As regulatory evaluations appear on the agenda of multiple European gambling marketplaces during the second half of 2021. Regulus Partners warns stakeholders to pay close attention to Belgium proceedings, where online gambling’s strictest spending limits have been approved.
It is perhaps fitting that the first identified remains of a guinea pig in Europe can be traced to Mons in Belgium, a city which also gave its name to one of King James II of Scotland’s biggest artillery pieces (now in Edinburgh Castle) – he was subsequently killed when one blew up in his face. Neither fact was probably on the collective mind of the Belgian Council of Ministers, which approved measures to change the basis of Belgium’s online gambling expenditure limits from €500 per player to €200 per account this week, following recommendations from the Belgian Gaming Commission from April, proposed by the Minister of Justice earlier this month.
In addition to a shift in the amount and mechanics of the expenditure limits, the Gaming Commission is also planning to work with the National Bank to assess whether customers are defaulting on credit payments as an indicator of harm, subject to GDPR approval. We see these changes as highly important to the Belgian sector on four levels.
The first is that the timing of the changes is revealing. While the impact of the Covid-19 pandemic is far from over, the general theme across Europe has been one of cautious opening and ‘normalisation’. This is not an obvious time to be ‘tweaking’ spend limits unless the plan is to make them more permanent than specific concerns triggered by the lockdown. This is part of an emerging if historically well worn, the pattern of governments putting in restrictions during a crisis, using exceptional circumstances as the reason (or excuse) and then claiming they are broadly necessary as the crisis passes. Gambling licensees hoping for a return to ‘normal’ should take heed that in the ‘new normal’ swingeing government/regulatory intervention is much easier and more generally accepted by populations becoming used to having freedoms curtailed using ‘science’ in the same way previous generations might have accepted an official interpretation of the Word of God.
Second and more practically, the new rules bow to the reality of a global expenditure limit being very hard to enforce without effective ‘single customer view’ technology currently absent in Belgium (and anywhere else) – Belgium has a system of online licences linked to landbased assets. There are currently:
- nine online casino licences owned by eight groups operating 10 websites (all of which also have arcade and betting licences)
- forty-two online arcade licences owned by twenty-six groups operating 29 (dice.circus.be alone has twelve licences – currently all directing to the same website)
- twenty-six online betting licences owned by twenty-three groups operating 23 websites
A €200 per player net expenditure limit can therefore represent a current maximum of €12,400 per month spread across all current websites, increased to €15,400 per month if currently consolidated brands choose to launch sub-brands to maximise their share of higher spending customers. Even if the BGC requires group companies to apply a limit across websites or licence classes (a complex and not necessarily possible undertaking), then this still leaves over €8,000 pcm. Belgian licensees will be forced to game the system to respond to changing customer dynamics, resulting in bureaucracy-driven market share disruption and even lower visibility of customer behaviours.
However, while both the underpin and the supply-side changes of the regulatory adjustments are questionable, the biggest impact is likely to be on customers – but not in the way the Belgian government or regulator intends, in our view. It has certainly been the case that applying a global €500 limit has been almost impossible to deliver or enforce because of technological constraints and potential definitional loopholes. To some extent, these delivery, compliance and enforcement issues made some sort of change inevitable and simply dropping the measure does not suit the zeitgeist.
The change at least has the benefit of being possible. However, by being possible it will also be more impactful. We would estimate that a €200 net monthly expenditure limit is likely to capture c. 10% customers accounting for c. 80-85% of revenue. As we have demonstrated above, in theory most of these customers can continue in the domestically regulated market simply by spreading their expenditure around: very few customers will be losing over €10k per month, albeit the revenue impact of their complete loss would still be material. However, opening dozens of accounts to gamble to the level a customer wants solves for expenditure over time, but it is not efficient and it does not follow typical gaming customer behaviour of sequential account use rather than using lots of accounts at once: even if this optically suggests lots of accounts are being used over a year, this is different to using lots of accounts simultaneously. A far more attractive solution to these customers would be to continue their existing habits in the black market – something Belgium’s blacklist is likely to have only a limited impact upon.
Belgium’s online market is therefore likely to be distorted for questionable reasons in a way that reduces the spirit of compliance from both customers and operators while also encouraging the black market. Perhaps the biggest issue though is the extent to which anybody is being protected.
- Encouraging high-value customers to the black market is obviously counter-productive
- Encouraging higher spending customers to split their expenditure across accounts increases the likelihood that they will lose track of their play
- Offering an officially ‘safe’ limit of €200 but applying it to supply may lead some customers to think that they are being protected more meaningfully than they are – encouraging them to gamble up to the limits set rather than applying their own risk assessment and/or encouraging operators to tailor risk to their circumstances
- Even a €200 PCM limit adds up to €2,400 per annum: 6% of average take-home pay and 12% of minimum wage – a figure that can rapidly become meaningful to the unemployed or those gaming the system
One size fits all rarely if ever works in any system built around consumer choice and the bifurcated reality of consumer disposable income. State intervention of this scale and on this basis has some very obvious risks and likely negative outcomes for very uncertain consumer benefits. Politicians and regulators can no doubt feel comfortable that they are ‘doing something’ and in this febrile political environment ‘doing something’ is likely to play well. However, rowing back from bad policy decisions is far more difficult than promulgating them – as has been seen in Sweden. If Belgium is to be a guinea pig in high-impact high-risk regulatory intervention, it would be beneficial to all stakeholders if the impact is properly and dispassionately analysed before Belgium makes the changes genuinely permanent or other jurisdictions follow suit.
Featured article edited by SBC from ‘Winning Post’ Sunday 01 August 2021 (click on the below logo to access a full unedited version)