Looking at legal loopholes: Is it a game or a bet?
Difficult times lead to the need for gambling companies to think laterally, and push the creative boundaries in what constitutes a game or a bet, writes Hilary-Stewart Jones, chair and CEO of Skywind Group.
Prior to the advent of online gambling, customers (and operators) more or less determined the type of wager being made by the place they were making it e.g. a casino, bingo hall, dog track etc.. With advancing technology these distinctions became blurred.
The core of these problems arose because there is a huge overlap in the definitions deployed by regulators to define a game, a bet or lottery product. At their core they all require participation to win a prize and where there is an uncertain outcome.
We saw this in the UK in the mid-nineties. Bookmakers were still feeling bruised by the introduction of the National Lottery, and even with a few relaxations afforded to them in the shops, they were concerned that the even playing field had changed forever.
This was hardly surprising, given at that point all other gambling operators were heavily restricted in the form and messaging of advertising. However, the National Lottery operator was able not only to advertise on television but use the socially irresponsible rallying slogan “It could be you…..”. Needless to say, it rubbed salt in the wound.
Big three push boundaries
The big three bookmakers at that juncture (Ladbrokes, William Hill and Coral) were not daunted, ultimately leading to a head-to-head with the then National Lottery operator Camelot. Deploying the latest technology with machine draws overseen by a tier one auditor, they created their own keno-type numbers content and streamed the results into the betting shops. They argued that this numbers game was not a game (in the legal sense), or a lottery, and could still constitute a bet. It could therefore be lawfully offered in a betting shop, provided the customer knew what the return would be before making a wager (i.e. it was a bet at fixed odds) given the outcome was on an uncertain event, even if it was an event the bookmakers were staging and hosting.
Camelot, the national operator, begged to differ and sought to argue that “numbers” gambling was the preserve of an authorised lottery provider and those entities licensed for gaming, not betting. The 49’s case, as it became known, ended up at the Bow Street magistrates court in 1997, with a decisive victory in the bookmaker’s favour. The beast had been unleashed.
Numbers betting keno-type games were only ever intended to be a “filler” between horse races, much the same as greyhound racing. However, the hidden bounty of winning the case was that it paved the way for the (what was ultimately regarded to be noxious) FOBT’s (Fixed Odds Betting Terminals). These enabled bookmakers to offer casino-type games in betting shops, without wagering or payout limitations, or restrictions on numbers of terminals. This was because there was a technical loophole in the then applicable Gaming Act of 1968 which meant if a machine was dependent on a remote server to generate a result, it did not qualify as a gaming machine.
Another example of where technology advancement outstripped older legislation. This combined with the precedent of the 49’s case meant that new “betting” games could be provided without restriction provided all the games had a stated return (i.e. fixed odds). Whilst the then regulator (the Gaming Board for Great Britain) was torn between legal challenge and compromise, it chose the latter which at least reined in the numbers of FOBTs in the shops as well as product offerings and pay out.
Technology outpacing legislation
However, it still enabled the bookmakers to make hay, and to continue to make hay, long after the 2005 Act reforms, until eventually the government intervened and by statutory instrument limited the FOBTs (B2 machines under the 2005 Act) to a £2 maximum stake limit (down from £100) with effect from 2019. Undoubtedly the FOBTs were hugely controversial from a social responsibility perspective, but it demonstrates that any form of statutory definition may prompt different legitimate interpretations and that technology can outrun the foresight of the legislature.
The Big Three’s success in court also paved the way for another new product – betting on the outcome of lotteries. Again, this prompted challenge and push back from lottery providers despite the fact that the wager is on the outcome, and the bettor does not actually participate in the lottery (albeit the bookmakers sometimes hedged their books by buying lottery tickets too).
The UK restrictions on bookmakers on taking bets on lottery outcomes only extended to the National Lottery and lotteries forming a part of it (see section 95 of the 2005 Gambling Act). However again the parameters of this were tested when some bookmakers looked to offer bets on Euromillion games outside the UK (on the basis that this was not a lottery which formed part of the National Lottery).
This loophole was plugged in 2016, but the lobbying for change (implemented by operating licence condition) again highlighted the National Lottery’s antipathy towards bookmakers. It continued to insist that the product cannibalised lottery offerings, despite the fact that the UK customers could not participate in the Euromillions draws upon which bets were offered and that the core of its complaint (namely that good causes collections were being significantly undermined) was both overstated and overly simplistic.
Australia lottery bets banned
The same issues/confrontations occurred in Australia, where bookmakers with a Northern Territory licence were allowed to offer bets on the outcome of lotteries. Outcry followed from the likes of Tabcorp, which used the same good cause arguments as Camelot had done in 2015/2016. Ultimately the government intervened by passing a law which prevented operators offering such products (with effect from January 2019). What again is interesting from the contemporary reports, is the seeming lack of hard evidence about the demonstrable cannibalisation from traditional lottery players and the government’s willingness to take things at face value.
No-one gave genuine commercial consideration as to whether there were new non-lottery players being attracted to more accessible/attractive products (which in any event resulted in taxes and overall benefit to the economy) and ignored the fact that bookmakers were volunteering a good cause payment to keep the concession.
The latest betting/gaming product “blur” is in South Africa where casino licences are strictly regulated regionally (by provincial law) and nationally. Interactive gambling is forbidden under the National Gambling Act 2007 (“the NGA”) but according to local lawyers, there are a number of bookmakers (which are not licensed casinos, and even if they were could not offer remote gambling) who are offering products where the look and feel is indistinguishable from an online casino. Similar to the legislation that applied when the 49’s legal challenge was made, a fixed odds bet is defined under the NGA as “a bet on one or more contingencies in which odds are agreed when a bet is placed ….” and a “contingency” as “any event or occurrence of which the outcome is uncertain…”.
Some provinces limit content. Gauteng has, for example, limited offerings to sports betting, but has nonetheless permitted betting on a lottery. With this odd exception, there has in recent years been a steady growth of the licensed interactive fixed-odds games, which thus far have not attracted criticism or apparent scrutiny. Indeed, it has reached the point that if the wager is placed with a bookmaker then irrespective of the content it will comprise a bet and not a game. That’s not to say however that the political status quo will remain, and as UK and Australian operators have learnt, pushing the parameters too far may result in heavy lobbying by other incumbents and ultimately legislative intervention.
As stressed above, the cause of many of these issues is as a result of what have been overlapping definitions of various wagering products, giving rise to very heated opposition where one product provider is a monopoly. (The 2005 UK Gambling Act seeks to address overlapping provisions, where if one product could simultaneously qualify as two products as per the statutory definitions, one definition will “trump” the other.) However, the industry continues to challenge the parameters of what is permissible, and even if the outcome is not to everyone’s liking, one cannot lightly dismiss the inventiveness of operators and their harnessing of technology to find loopholes in older statutes.
Hilary Stewart-Jones with thanks to Garron Whitesman
