’ VIP tangle
VIP issues in the UK, the chances of iCasino in New York examined, UK horseracing takes up the affordability cudgels +More
Good morning. On today’s agenda:
Recent events surrounding 888 highlight the tangle around VIPs in the UK.
The chances of iCasino in New York look like they might be a long shot.
UK horseracing fulminates at the UK Gambling Commission.
The EU is gearing to ban loot boxes and limit in-game payment prompts.
The UK VIP tangle
Terminology is increasingly an issue for UK operators as the term ‘VIP’ has become toxic.
Behind the velvet rope: During a recent pre-ICE briefing held by law firm Wiggin, Peter Marcus, the group operations director at Entain, told the audience that VIP was a “bit of drug that you have to get out of”.
This followed comments from Entain CEO Jette Nygaard-Andersen during a recent call with analysts that “we don’t run the VIP schemes, in Entain we don’t have the VIP customers”.
The comments came a week after 888 had seen the departure of its CEO, caused – seemingly though the company denies any link – by its admittance of having VIP business derived from the Middle East.
Sources pointed out that the conflation of VIP with any business taking place, via Gibraltar, with potentially very dark gray transactions around the globe is “unhelpful”.
Heavy duty: In the UK, the term ‘VIP’ has become something of a lightning rod for the Gambling Commission, which introduced guidance on how to deal with high-value customers that came into force in October 2020.
That guidance backed away from making affordability checks a de facto requirement, but did place a responsibility on operators to ”assess the risk” of incentivising HVCs.
That included applying player protection controls, affordability checks and due diligence consistently to all customers at “appropriate stages of the customer relationship, or in response to specific concerns”.
The 3%: As has been detailed by C+M, 888’s VIP issues in the Middle East fall outside the jurisdiction of the UK because the activity took place under the company’s Gibraltar license. The company said the business in question was worth 3% of total revenues.
An inspector calls: Maybe coincidentally, the UKGC’s guidance on black market activity stated that B2C businesses needed to tell the Commission more about any market at or above this level.
Of course, the Middle East could cover any number of countries, but the vagueness of 888’s original statement might need some further explaining to the Commission.
As one source added, 888 is “going out of its way to say this is just 3% of revenues and there is nothing to see here”.
But there are questions that Gibraltar will need answers to, including which specific countries are involved, how many customers were involved and whether any of them were politically exposed persons (PEPs).
The bottom line: For VIPs we should now read high-value customers, but it is clear it is the treatment of this cohort, not the terminology that surrounds them, that is the point at issue.
For any operator, the “litmus test”, as one source put it, will be to prove to the UKGC and potentially other jurisdictions over time that the company is not “creating any privileged groups of players via KYC or any incentive to spend or play more”.
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The Big Apple circus
Slim’s out of town: As reported last week, New York Sen. Joseph Addabbo has introduced a bill to legalize online casinos. But if the last few years have taught us anything, expect the unexpected. As such, the New York landscape deserves a thorough examination. You can read up on the specifics of the bill here.
Further reading: See Earnings+More today on how DraftKings and FanDuel are failing in their big state lobbying.
So, you’re saying there’s a chance: Any resistance to expanded gambling New York possessed is a distant memory. In addition to racinos, tribal casinos and a state lottery that includes online subscriptions, the Empire State has added the following gambling options in recent years:
Four upstate casinos opened between December 2016 and February 2017.
DFS was officially legalized in 2016.
Retail sportsbooks opened in 2019.
OSB was legalized in 2021 and launched in 2022.
A big tent: The bill does an excellent job of bringing everyone on board, reducing the possibility of stakeholder opposition or disagreements. Potential licensees include commercial casinos, tribal casinos, racinos, mobile sports-betting operators and the three additional licenses granted via a competitive bidding process.
The gatekeeper: The bill has a decent chance to pass the NY Senate, but the Assembly has always been the chamber where gambling bills go to die.
Standing guard is Assemblyman Gary Pretlow, who relishes his gatekeeper role as chair of the Assembly Racing, Gaming and Wagering Committee.
The Senate passed online poker bills in 2016 and 2017 by overwhelming majorities.
Despite Pretlow sponsoring companion legislation, those bills never received a committee vote in the Assembly. Solving the Pretlow enigma will be iCasino’s first challenge, but not the last.
Ancillary problems: Gov. Kathy Hochul didn’t include online casino revenue in her budget, which signals a lack of support from the chief executive. Additionally, New York has bigger gambling fish to fry with the three downstate casino licenses it hopes to award. If online casino legalization can inject itself into the downstate casino conversation, its chances will improve.
It’s not illegal if you believe it: iCasino wasn’t part of New York’s online poker efforts in the mid-2010s. The belief at the time was that iCasino would require a constitutional amendment, while it was argued that poker could get a skill-game pass.
Online poker never came to pass, but New York has been creative in bypassing the constitutional amendment requirement to expand gambling over the years.
DFS was classified as a game of skill, and while that was challenged legally, after a six-year legal battle, the courts eventually sided with the state.
Clarification: Judge Janet DiFiore’s 2022 Opinion stated that the court “clarified” that the “historic prohibition on ‘gambling’ in article I, § 9 does not encompass skill-based competitions”.
“Because ample support exists for the legislature’s determination that the IFS contests authorized in article 14 are properly characterized as lawful skill-based competitions for prizes under our precedent, plaintiffs have not met their burden to demonstrate beyond a reasonable doubt that article 14 is unconstitutional.”
When it came to legalizing OSB, New York lawmakers came up with a new reason that a constitutional amendment was unnecessary. Since retail betting is already allowed, online gambling isn’t an expansion of gambling.
Instead, it’s a different delivery channel for an already legal form of gambling. And as long as the server is located at a land-based gambling facility, everything is fine and dandy.
This interpretation of when a constitutional amendment is required has not been challenged.
iCasino takes a page from OSB playbook: Online casinos sans a constitutional amendment would follow a similar path. Per S 4856:
“It has been, and continues to be, the sense of the legislature that this provision is not contravened by a statute that authorizes the acceptance of a wager by an individual located in New York state who is betting by virtual or electronic means and the wager is accepted through equipment located within a licensed gaming facility.”
If this legislation progresses (which would be no small feat), lawmakers must cross their fingers that no one challenges it in court.
EU: Gimme the loot boxes
Brussels is gearing to ban loot boxes and limit in-game payment prompts.
I got a new complaint: A recent report on consumer protection in online video games calling for further curbs on paid loot boxes was overwhelmingly approved by European Parliament members.
As part of the proposals, MEPs voted to analyze the impact of the in-game prizes and prompts to make purchases, and take action if necessary.
Brussels broadly defines loot boxes as “features in video games which are usually accessed through gameplay, or which may be optionally paid for with real-world money”.
Always wanting a different view: Cash, either real or virtual, is often a prize for buying loot boxes, prompting EU wonks in 2020 to acknowledge the gambling comparisons and tell individual states to make up their own minds on regulation.
Some, such as Belgium, Finland and the Netherlands, are firmly in the gambling camp and require developers to obtain the appropriate licenses, else their product is considered illegal.
Others, such as Italy and Germany, apply age barriers to video games containing the items.
France is unusually liberal, requiring only adherence to consumer protection laws in most cases rather than regulations that cover games of chance.
One in the chamber: The latest intervention by MEPs promises to go much further, however. It proposes an assessment to consider disabling in-game payments and outlawing loot boxes altogether, to protect children and avoid the fragmentation of the single-market’s approach to gambling regulation.
“The impact of an EU legislative proposal banning paid loot boxes would be disastrous for the gaming industry active in the EU,” said Lucas Falco, public policy lawyer at Covington.
UK horseracing goes on the attack
Held under starter's orders for as long as they can take, luminaries of the UK’s horseracing scene have lashed out at the behavior of the Gambling Commission.
Anger in the streets: A Racing TV survey of more than 3,500 members has unearthed a deep well of frustration at some of the measures expected within the Gambling Act review. The broadcaster said the responses indicated black market operators would be a big winner should the government impose spending caps and tougher affordability checks on punters.
Key findings included:
80% of 3,469 respondents do not want mandatory limits imposed by bookmakers.
15% of 3,539 respondents bet, or know someone that bets, with an unregulated online bookmaker.
22% of 3,575 respondents have been asked to supply personal information.
50% of those asked to supply this information refused to do so.
92% of 3,237 respondents would consider using a different bookmaker if no personal information was required.
Something’s got to give: “This survey is clear evidence that shows that the black market is real and substantial,” said Martin Stevenson, CEO of Racing TV parent company Racecourse Media Group, adding that affordability checks are taking “a heavy financial toll” on the sport.
Racing Post research estimated the checks could cost the sector £40m each year on top of already declining betting numbers.
The station has launched a campaign urging viewers to contact their local MP about their concerns, hoping to exert pressure on the incoming gambling minister while delays continue to beset the White Paper.
I’ve been fobbed off and I’ve been fooled: The Racing Post also did not hold back in a thundering column by editor Tom Kerr that said the “out-of-control” Commission was “either clueless or treating us with contempt”.
Kerr took exception to Commission CEO Andrew Rhodes’ assertion that affordability checks creeping in from spooked bookies were not the fault of the regulator, as it had made no explicit ruling on their necessity.
“Bookmakers, caught between the rock and a hard place of swingeing punishments and impossibly vague guidelines, have understandably applied the precautionary principle, meaning tens of thousands of ordinary, responsible punters have already been caught up in affordability checks,” Kerr said.
Monkey wrench: 888 has set the check bar at £500, which would be “a conservative bank” for Cheltenham, Kerr said, but still trigger an account freeze until more documentation was provided.
The sum wouldn’t be enough to get most people through 24 hours at next month’s festival, Kerr pointed out, given the costs of entry, food, drink, bed and board.
“The only real form of recourse, and the only hope that the out-of-control regulator can be stopped before catastrophic damage is done to racing, is for the government to step in,” Kerr said.
Hanging on by the skin of its teeth: The White Paper will also consider the Commission’s powers and resources, with no guarantees it will survive in its current shape as it scrambles to appoint an entirely new board.
“There is a sense that the Commission is approaching a reckoning,” said Regulus.
“Embroiled in crisis, it is imperative that the Commission does not yield to the temptation to put its head down and carry on regardless.”
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US notebook
North Carolina: Gov. Roy Cooper has signaled his support for the effort to legalize sports betting, according to the Raleigh News & Observer. A bill is likely to be introduced this week.
Controversial skill-games provider Pace-O-Matic said in a press release that the recent record levels of revenue generated by US land-based casinos proved its skill games had “no impact on gambling”.
The Pennsylvania Gaming Control Board met with Parx Casino lobbyists just weeks ahead of a decision to take a stance against unregulated skill games, according to the investigative journalism arm of The Philadelphia Inquirer.
European notebook
The Swedish Gaming Authority has published its long-awaited guidance on B2B licensing, including clarifications on the differing permit requirements.
LatAm notebook
Brazil’s Tourism Institute is the latest body to push for the regulation of betting, suggesting it would help the tourism industry, according to SBCAmericas.
Asia notebook
Cambodia: Inside Asia Gaming reported that a crackdown on illegal gambling was one of the issues addressed during a recent visit to China by Cambodian Prime Minister Hun Sen.
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