What Does the Government's Newest White Paper Mean for the Slots Market Economically?

In April 2023, the UK Government issued a white paper following a review of the Gambling Act 2005, which has not been amended since 2014, when online slots were brought under the jurisdiction of the UK Gambling Commission. One of the key elements of the white paper was around stake limits on slot machines, which would bring the online industry into line with land-based slots. In addition, there was a proposal to have a lower limit for gamblers between the ages of 18 and 24. The paper marked the sector's biggest shake-up in almost two decades and has now passed through its consultation process. It has been confirmed that new slot limits will be coming into force later in the year.

While millions of gamblers are able to play without any ill effect, there is a proportion of people who are affected by gambling harms and can lose life-changing amounts of money over a relatively (or even very) short space of time. The legislation aimed to introduce a comprehensive range of measures that would protect younger people and other vulnerable groups without disrupting enjoyment for the vast majority of gamblers. The key proposal in the white paper was the introduction of a stake limit, and different options were discussed. These included:

a maximum online slots stake limit of £2 per spin
a maximum online slots stake limit of £5 per spin
a maximum online slots stake limit of £10 per spin
a maximum online slots stake limit of £15 per spin

In addition, there was a consultation on slot-specific measures designed to offer greater protection for 18 to 24-year-olds as there is evidence that this cohort might be particularly vulnerable. So, the following options were considered for the younger age group:

a maximum online slots stake limit of £2 per spin
a maximum online slots stake limit of £4 per spin
not introducing a specific statutory stake limit for 18 to 24 years olds (meaning they could access the general maximum limits above), but instead introducing particular requirements on operators to consider age as a risk factor for gambling-related harm, which could justify a range of mitigations, including limiting access to higher staking opportunities on a case-by-case basis

When all the options were considered, the recommendation was a £5 stake limit per spin for over 25s and £2 for the younger cohort. The government is keen to stress that this should be a limit that players can stake up to and not be the new default stake on offer. The aim is to modernise the regulation of the gambling sector, which is hardly surprising when you consider how old the legislation was. In the last decade, technology has come on leaps and bounds in terms of software, hardware and connectivity. The gambling landscape had been transformed, and anyone searching online for slots with a smartphone had access to a mobile casino 24/7. The online slots are incredibly popular, and it was felt that the regulations needed to catch up.

Currently, there is no limit on the amount gamblers can stake, although some of the larger operators impose voluntary limits. The restrictions could cost the UK gambling industry hundreds of millions of pounds. This is both in terms of revenue and additional costs involved in imposing the limits and adapting software to differentiate what is on offer depending on a player's age. According to Gambling Commission figures, online slots bring in £3 billion a year but also have a higher addiction rate than sports betting or other casino games.

While the legislation aims to reduce gambling harms, there are fears that high-stakes players might risk gambling on black sites, and some people in the industry have expressed concerns about how effective the measures will be. While it is impossible to predict the effect on the bottom line, the government's own analysis forecasts it could be in the region of £166 million. The limits will come into force in September, and operators will have six weeks to comply. There will then be an additional six-week window for adjustments to be made to games to ensure the lower stake limit for younger players is in place.

Michael Dugher, CEO of the Betting and Gaming Council (BGC), acknowledged there would be a financial impact on his members and their customers, saying, "It is important to recognise that measures like this come with a cost to our members and impact their customers,"

However, he broadly welcomed the changes.

He added, "Nothing in the white paper should be viewed in isolation but instead be seen as a total package, and I would urge ministers and the regulator to remain mindful of the overall impact all these changes make for BGC members. We must avoid customers drifting to the unsafe, unregulated black market online if we don't tread carefully and get the balance of regulation right". 

Paul Leyland of Regulus Partners, a sports and leisure sector consultancy firm, concurred. He expressed concern that while the government intended to reduce harm, questions remained as to whether it would work, and he reiterated concerns about driving demand to unregulated sites. A 2017 study of revenue models for differing stake thresholds found that almost 50% of slot revenues were generated by stakes over £2 and more than a quarter by those over £5. However, he acknowledged that lower stakes could mean players played for longer – particularly if they had a preset budget.

Leyland wrote: "In addition, we believe the revenue at risk from the £2 limit for under 25s is likely to be c. £30m, giving a total revenue risk of £730m."

He also predicts that losing £10 and above stakes could lead to a reduction in slot revenues of around £460m or 15%. He also claimed the new stakes limit could see the size of the UK black market doubling, and he estimated it could account for 10% of the total market after the new limits come into force. Ironically, this could lead to a rise in problem gambling, as players who gamble on the black market are afforded virtually no protections. It could also mean that more players move to crypto casinos where they can gamble anonymously, with few or no limits. The danger is players will find themselves on sites that lack protections and are not governed by any discernible ethical standards.

Campaigners and charities hoping for a blanket stake limit of £2 across the board have said it is a step in the right direction. However, Gambling With Lives co-founder Charles Richie has been reported as saying he believed it was a missed opportunity.